An American Editor

August 19, 2013

Business of Editing: What to Charge (Part V)

The previous four parts of this series (I, II, III, and IV) discussed the effective hourly rate, how to calculate it, and how track it. The remaining question, as several colleagues have noted to me, is: “Why bother?”

Professional editing is a business. If it were a hobby, it would not matter whether or not we made a profit because we would be pursuing editing purely for our love of editing. Yet, for most of us, editing is a business, and as a business we need to be concerned with profit and loss. Even businesses that are organized as nonprofits need to be concerned with profit and loss. The difference between a for-profit and a nonprofit business arrangement is that the former distributes any profit to its “owners” whereas the latter uses any profit to further its goals (i.e., there is no distribution to owners because there are no “owners”).

A business cannot make a profit if it does not generate income in excess of its costs of doing business. It’s a simple concept but one that seems to be just outside the grasp of many business owners.

Knowing whether we are making a profit or suffering a loss is important to editors because we, just like all other businesses, need to constantly evaluate whether what we are doing is worth continuing to do. If we are not making a profit and if we cannot adjust what we are doing so that we do make a profit, perhaps we need to pursue a different career path or conduct our business differently.

Tracking one’s effective hourly rate (EHR) is a way to determine the health of one’s business. It is also an alert system to tell us if and when we need to make adjustments in how we operate our business.

If we know, for example, that no matter what we do, our current client base will not pay a rate higher than $20 an hour (or its equivalent), and if we know that our EHR, as we are currently operating, needs to be higher than what our client base is willing to pay (the required EHR), then we know that we need to make adjustments in how we conduct our business.

This is the critical and most important reason to know and track the EHR. When we operate without knowledge of our EHR, we assume that if we bring in $1,000, it represents mostly profit. This is the allure of the hourly rate: an hourly rate makes us believe that we are earning a decent income because we are assured that for every hour we work, we earn that hourly rate. In real-world business, however, it is not so simple.

Editors, like all businesses, have a production line. I know we do not like to think in those terms, but the fact is that we do operate a production line. (A “production line” is not synonymous with “assembly line.” Production line refers to the manner and order in which we do our work.) We receive a manuscript and we take certain steps in dealing with the manuscript, steps that we repeat with each project. For example, the first thing we may do is clean up the file to remove extraneous elements like extra spaces. Then we may break out reference lists from the main text, or put figure legends in a separate file, or insert bookmarks, or whatever. Ultimately we get to the editing phase, but it is rarely the very first thing we do.

As part of our production line we may do multiple passes. We may do a rough edit, then a second edit, then a cleanup, then a final pass to search for anything we may have missed. What exactly each of us does is not as important as that we recognize we have these steps and that we can articulate them. The articulation is important because part of what we need to do if we are not making a profit is determine what steps in the production line can be omitted or modified so as to make the step more efficient.

One publisher, for example, looks for the least-expensive editor who meets certain minimal qualifications and then provides a multipage checklist of things it expects the editor to do. There are several interesting aspects to the list, one of which is the blurring of the roles of the developmental editor and the copyeditor. The publisher expects copyeditors to fulfill both functions for one very low price. In addition, the publisher has its own style. which differs from standard styles in small, subtle ways. However, failure to comply with the publisher’s house style results in requests for the editor to repeatedly go over the manuscript to fix it for no additional fee.

Faced with not earning the EHR, an editor has to determine what changes can and must be made in the editor’s production line in order to earn the EHR. Will, for example, eliminating a second or third pass over the manuscript reduce the hours sufficiently to raise the EHR? Will changing the production line to a single-pass process do the trick? What other adjustments can be made that will result in increasing the EHR? Or does the editor need to drop this particular client? Can the editor afford to drop this client (i.e., how easily can the revenue this client generates be replaced)?

The reason to bother with calculating and tracking the EHR is to create a foundation for making business decisions. Bringing in revenue of $50,000 a year is nice, but meaningless, if we do not know what our cost of doing business is or whether the procedures we follow are hampering, increasing, or having no effect on our profitability — or even how many hours we need to work to make that income. It is also meaningless if we do not know whether doing work for a particular client is profitable. If working for a particular publisher is not and cannot be profitable, should we not know this so we can decide whether or not to drop the publisher and find other clients?

Perhaps even more importantly, bothering with the EHR lets an editor determine how well the editor is doing over time. Is the editor’s speed and efficiency and productivity increasing or decreasing or remaining stable — month to month, year to year?

The EHR also spreads the earning requirements over the full work week, thus accounting for the nonbillable time we need to devote to business, such as for marketing. It also is (usually) a rate we can more realistically expect clients to accept. More importantly, unlike an hourly rate, the EHR forces us to think in terms of a business week and not just in terms of billable hours. Too many small business owners think that the only hours that are part of the business calculation are the billable hours, which is incorrect.

Finally, the EHR, unlike an hourly rate, lets us fully measure productivity and efficiency. The more productive and efficient we are, the more often we exceed our EHR. When we charge by the hour, we can never exceed that hourly rate.

The EHR is foundational information that acts as a guide to business decision making. It is something against which a business can measure what the business is doing and determine whether the business is on the correct path or needs to alter its course — making calculating the EHR worthwhile.

Links to the other articles in this series:

August 14, 2013

Business of Editing: What to Charge (IV)

Originally, part IV was scheduled to be the last part of this series, and was to tackle the question, “Why bother?” However, what was part IV is now part V. The change was made because I have received several requests for clarification on how to determine what to charge. The confusion seems to stem from two things:

  1. The effective hourly rate (EHR) discussed in parts I, II, and III, is based on a 40-hour work week. The calculated EHR is what is needed to be earned each hour of that 40-hour work week. This does not mean that you must have 40 billable hours, just that this is the EHR that each hour has to earn even if the earning has to be compressed into 20 billable hours.
  2. I did not take the calculation to the final step, which is determining the actual hourly rate. I assumed that readers would be able to make that final step themselves. I have been using the EHR for so many years that what to do seems obvious to me, but in reality, it is not so obvious — as readers have pointed out — and so that is the topic of this post: How do you calculate the actual hourly charge?

For purposes of this example, let’s change the dynamic a bit. Although we’ll retain the $30 per hour charge, the 20 billable hours per week, and the 40-hour work week for purposes of calculating our current net EHR, let’s make our expense number a more realistic $4.60 per hour (based on these monthly expenses allocated to the business: rent/mortgage = $500; heat, water, and electric = $200; telephone = $40; and maintenance = $50). This changes our net EHR to $10.40 ($15 gross EHR − $4.60 expenses) based on a 40-hour work week.

(If your work week is only 30 hours, the method of calculation is the same but the numbers change. For a 30-hour work week, your gross EHR would be $20 and the same expenses would equal $6.13 per hour, giving a net EHR of $13.87. The figures change because the number of hours over which the EHR has to be earned has changed. You need to calculate the EHR using your work week, expenses, and hourly charge.)

Although some readers think we only need to pay attention to billable hours, that is not true. It is true that in a 40-hour work week we do not bill for 40 hours; we do have administrative matters and marketing, for example, that need to be addressed for which we cannot directly bill a client. But these are no different from the rent. They need to be paid for and every business calculates what it needs to charge customers by including time spent on nonbillable matters. The same is true for sick days and vacation time. These items are part of the expense of doing business; we just cannot give them precise numbers like we can give rent.

Consequently, the hourly charge that we determine accounts for the facts that we have only so many billable hours in a week and we also have hours in the week that we have to devote to nonbillable matters.

If we were to use the net EHR we calculated ($10.40), your average weekly earnings, after expenses, would be $416 or a yearly income after expenses of $21,632. But our goal is for that yearly income to be $50,000.

Here are the steps we need to take to obtain the EHR data and calculate how much we need to charge to reach our goal of $50,000 after expenses:

  1. Calculate the EHR for $50,000:
    $50,000 ÷ 52 weeks = $961.54 per week
    $961.54 ÷ 40 hours = $24.04 EHR
  2. Add the expenses to the EHR because the EHR currently only represents our net income (after expenses) goal
    $24.04 EHR + $4.60 expenses per hour = $28.64 EHR
    (or an average gross weekly income of $1,145.60 which translates to gross yearly earnings of $59,571.20)
  3. Calculate the number of billable hours in a year:
    20 billable hours per week × 52 weeks = 1,040 per year
  4. To determine the hourly rate you have to charge, divide the gross annual income by the number of billable hours:
    $59,571.20 ÷ 1,040 billable hours = $57.28 per hour

Now you know what you have to bill per hour to have a net annual income of $50,000 while having only 20 billable hours a week.

Your question is: This number can be calculated without calculating the EHR, so why go through the trouble of calculating the EHR? Why not go to the heart of the matter directly?

The answer is that few of us can directly charge the hourly rate we need to earn. How many of your clients would knowingly pay you $60 an hour for copyediting? Most of us have difficulty transparently charging and collecting that amount, especially if we work for publishers. That is why we began this series with the hourly charge of $30.

We need to calculate the net EHR to see what we are really earning under our current charging scheme. Most of us see that this week we brought in $600 and the week before we brought in $900 and last year we had a gross income of $41,628. And we also see that when it came time to pay the rent, we paid it, even if we struggled to do so — the same being true of our other bills. But few of us really know what we are really earning, and in the absence of knowing that, we have no foundation on which to evaluate the manner in which we run our business.

The hourly charge figure tells us that if we want to continue our current way of doing business, we need to double our hourly charge (from $30 to $60). In other words, our current business methods are not sustainable at the level of our economic goal.

The $28.64 EHR, which is based on your economic goal, tells you what hourly rate you need to average over the 40-hour work week in order to meet your economic goal. This number is important because it is often a more achievable number. It is also an argument for abandoning the hourly rate method for the per-page or project-fee method of billing, because, unlike the hourly method, these methods reward you for productivity and efficiency.

The result is that with these three numbers in hand, you are in a position to evaluate your current business and can align your goals with your decision regarding what and how to charge. For example, if you know you need to charge $60 an hour for 20 billable hours to meet your goal, you can either find clients willing to pay that rate, increase the number of billable hours in your work week, or lower your economic goal. If you increase your billable hours from 20 to 30, the hourly charge drops by approximately one-third, from $57.28 to $38.19 (or from $60 to $40). (Note: The EHR does not change. The EHR changes only if the work week total hours change and/or the economic goal changes.)

In my experience, it has been impossible to charge the hourly rate I would need to meet my economic goals. On the other hand, by analyzing my work habits, increasing my productivity and efficiency, and using a per-page/project-fee method of charging, I have been able to meet, and almost always exceed, my required EHR. There are weeks when I do not meet the EHR over the course of the work week hours, but those weeks are made up for by the weeks that I exceed my EHR.

The EHR also serves as the standard against which I judge my business. I evaluate clients and projects based on the EHR. Clients whose projects regularly do not meet or exceed my EHR become ex-clients, because I know they cannot be made profitable.

I am not in business to lose money or not meet my goals, which is why I rely on the EHR and review it constantly. Are you in business to lose money? Under your current setup, how do you know whether you are making or losing money, and if you are making money, how much you are really making?

Next is part V, which tackles the question: “Why bother?”

Links to the other articles in this series:

August 12, 2013

Business of Editing: What to Charge (Part III)

In parts I and II of Business of Editing: What to Charge, we discussed the effective hourly rate (EHR), how to calculate a true EHR, why it is important to have a definition of what constitutes a manuscript page, and why I think it is smarter to charge by the page or project rather than by the hour. But knowing your required EHR is not enough; you need to track it as well.

I use two programs to track my EHR: Timeless Time & Expense (TT&E) and Microsoft Excel. In the case of TT&E, I am using an older version because it does all that I need. TT&E is not freeware and it is a bit pricey if all you want is to track time, but I like that it makes it easy to track multiple projects. In any event, what you need is a good timing program that will track how much time you spend on a project and give you a total time.

Excel is a program that most of you are familiar with. However, as with TT&E, it is not necessary to use Excel; any quality spreadsheet program will do.

Tracking time is key. I round total time up to the nearest quarter hour. For example, if the total time I spent on a project is 25 hours and 1 minute (25:01), I enter that as 25.25 hours. I know that somewhere along the line I missed timing a few minutes of work, so this is a way to compensate.

Another thing I do is track the time based on billing cycles. If a project is to be billed only upon completion, then I track the time until the project is complete and being billed and use the single total time. If the project is being billed in batches, then I track the time for each batch and enter the time in Excel batch by batch.

As you can see from the following image, I use a simple form to track important data.

In the sample, I have given a spread of per-page price ranges. The key, of course, is to maximize price and minimize hours. (I know that some of you will point out the high pages-edited-per-hour rate that this illustration uses. The pages and hours shown are taken from a real project. Remember, however, that this is an illustration and your figures will differ.)

What is important is that even at the lowest per-page price of $2 per page, the EHR exceeded the required EHR of $25 (based on editing 16 pages an hour; at a rate of 13 pages per hour, the EHR would still be exceeded but at 12 pages an hour, it would not be met. However, at $2.50 per page, where the illustration has a 19 pages-edited-per-hour rate, even at a rate of 12 pages per hour the EHR would be exceeded). This illustrates that it is possible to have a low rate and still meet and exceed the required EHR if you are efficient and productive. Do not, however, take this as an argument for a low per-page rate, nor an indication that you will always exceed the required EHR, nor an indication that one can always edit at such a high pages-per-hour rate — this is just an illustration of how to calculate and track the EHR.

If the per-page rate had been $2 for the whole project, the EHR would have been $38.45 based on the numbers. However, to achieve that EHR, the editor would have had to average, as indicated in the image, 19.23 pages an hour. Depending on the project and the parameters of the project, that may be doable.

But we stray off course.

The key to determining what to charge is determining your required EHR. But to determine that EHR, you have to have accumulated data. In the beginning, you guess, but as data accumulates, you can be more precise in your calculation. The important data are the EHR for each batch of submitted manuscript, as well as for the entire project, and your average number of pages edited per hour (shown in the image at the bottom far right).

Unfortunately, the image doesn’t show the column labels. Column A is the Date; B is Batch #; C is Number of Pages; D is Per-page Rate; E is Number of Hours; F is EHR; G is Charge; H is Total; and K is the Average Pages/Hour. You need the column information for the following Excel formulas to make sense.

Although the information is important, columns A and B are not needed to calculate any of the other data in the table.

The formula to calculate the EHR of column F is:

=IF(E11=0,””,(C11*D11)/E11)

where, for example, E11 represents the data in column E row 11. The “” is an instruction to leave the cell in column F blank if the data in E11 equals 0.

To calculate the Charge of column G, use the formula:

=SUM(C11*D11)

The Total column (H) needs two formulas. The first is only for the very first row of data, which in this example is row 11:

=SUM(G11)

The formula is that simple because in this instance, the Charge and the Total are identical. To calculate subsequent Totals by row, the formula is:

=SUM(G12+H11)

which means to add the new Charge found in this row (G12) to the Total in the row immediately above (H11) so that the Total in this row is a running total. Remember that the numbers (e.g., 12 in G12) represent the row number; the letter represents the column.

All of the data is row-centric; that is, the calculations are for the row only. The exception is the Total column, which is a running total.

The Profit/Loss Data row is where we get our overall information. The formulas for the various entries are as follows:

Total Pages: =SUM(C11:C22)
Total Hours: =SUM(E11:E22)
Ave Effect Hrly Rate: =IF(E24=0,””,G24/E24)
Total Billed: =SUM(G11:G22)
Project Gross Profit: =SUM(G24-D24)

Finally, the formula for the Ave Pg/H is:

=IF(E24=0,””,C24/E24)

Because I hire other editors to work on projects, I need the IC Fee and the Gross Profit percent (%) information. For those who never hire someone else, these items can be omitted. For those that do hire, you manually enter the amount of total fee paid to the other editor under the IC fee and use this formula to calculate what percentage of the total fee you retained:

=IF(G24=0,””,H24/G24)

Although not shown in the illustration, you can also track your EHR over the course of time by adding up the total hours from each project and the total billed for each project and dividing the grand total billed by the grand total hours.

With this data at hand, you can determine whether you are charging enough for your services. Adjustments can be made as needed. This information will tell you the state of health of your business. If you see that you are not making your required EHR, you need to analyze why not. Are there things that you can do to improve your efficiency and productivity? Or is the only solution to raise your prices and find new clients?

Part IV adds some clarification and Part V concludes the series, tackling the question: Why bother?

Links to the other articles in this series:

August 7, 2013

Business of Editing: What to Charge (Part II)

In Business of Editing: What to Charge (Part I), we ended with this question: Is the $30/hour rate you charge sufficient to generate your desired annual gross income based on your EHR? The answer is “no.”

Your current charge of $30/hour is not enough to generate the desired gross annual income of $50,000 because your net EHR is $13.56 (based on 20 billable hours in a 40-hour workweek), not the required minimum EHR of $24.04. Your EHR is $10.48 too little. Based on your EHR, your gross annual earnings will be approximately $28,200, or a little bit more than half of your desired annual gross income.

There are several options for curing this problem. First, increase the number of billable hours you work each week. At the hourly rate of $30, you need to generate at least enough work to bill for 34 hours every week for 52 weeks a year (or its equivalent). That will generate a net EHR of $24.06 ($30 × 34 hours = $1020 ÷ 40-hour workweek = $24.06). That is not impossible to do, but if you haven’t averaged at least 34 hours a week of billable-at-$30-an-hour-work over the course of a year in past years, you will have to devote some time, money, and effort to bring your workload to that level.

Second, you could lower the amount of your desired gross annual income. That would certainly change the calculation, but it would raise other questions, such as: Are you earning enough to meet your bills? Are you earning enough to warrant remaining a freelance editor? Is your annual income sufficient to support the lifestyle you want?

The third option is to raise your hourly rate to $51 an hour and continue to generate an average of 20 hours of work a week for 52 weeks, which would give you a net EHR of $24.06 and meet your income goals.

The fourth — and best — option is to calculate the net EHR you need to meet, which is, in this case, $25 (it really is $24.06, but rounded numbers are easier to deal with and so we round up). Then, instead of trying to charge and collect an hourly rate of $50, charge a per-page or project fee and work to increase your efficiency so that you can generate your necessary EHR. It is more likely that clients will accept a per-page or project fee than an hourly fee that they view as too high or outside their budget.

Also very important to consider when deciding whether to charge by the hour or the page/project is this: If you charge $3 per manuscript page, you need to edit a little more than 8 pages an hour to meet the $25 EHR. If you can edit 10 pages an hour, your EHR will equal $30, which is $5 more than needed. As time passes and that extra $5 adds up, you build a cushion for those times when you have no work, a cushion that may still allow you to maintain the EHR of $25 over the course of the year.

And don’t forget this: The $25 EHR is based on your generating enough work to bill for 20 hours a week on average. Thus, to meet your goal, you need to copyedit approximately 167 pages a week. (A cautionary note: Remember that all of these example calculations are based on our net EHR but that our net EHR is incomplete. You must do your own calculations based on your own business.)

Option 4 is, in my thinking, the best option because, as many freelancers have noted, publishers generally do not offer rates above $25 an hour, and authors aren’t knocking down doors in a scramble to pay editors $50 an hour. Most publishers offer a rate between $18 and $25 an hour; some publishers, to their discredit, I think, offer rates of $12 or less an hour. In addition, we are competing worldwide with editors who do not calculate their EHR needs and will accept work at any price offered. Consequently, the best way to charge is a per-page or project-fee rate because you can compete effectively yet increase your productivity and efficiency and thus raise your EHR to a sum much higher than the offered hourly rates — in other words, by becoming more efficient and speedy, you can make a $20 hourly rate (when converted from a per-page rate) an EHR of $50.

Which brings us to the next matter: calculating a page. There are lots of ways to calculate a page. One of the most common formulas is 250 words = 1 page. But there are other formulas, such as counting characters. It really doesn’t matter what you decide equals one page; what does matter is that you have a definition, that you make it known to clients, and that you apply it before quoting a price.

Regardless of how you ultimately decide to charge — whether by the hour, the page, the word, or the project — it is important to be able to calculate the number of pages because for most people, the number of pages has meaning as a measure. In addition, editors think in terms of how many pages they can edit in an hour, not how many words they can edit in an hour.

In a recent online discussion, someone was looking for an editor to edit a 248,000-word manuscript that they said equaled 450 pages. Before bidding on such a project, you need to have a standard definition of what constitutes a page so that you can rationally determine what to bid. In this instance, the author calculated a page as 550 words, more than double the commonly used 250 words. Were I to bid on this project, I would bid as if the page count were 992 pages, not 450. One page equaling 550 words is not within my lexicon.

If I placed a bid based on the 992-page count, I would be prepared to explain what constitutes a page and how I calculated the manuscript’s true (for editing) size. This count is important to me because I have a pretty good idea of how many pages I can edit in an hour. That number is a range that covers badly written manuscripts through well-written manuscripts. Knowing the correct number of pages by my definition of what constitutes a page and knowing how many of those pages I can edit, on average, in an hour, lets me knowledgeably decide if I can undertake the project and how much I need to charge.

If the author insists that the correct page count is 450, my response would be that it doesn’t matter — this is my bid price for the manuscript as described, whether we call it 450 pages or 992 pages. What matters is that I have a definition for a page that I apply when calculating my fee.

This is important because I charge by the page, not by the hour. I have a high EHR that I want to meet and a key to knowing whether I can meet that EHR is knowing how many pages I can expect to edit in an hour. The more pages I can edit, the higher my EHR.

In contrast, if I charged by the hour, aside from the fact that my true EHR would be significantly lower than my hourly rate, it wouldn’t matter how many pages I could edit in an hour. I am being paid by time, not by productivity — and I will not be rewarded for being efficient or productive; in fact, I will be punished if I am efficient and productive because I will earn less (in gross) on the project. When I charge by the page (or by the project), I am rewarded when I am efficient and productive.

Every time I exceed my required EHR, I am given a bonus. In contrast, if I charge by the hour I can never exceed my required EHR (and usually cannot meet it), thus I can never receive a bonus.

I know the concept of EHR can be confusing, maybe even daunting, but combined with a firm definition of what constitutes one manuscript page, it is really the best way to determine what you should be charging.

In Business of Editing: What to Charge (Part III), we will discuss tracking the EHR.

Links to the other articles in this series:

August 5, 2013

Business of Editing: What to Charge (Part I)

One problem with editing as a profession is that it is easy to set one’s self up as an editor. The result is that every day brings new editors into competition with existing editors. And every day the question gets asked: “What should I charge?”

The first response to that question, at least in the United States, is to take a look at the EFA (Editorial Freelancers Association) list of editorial rates. It does no harm to look at the rate schedule, as long as you recognize the failings of the schedule and do not rely on it for setting your rates.

The EFA schedule of rates is based on surveys of EFA members. Consequently, the survey excludes data from the many thousands of nonmembers. More importantly, the portion of the membership that responds to the survey is just a small fraction of the EFA membership, which itself is but a miniscule fraction of the universe of editorial freelancers. There are other biases in the survey as well.

The EFA schedule is also problematic because it fails to define its terms. For example, what does “basic copyediting” include/exclude that distinguishes it from “heavy copyediting?” What justifies the range difference? Suppose the copyediting were “medium.” How does that differ from “heavy” or “basic?” (For a discussion of light, medium, and heavy and their real-world relationship to editing, see The Business of Editing: Light, Medium, or Heavy?)

Bottom line is that the EFA schedule of rates is a place to begin but not to stop. It should be reviewed then discarded.

A problem with the query about what to charge is that the asker believes in a false assumption — that there is a “going rate.” There really isn’t a going rate in editing. It is true that many publishers pay similar fees for work, but if you look at what work is required, you will see that there is a great variance among publishers. In the case of authors, there is no rate similarity that is author imposed. Authors deal with editors on a one-to-one basis, and negotiate rate one-to-one. Publishers, in contrast, deal with many editors simultaneously and thus have company-established pay guidelines that they impose.

Although there is no “going rate” per se, it could be argued that there is a de facto one because Publisher A will offer pretty much the same as Publisher B by way of compensation; only the amount of work demanded (i.e., services required for that pay) varies — and should be carefully looked at and incorporated into your determination of what to charge.

Ultimately, any “going rate” has little meaning in the absence of it meeting your needs, which is the crux of the issue of what to charge.

The most important factor in setting a rate is knowing what your effective hourly rate (EHR) has to be in order for you to make the income you need. We have discussed the EHR several times. The original discussion and explanation is found in Thinking About Money: What Freelancers Need to Understand. That article covered the surface of the EHR.

The EHR gives you a better picture of what you are really earning. For example, if you charge $30 an hour but are able to charge and receive payment for only 20 hours of a 40-hour workweek, your “gross” EHR is $15 not $30. You need to account for all of the hours in a workweek. The gross EHR isn’t a “true” EHR because it accounts only for hours, but it is better than blindly choosing a number that sounds good or matches the rate of some other editor whose circumstances and needs are likely to be different than yours.

The true EHR also accounts for expenses incurred by your business. For example, if you work from your home and pay $500 a month in utilities, you might attribute $250 a month to your freelance work. That works out to $57.70 a week (or $1.44/hour) in utilities expense that you “would not otherwise incur” if you were working outside the home and for someone else who supplied the utilities during the workweek. (Even if your utilities bill would not be lowered by your working outside the home, some portion of the utility cost is attributable to your working from home.)

Utilities are but one of the expenses that are attributable to your freelance business. Health insurance is another, especially if you had employer-paid health insurance before pursuing your freelance career. The point is that you need to identify all your freelance-related expenses and add them to the mix to determine what to charge.

Let’s pursue the example of a true EHR using an hourly rate of $30. If you charge $30/hour for copyediting (however you define copyediting) and have billable work for 20 hours, your gross EHR = $15 an hour, which is calculated this way:

$30 per hour × 20 billable hours in 1 week = $600
$600 ÷ 40 hours (standard workweek) = $15 EHR

Now that we know the gross EHR, we need to fine-tune it to determine the “true” EHR. Consequently, from the gross EHR subtract the cost of utilities, as follows:

$15 (gross EHR) − $1.44 (freelance portion of utilities per hour) = $13.56 (“true” EHR)

We are only using utilities as a cost here, but the deduction from the gross EHR would be the freelance portion of all expenses of maintaining your business, broken down into its hourly value, such as the appropriate portion of health insurance, other required insurance(s), telephone and Internet service, rent or mortgage, hardware and software, etc. In other words, the $13.56 in the example is still high.

Once you have figured out your EHR, you need to determine your target gross yearly income. In reality, you will pick a number that you would like to earn and see if it is feasible.

Let’s assume that your target gross income for a year is $50,000. That equates to a gross of weekly income of $961.54 (based on a 52-week year), which equates to a minimum EHR of $24.04 (based on a standard 40-hour workweek). Is the $30/hour rate you charge sufficient to generate your desired annual gross income based on your EHR?

The answer and more in Wednesday’s Business of Editing: What to Charge (Part II).

Links to the other articles in this series:

 

July 17, 2017

From the Archives: The Business of Editing: Killing Me Softly

(The following essay was originally published on
 An American Editor on July 25, 2012.)

I recently reviewed the various groups I am a member of on LinkedIn and was astounded to find a U.S.-based editor soliciting editing work and offering to do that work for $1 per page in all genres. Some further searching led me to discover that this person was not alone in her/his pricing.

What astounds me is less that someone is offering to do editorial work for such a low fee but that people actually believe that is a fair price to pay for professional editing. I recently spoke with an author whose ebooks are badly edited — yes, edited is the correct word — who told me that he/she had paid a professional editor $200 to edit the novel in question and so was surprised at all the errors the novel contained.

Recently, I wrote about the publisher who wants copyediting but calls it proofreading in an attempt to pay a lower price (see The Business of Editing: A Rose By Another Name Is Still Copyediting). In my own business, I have been under pressure to reduce my fee or see the work offshored.

I am being killed softly. (And for those of you who enjoy a musical interlude, here is Roberta Flack singing Killing Me Softly!)

Unfortunately, so is my profession for the past quarter century being killed softly.

I write “being killed softly” because that is exactly what is happening. There are no trumpets blaring; clients aren’t shouting and ordering me to work for starvation wages. Instead, what they are doing is saying that they can get the services I provide for significantly less money because the competition is so keen, driving downward pricing.

There is no discussion about whether the services clients get for less money are valuable services. The base assumption is that any editor will do and any editor will do a competent, quality job. Alas, there is little to disprove the assumption in the absence of postediting proofreading, but that work is being driven by the same dynamic and so clients set a mouse to catch a mouse, rather than a cat to catch a mouse. If the proofreader’s skills match the skills of the editor, little by way of error will be caught. We see this everyday when we pick up a book and discover errors that should have been caught by a professional editor and/or proofreader.

When passing out the blame for this situation, we can look elsewhere — to the international conglomerate bean counters, to the Internet that has brought globalization to the editing profession, to the death of locally owned publishing companies that count quality higher than cost — or we can look to ourselves — to our insistence on being wholly independent and our resistance to banding together to form a strong lobbying group, to our willingness to provide stellar service for suboptimal wages, to the ease with which we permit entrance to a skilled profession. Looking at ourselves is where we should look.

Individually, we may strike gnat-like blows against this professional decline, but these will continue to prove of little avail. The profession of editing used to be a highly respected profession. It always was an underpaying profession, but it was a prestigious profession. All that has changed in recent decades. Our bohemian attitude towards our profession has worked to hurry its decline. It is now one of those work-at-home-and-earn-big-bucks professions that draws anyone in need of supplementary income.

It has become this way because we have let it become so.

I wondered if anyone was going to challenge the $1/page person, but no one did. There was no challenge of the price or of skills or of services. The idea that at this price level superior services can be provided is rapidly becoming the norm. That a good editor can often only edit five or six pages an hour — and in many instances even fewer pages an hour — does not seem to be a concern to either clients or to the editors advertising inexpensive services.

It is increasingly difficult to compete for business in the editorial marketplace. There are still pockets of clients who pay reasonable fees, but I expect those pockets to diminish and eventually disappear, and to do so in the not-too-distant future. Those of us with specialty skills are beginning to see the encroachment of downward pricing pressure.

What I find most interesting is that so many people do not even notice poor editing. There is a cadre of people who care about precision communication, but that cadre grows smaller with each passing year. A rigorous language education is now passé. The result is that there are fewer individuals who can recognize good editing from bad/no editing, and even fewer who care, being more concerned with cost.

I have no surefire solution to the problem. My hope is that some day someone in charge will see the light and decide that quality is at least of equal importance to cost control and recognize that it is not possible for an editor to provide a quality job at $1/page. Unfortunately, I do not see that day arriving any time soon.

What solutions do you propose?

Richard Adin, An American Editor

July 12, 2017

From the Archives: The Business of Editing: Thinking About Invoices

(The following essay was originally published on
 An American Editor on January 23, 2013.)

Have you given much thought to your invoice form and what it says about you?

It seems like an odd question, but it really is a basic business question. The ramifications of how your invoice presents you are several, not the least of which is how you are viewed by clients when it comes to payment terms.

Some companies require freelancers to fill out and sign an “invoice” form. They do this for several reasons. First, it ensures that the information the company needs to pay the freelancer is all there and easily accessible. Second, it acts as reinforcement for the idea that the invoicer really is a freelancer and not an employee in disguise in contravention of IRS rules. Third, and perhaps most importantly to a freelancer, it acts as a way to classify a freelancer and thus apply payment terms.

Have you ever noticed that companies often ignore your payment terms: Your invoice says payable on receipt but you are paid in 30 or 45 days. Your invoice says payable in 30 days yet payment may take 60 days. Good luck trying to impose a penalty for late payment. In the battle of wills between publisher and freelancer, it is the publisher who holds all the cards, except if the publisher doesn’t pay at all.

(I have always found it interesting that a publisher feels free to ignore the payment terms and to ignore any late charges on invoices that a freelancer submits, but should the freelancer buy a book from the publisher and not pay on time, the publisher will hound the freelancer to death for both payment and any publisher-imposed late fees.)

What brings this to mind were recent discussions I had with colleagues who were complaining about how a publisher unilaterally extended the time to pay their invoices, yet that same publisher continues to pay me within the 15-day payment term my invoices set.

The primary reason for this difference in treatment is how the publisher views my business. I am viewed as business vendor, not as a freelancer.

This difference in view extends not just to how I am paid, but also to how clients treat me. For example, one client who insists that freelancers complete a publisher-provided invoice form and sign it, accepts my invoices as I print them and without my signature.

Another publisher sends files in which the figure and table callouts are highlighted and instructs freelancers to not delete the highlighting — but that does not apply to me. (In this instance, it doesn’t apply for at least two reasons. First, the publisher doesn’t view me the same as it views other freelancers. Second, I spent some time explaining to the publisher how I rely on EditTools while editing to increase consistency and accuracy and sent a sample file showing the highlighting EditTools inserts in action. I then explained that I could either leave all the highlighting or remove all the highlighting, their choice. The publisher chose removal. What is important is that the publisher did not immediately dismiss me by telling me to do it the publisher’s way or find work elsewhere. Instead, the publisher held a business-to-business discussion with me and saw and understood the value in the way I work.)

My point is that I have spent many years cultivating the view that I am a business, not a freelancer. Too many “clients” (both actual and prospective) view freelance editors as something other than a “real” business. I used to hear clients refer to freelance editors as part-timers and as people for whom this is a “vacation income.” I don’t hear that anymore but the attitude hasn’t changed.

Colleagues have told me that they get calls from clients who see no reason why the freelancer can’t do a job on a rush basis over the weekend at the same price as they would do it leisurely during the business week. Even when they try to explain that they are a business and that they can’t just drop everything, especially without additional compensation, the message doesn’t get through.

The solution to the problem is complex, not simple, but it begins with how we present ourselves and how we insist on being perceived. To my mind, it begins — but does not end — with the invoice. When your invoice asks that checks be made payable to Jane Doe and includes your Social Security number, you are feeding the image that this is a casual secondary source of income for you. Yes, I know and you know, and maybe even the inhouse editor knows this isn’t true, but accounts payable and the company as a company doesn’t see it that way.

If the invoice instead gives a business name, a name that makes it clear that the check will require depositing into a business checking account, and an employer identification number rather than a Social Security number, that anonymous accounts payable clerk is likely to begin to view you differently.

I think it also matters how the invoice is presented. I know that when I receive an invoice from someone that is just a Word or Excel document I think “not very professional,” especially if everything is in a bland Times New Roman font. Your invoice should be a “designed” form into which you enter data, and printed in PDF if sent electronically (color is not needed and even best avoided; it is layout that matters). I understand that the information will be the same, but information is not what we are talking about — presentation is important in establishing credentials as a business.

We’ve had these types of discussion before. For years I noted that to be treated as a business you must act like a business. Years ago, that began with the way you answered your telephone, which either lent credence to your being a business or to your editing being “vacation income.” Today, when so little is done by telephone, it is important that the material that a client sees conveys the image of a business. The image begins, I think, with the most important item we send a client — the invoice for our work (perhaps equally important are your e-mail address and e-mail signature: not having your own business name domain sends the wrong message, which is a discussion for another day).

Remember that the people who make the decision on how fast you will be paid are not the people who evaluate your editing skill. They are far removed from the editing process and make decisions about you based on things they see that are unrelated to your editing skills. Consequently, you need to create a professional image on paper, beginning — but not ending — with your invoice.

Richard Adin, An American Editor

July 10, 2017

From the Archives: The Business of Editing: Best Price “Bids”

(The following essay was originally published on
 An American Editor on October 10, 2012.)

I was recently asked to give my best price on a possibly large project. My client was soliciting my bid for my editorial services on a project coming from one of its clients. In other words, I would not be directly working for the ultimate client.

It was an STM (Science, Technology, Math) project and supposedly would run 3,000 to 4,000 manuscript pages a month. My client wanted a price for both the original editing and for a review of the editing. A lot of detail was missing, so before I would give a price, I asked some questions.

Over my 29 years of editing, I have been asked many times to bid against myself with the client promising a large amount of work. What I learned was that there is a difference between what is promised/proposed in terms of quantity and what actually is delivered, which means that in the past, I lowered my price expecting lots of work only to do much less work than “promised” for that lower price. Consequently, I no longer simply bid against myself; I attach conditions.

Make no mistake. When you are asked to give a price in such a situation, you are being asked to bid against yourself (as well as against others). You should not bid against yourself without assurances that the work will really materialize in the quantities and on the schedule given in the solicitation.

The first question I ask is how many pages are expected for the entire project. To me, it makes a difference if I am pricing for 3,000 pages or 18,000 pages of manuscript. The closer the count is to 3,000, the less inclined I am to lower my price because 3,000 to 5,000 manuscript pages is a normal-size project for me. Conversely, the closer it is to 18,000 or more manuscript pages, the more inclined I am to discount my price.

But then I ask what often turns out to be the stickler question: What is the minimum guaranteed manuscript page count? That is, what is the minimum amount of pages for which I will be paid regardless of whether the client sends me that amount of pages. The answer to this question tells me a lot of things about a project.

First, it tells me whether the original request’s numbers are puffery or real. If the original request spoke of 3,000 pages a month for 6 months but the minimum guarantee is just 3,000 pages, it is likely that the project is no more than 6,000 pages. The more the client is willing to guarantee, the more likely it is that the project is as claimed.

Second, it tells me whether the client simply is trying to get me to commit to a lower price. This is a major problem. Even if the project turns out as advertised, I run the risk of establishing a price that the client will expect for all future projects, regardless of size. This is no different from consumer expectations in a host of areas, but that doesn’t mean it is a desirable result when it comes to my pricing.

Third, it tells me I need to be wary and make sure that I know a lot more about the project than I currently do before pricing it. The very worst thing I can do when being asked to bid is to not know as much as I can about the project and the likelihood of it really being as described before I make a bid. Once I make my bid, I am stuck, and I see value to having been the culprit who sticks me with what turns out to be an untenable bid.

Of major concern is how difficult the editing will be. The more difficult the editing, the less inclined I am to lower my price. Consequently, I need to to see several samples, something I do not ordinarily ask for.

In the instant case, one of the things that was supplied to me were a couple of samples showing the type of editing expected and a copy of the ultimate client’s guidelines for editors. When I saw the guidelines, I knew there would be trouble. The guidelines was a list of more than 60 items that the editor was expected to do — many of which are not normally done by a copyeditor, and certainly not done without an extra fee.

Editing is a labor-intensive business, which complicates the matter of bidding. How little are my services really worth? If I ask my clients, they don’t respond with a value of my services; rather, they respond that they can hire an editor for $x less than they pay me. There is never a discussion about quality or speed or knowledge; the only discussion is about market availability of editors who will work for less than I charge, and it is this single dynamic that has brought about the request for bidding for editorial services.

Sometimes there is little that one can do except participate in the auction. When I am in such a position, as with this recent request, I condition my bid on three things: (a) there has to be a minimum guaranteed number of manuscript pages within a certain period of time for which I will be paid regardless; (b) the quoted price is the price only for this project and not transferable to any other project; and (c) after x number of manuscript pages have been edited, the bid price will be revisited to be certain that there were no “hidden” complications that should have been included in the solicitation or that there are no problems that arise that are out of my control that warrant a higher price than the bid price.

A major problem of bidding against oneself is that it is difficult to protect oneself and still get the job. But experience has taught me to be suspicious of jobs that have no flexibility and I would prefer to not get the work than to get work on which I cannot make any money.

Which raises another matter about bidding. When I bid on a project, I have a firm grasp of exactly what services I am willing to perform for what price. Consequently, when I am asked to bid on a project that wants more services, I start my evaluation from the price point that I would normally charge for providing the requested services. It is a bad idea to have a single price for copyediting because that doesn’t consider the various services that can be provided, even if 99% of the time that single price is the price you charge or bid.

In this case, I bid much higher than my normal copyediting rate, but lower than the rate I would normally charge for editing performed with all of the required services. As I know who the ultimate client is, I do not expect to “win” this bid based on the price and conditions I submitted. I assure you, I will not shed a single tear should my bid be rejected.

Richard Adin, An American Editor

July 5, 2017

From the Archives: The Business of Editing: Why $10 Can’t Make It

(The following essay was originally published on
An American Editor on February 19, 2014.)

In a previous essay, The Business of Editing: Worth in the Decision-Making Process, I wondered why editors and those who use our services attribute so little worth to the value of what professional editors do. As I noted, we are a large part of our problem because we accept — and even solicit — work at a price that cannot provide a sustainable lifestyle.

What brings this to my immediate attention, in addition to the experience I related in that essay, are the constant notes I see on various forums, including the “professional” LinkedIn forums, from “professional” editors who are willing to edit a manuscript for $10 or less an hour — and when questioned about the economics of such a fee, they vigorously defend it.

Let’s start with some data (all from “Opening Remarks,” Bloomberg BusinessWeek, February 17-23, 2014, pp. 10-13):

  • Minimum wage for tennis ball boy in Chennai, India: 37¢
  • Price of a Starbucks Frappucino in New York City: $5.93
  • One-tenth of 1% of hourly pay of JP-Morgan Chase CEO Jaime Dimon (based on 60 hours/week, 50 weeks/year): $6.66
  • Poverty wage for a single parent with 2 children: $9.06
  • Average price of 3 lbs ground chuck beef: $10.77
  • Prevailing hourly wage for NYC laundry-counter attendants: $11.62
  • Median hourly wage in Mississippi: $13.37
  • Hourly wage paid by Henry Ford to auto workers in 1913 adjusted for inflation: $14.71
  • What the hourly minimum wage would be if it had kept pace with productivity growth: $16.93
  • Hourly wage required to afford a 1-bedroom apartment in San Diego: $20.24
  • Living wage for single parent with 2 children in Pascagoula, Mississippi: $22.27/hour
  • Living wage for single parent with 2 children in San Francisco: $29.66/hour
  • Living wage for single parent with 3 children in Shakopee, Minnesota: $33.28/hour
  • Adjusted for inflation, Americans’ real incomes have fallen 8% since the start of 2000
  • U.S. Census Bureau’s poverty threshold: $18,123/year

I am a firm believer that each of us needs to set our own rate. However, to be able to intelligently set my rate, I need to know precisely how much my effective hourly rate must be for me to earn a sustainable livelihood.

(By sustainable livelihood, I mean an income that lets me live comfortably and not worry about meeting bills or whether I can afford to buy a book or go to restaurant or buy a toy for my grandchildren. For a discussion of how to determine what to charge, see my five-part series, “Business of Editing: What to Charge.” This link will take you to Part V where you can find the links to the other four articles. The articles should be read in order.)

So, when I say $10 an hour for editing is not sustainable, I base that on an analysis of fact. Let’s look at the $10 per hour rate. (The same analysis method applies regardless of your country.)

In the United States, $10 an hour equals a yearly income of $20,800 if you work 52 weeks in the year and every week you can bill and collect $10 an hour for 40 hours. If you can only work 30 hours a week for 20 weeks, 40 hours a week for 25 weeks, and 10 hours a week for the remaining 7 weeks, you will earn a maximum of $16,700. Similarly, even if you can earn $10 an hour for 40 hours and do so for 40 weeks of the year, your gross income will be $16,000.

Remember that these figures are gross income; let’s work from the best scenario, $20,800 per year. In the United States, you must pay the self-employment tax. This is the one tax that cannot be avoided. It amounts to 13.5% of earnings, which on $20,800 equals $2,808. Your yearly income has just been reduced from $20,800 to $17,992 — and nothing has been paid for except the unavoidable self-employment tax which is your contribution to Social Security and Medicare.

To do business these days, an Internet connection is required. I suspect it is possible, but I do not know anyone who pays less than $35 a month for the Internet ($420 per year). I also do not know any editor who does not have telephone service, usually at least cell phone service and often both cell and landline service, which runs about $50 a month ($600 per year).

I won’t add a charge for computer hardware and software; let’s assume that was bought and paid for last year. We now are at a “net” income level of $16,972. We haven’t yet paid for rent, food, gasoline, health care, television, clothing, heat and electric, and the like. In my area, the average rent for a studio apartment runs $972 per month. Assuming you can get one of the least-expensive studio apartments available and that it includes heat and electric, the cost would be $700 per month ($8,400 per year), which drops our available income for other necessities, like food and healthcare, to $8,572.

Food is always difficult, but I think $100 per week on average is probably reasonable, which means $5,200 per year, leaving us with $3,372. Do we really need to go on?

Can you scrape by on $10 an hour? Sure. People live on even less. But the biggest fallacy in this analysis is the base assumption: As an editor, you will have 40 hours of paying and collectible work every week for 52 weeks — that is, no downtime. It does happen, but the usual scenario is that an editor ends the year having worked fewer than an average of 40 hours per week and fewer than 52 weeks during the year.

Yet the expenses don’t fluctuate. The rent will remain the same whether you work 52 weeks or 32 weeks, 40 hours or 20 hours. Similarly, the telephone and Internet bills will likely remain the same. The bottom line is that $10 an hour is only doable under ideal conditions and even then is barely doable.

The $10/hour wage has multiple effects in addition to not being a “living” wage. The more often editors say they will work for that amount, the more difficult it is to rise from it. If a goodly number of editors are willing to work for that price, then the market price is being set.

I have discussed the hourly number with a number of clients. I have asked them about the basis for the hourly rate they pay and when it was last raised. Several have told me that they have not raised the hourly rate since the early 1990s. The reason is that there is a flood of editors willing to do the editing for a price that equals or is less than their hourly rate, so why raise the rate — the market is not demanding that the rate be raised and because of industry consolidation, editorial quality is not high on the list of corporate objectives.

Consequently, we are often our own worst enemy when it comes to rate setting. I know that when people ask on the lists about what to charge there is almost always a response that points to a published survey that quotes a higher-than-$10-per-hour rate, but then the flood of “I’ll edit for less” messages begins. There isn’t an easy solution to the free market problem except for this: Before setting your rate and agreeing to work for a rate, know what rate you need. I think those who low-ball rates would be less likely to do so if they really analyzed their needs.

The only other point I constantly raise with clients and potential clients is that the truly professional editor cannot and will not edit a manuscript for a nonsustainable rate.

Richard Adin, An American Editor

June 28, 2017

From the Archives: What to Charge (Part V)

(The following essay was originally published on
An American Editor on August 19, 2013.)

The previous four parts of this series (I, II, III, and IV) discussed the effective hourly rate, how to calculate it, and how track it. The remaining question, as several colleagues have noted to me, is: “Why bother?”

Professional editing is a business. If it were a hobby, it would not matter whether or not we made a profit because we would be pursuing editing purely for our love of editing. Yet, for most of us, editing is a business, and as a business we need to be concerned with profit and loss. Even businesses that are organized as nonprofits need to be concerned with profit and loss. The difference between a for-profit and a nonprofit business arrangement is that the former distributes any profit to its “owners” whereas the latter uses any profit to further its goals (i.e., there is no distribution to owners because there are no “owners”).

A business cannot make a profit if it does not generate income in excess of its costs of doing business. It’s a simple concept but one that seems to be just outside the grasp of many business owners.

Knowing whether we are making a profit or suffering a loss is important to editors because we, just like all other businesses, need to constantly evaluate whether what we are doing is worth continuing to do. If we are not making a profit and if we cannot adjust what we are doing so that we do make a profit, perhaps we need to pursue a different career path or conduct our business differently.

Tracking one’s effective hourly rate (EHR) is a way to determine the health of one’s business. It is also an alert system to tell us if and when we need to make adjustments in how we operate our business.

If we know, for example, that no matter what we do, our current client base will not pay a rate higher than $20 an hour (or its equivalent), and if we know that our EHR, as we are currently operating, needs to be higher than what our client base is willing to pay (the required EHR), then we know that we need to make adjustments in how we conduct our business.

This is the critical and most important reason to know and track the EHR. When we operate without knowledge of our EHR, we assume that if we bring in $1,000, it represents mostly profit. This is the allure of the hourly rate: an hourly rate makes us believe that we are earning a decent income because we are assured that for every hour we work, we earn that hourly rate. In real-world business, however, it is not so simple.

Editors, like all businesses, have a production line. I know we do not like to think in those terms, but the fact is that we do operate a production line. (A “production line” is not synonymous with “assembly line.” Production line refers to the manner and order in which we do our work.) We receive a manuscript and we take certain steps in dealing with the manuscript, steps that we repeat with each project. For example, the first thing we may do is clean up the file to remove extraneous elements like extra spaces. Then we may break out reference lists from the main text, or put figure legends in a separate file, or insert bookmarks, or whatever. Ultimately we get to the editing phase, but it is rarely the very first thing we do.

As part of our production line we may do multiple passes. We may do a rough edit, then a second edit, then a cleanup, then a final pass to search for anything we may have missed. What exactly each of us does is not as important as that we recognize we have these steps and that we can articulate them. The articulation is important because part of what we need to do if we are not making a profit is determine what steps in the production line can be omitted or modified so as to make the step more efficient.

One publisher, for example, looks for the least-expensive editor who meets certain minimal qualifications and then provides a multipage checklist of things it expects the editor to do. There are several interesting aspects to the list, one of which is the blurring of the roles of the developmental editor and the copyeditor. The publisher expects copyeditors to fulfill both functions for one very low price. In addition, the publisher has its own style. which differs from standard styles in small, subtle ways. However, failure to comply with the publisher’s house style results in requests for the editor to repeatedly go over the manuscript to fix it for no additional fee.

Faced with not earning the EHR, an editor has to determine what changes can and must be made in the editor’s production line in order to earn the EHR. Will, for example, eliminating a second or third pass over the manuscript reduce the hours sufficiently to raise the EHR? Will changing the production line to a single-pass process do the trick? What other adjustments can be made that will result in increasing the EHR? Or does the editor need to drop this particular client? Can the editor afford to drop this client (i.e., how easily can the revenue this client generates be replaced)?

The reason to bother with calculating and tracking the EHR is to create a foundation for making business decisions. Bringing in revenue of $50,000 a year is nice, but meaningless, if we do not know what our cost of doing business is or whether the procedures we follow are hampering, increasing, or having no effect on our profitability — or even how many hours we need to work to make that income. It is also meaningless if we do not know whether doing work for a particular client is profitable. If working for a particular publisher is not and cannot be profitable, should we not know this so we can decide whether or not to drop the publisher and find other clients?

Perhaps even more importantly, bothering with the EHR lets an editor determine how well the editor is doing over time. Is the editor’s speed and efficiency and productivity increasing or decreasing or remaining stable — month to month, year to year?

The EHR also spreads the earning requirements over the full work week, thus accounting for the nonbillable time we need to devote to business, such as for marketing. It also is (usually) a rate we can more realistically expect clients to accept. More importantly, unlike an hourly rate, the EHR forces us to think in terms of a business week and not just in terms of billable hours. Too many small business owners think that the only hours that are part of the business calculation are the billable hours, which is incorrect.

Finally, the EHR, unlike an hourly rate, lets us fully measure productivity and efficiency. The more productive and efficient we are, the more often we exceed our EHR. When we charge by the hour, we can never exceed that hourly rate.

The EHR is foundational information that acts as a guide to business decision making. It is something against which a business can measure what the business is doing and determine whether the business is on the correct path or needs to alter its course — making calculating the EHR worthwhile.

Richard Adin, An American Editor

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