There’s a poisonous idea that revenue is the most critical goal in business. I disagree — revenue is a critical goal in the very early days of a new business but revenue cannot become profit unless you become efficient. When growing a small business, efficiency is the difference between success and failure.
In creative firms where the work is on a project-to-project basis, seeing where you can become efficient is a unique challenge. Each project is a little bit different — it’s not like you’re churning out the same widget over and over. You need to take a different approach.Step 1: Your rates
Each element of your work has a different value. If you are a social media expert there is a different rate for setting up a Twitter account versus creating a compelling Facebook post. Setting up a Twitter account is important but it requires far less knowledge than writing for a specific audience, understanding the correct hashtags to use, and knowing what images get the best click-through rates.Think about the different aspects of your most common project. If you hired different employees to do different work on the project, would you pay each of them the same rate? No. Break it down and assign a billable rate to each aspect of the project. This will help you differentiate high-value work from the low-value work. And it will show you what talent you still need to hire as your business grows.
Step 2: Your billable hours
Working through the night isn’t brag-worthy unless you get paid for the effort. If you’re working 18 hours a day and you’re broke, you won’t make it in business. Therefore, tracking your time on projects is essential.
When you are just starting out it, you are happy to get the work — we get it. However, very quickly you will need to be able to estimate how much time each element of a project will take. As you develop your business and become busy, this knowledge will help you maintain a balanced workload — and your sanity.
Step 3: Set up systems
Consider getting the web app Harvest for time tracking. It’s very affordable and allows you to manage tracking your time on your computer or phone. Also, if you’re using Quick Books Online you can push information directly from Harvest into your QuickBooks account.
Step 4: Estimate and track the cost of your project
You need to start somewhere, so here is an easy way to start tracking how much time and money a project costs you. You’ll see that the elements of the project are broken down and that there is an hourly rate and estimated time requirement for each.
* These times and amounts were created on the fly and do not represent industry standards.
This basic set up will help you learn how long different aspects of your work take. In the short term, you will have an easier time estimating new projects. In the long term, you will know what types of projects to avoid, what work to outsource and whom to hire when you are ready for employees.
It’s not just revenue that you need to focus on — make sure your business is profitable by making each project more efficient.