It’s All About the Benjamins! EditTools’ Time Tracker (Part I)

By Richard Adin

In the early years of my freelance editing career, I joined the EFA (Editorial Freelancers Association) as a way to “meet,” via its chat list, other freelance editors. One thing that struck me was how united — except for me and a very few others — EFA members were in their approach to the business of editing. We outliers viewed our chosen career as a business, while most of our colleagues viewed what they did as more like art; that is, they paid as little attention as possible to the business side of freelancing and as much as possible to the skill (editorial) side.

There were many discussions about financial struggles, poor pay, added tasks, multiple passes, and the like. There were few discussions (and very few discussants) regarding advertising, promotion, business practices, calculating what to charge, negotiating — any of the business-side skills. And when business-oriented discussions did start, they often ended quickly because colleagues piled on about how craft was so much more important than something as pedestrian as business and money.

As I said, I was an outlier. For me, it was about the Benjamins (the money). Freelancing was my full-time job — my only source of income. I had a mortgage to pay and two children to feed, clothe, keep healthy, and school. I had no trust fund or wealthy relative who couldn’t wait to send me money on a regular basis. Although how well I edited was very important to both myself and my clients, the money was equally important to me.

I recognized from the start that if I didn’t pay close attention to the business side of freelancing, my family and I would be in trouble. When my son needed $5,000 worth of dental work, it was my job to make sure he got it. It was not my job to tell the dentist, “Sorry, but I am an artisan without sufficient income to pay for your services.” When it came time for college, it was my job to try to get my children through with minimal or no debt for them to deal with upon graduation. And this doesn’t even address such things as providing for my retirement or providing health insurance and auto insurance and the myriad other things that are part of modern life.

In other words, for me, it was all about the Benjamins in the sense that my editorial work could not be viewed through rose-colored glasses as if the only thing that mattered was artisanship.

Which brings me to the point of this essay: EditTools 9 and the project management macros that are part of the just-released EditTools 9 (www.wordsnSync.com).

In Business, Data Drive Success

What seems a lifetime ago, I wrote a series of essays for An American Editor about calculating pricing and why it is important not to look at rate surveys or ask colleagues for guidance (see, for example, the five-part essay “What to Charge,” beginning with Part I, and “The Quest for Rate Charts.” ) Yet, when I go to chat lists like Copyediting-l, it is not unusual to find colleagues asking “What should I charge?” or “What is the going rate?” Nor is it unusual to see a multitude of responses, not one of which is really informative or meaningful for the person who asked the question.

When I meet or speak with colleagues and these questions come up, I usually ask if they have read my essays (some yes, some no) and have ever actually gathered the data from their own experiences and used that data to calculate their personal required Effective Hourly Rate (rEHR) and their actual EHR, both for a project and over the course of many projects. Nearly universally, the answer to the latter questions (about data collection, rEHR, and EHR) is “no.” Why? Because “it is too much effort” or “the XYZ rate chart says to charge X amount” or “I can’t charge more than the going rate.”

But here are the problems: If you don’t collect the data,

• you can’t determine what you are actually earning (as opposed to what you are charging; you can be charging $3 per page but actually earning $45 per hour, or you can be charging $5 per page but actually earning $9.25 per hour);
• you can’t know what is the best way to charge to maximize your EHR for the kind of projects you do;
• you can’t determine whether some types of work are more profitable for you than other types; and
• you can’t easily determine what to bid/quote when asked for a bid/quote for a new project.

Ultimately, if you don’t know your rEHR, you don’t know if you are making money or losing money because you have nothing to compare your EHR against.

It is also important to remember that there are basically two ways to charge: by the hour or not by the hour (per word, per page, per project). Although many editors like to charge by the hour, that is the worst choice because whatever hourly rate you set, that is the most you can earn. In addition, it is not unusual to start a project and suddenly find that it is taking you less time — or more — to work than originally expected. If you charge by the hour and it takes less time than originally thought, you lose some of the revenue you were expecting to earn; if it takes more time, and assuming nothing has changed, such as the client making additional demands, you run up against the client’s budget. I have yet to meet a client with an unlimited budget and who doesn’t rebel against the idea that you quoted 100 hours of work but now say it will take 150 hours and expect the client to pay for the additional 50 hours.

However, to charge by something other than the hour requires past data so you can have some certainty, based on that past experience, that you can earn at least your rEHR and preferably a much-higher EHR. The way it works is this:

If you charge $3 per page for a 500-page project, you know you will be paid $1,500. If your rEHR is $30, you also know that you have to complete the job in no more than 50 hours. If you can complete the job in 40 hours, the client still pays $1,500 because the fee is not tied to the time spent but to the page count, and your EHR is $37.50. If you were charging by the hour and charged your rEHR of $30, you would be paid $1,200 — a $300 revenue loss.

All of this is based on knowing your data. During my years as a freelancer, I accumulated reams of data. The data were not always well-organized or easy to access until I got smarter about how track the information, but it was always valuable. Within months of first collecting data, I learned some valuable things about my business. I learned, among many other things, that for me (I emphasize that this applies solely to me and my experience):

• medical textbooks earned a higher EHR than any other type of project;
• charging by the page was better than charging hourly;
• calculating a page by number of characters rather than words was better;
• high-page-count projects that took months to complete were better than low-page-count projects (I rarely edited books of fewer than 3,000 manuscript pages and usually edited texts ranging between 5,000 and 7,500 manuscript pages; I often edited books that ran between 15,000 and 20,000+ manuscript pages);
• working directly with an author was highly problematic and to be avoided;
• limiting my services to copyediting was best (I phased out proofreading and other services);
• working only with clients who would meet my payment schedule was best;
• saying no, even to a regular, long-time client, was better for business than saying yes and not doing a topnotch job because I hated the work.

I also learned that investing in my business, such as spending many thousands of dollars to create and improve EditTools, paid dividends over the long term (the more-important term).

And I learned a lesson that many editors don’t want to accept: that sometimes you lose money on a project, but that is no reason not to try again. Too many editors have told me that when they have charged by a non-hourly method, they lost money, so they returned to hourly charging. How they know they lost money, I do not know, because they had no idea what their rEHR was, but their assumption was that if they earned less than they would have had they charged by the hour, they lost money. This is not only incorrect thinking, it is short-term thinking.

Such decisions have to be made based on data. Because collecting and analyzing accurate data is a stumbling block for many editors, EditTools 9 includes the Time Tracker project management macro, discussion of which will begin in Part 2 of this essay.

Richard (Rich) Adin is the founder of the An American Editor blog, author of The Business of Editing, owner of wordsnSync, and creator/owner of EditTools.

The Business of Editing: Recordkeeping I

Have you ever wondered why some businesses are successful and others are not? One key ingredient to being successful is knowledge — knowledge about one’s business.

Think about all the ways companies like Google and Facebook collect data on those who use their services — all the ways they “invade your privacy.” Why do they and other companies mine their users for information? Because data is important and these companies either want to sell others data about you or want the data to determine how best to reach you.

It’s true that editors don’t need the same information or even the same detail information, but we still need information about how our business is running. We need to know, for example, what our minimum effective hourly rate needs to be in order to ensure that we charge clients enough to meet our bills. (For a discussion on the effective hourly rate and what to charge, see the 5-part series Business of Editing: What to Charge. Part V includes links to the prior parts. The series should be read in order.)

Note: The following discussion centers on editing and editors. Modifications need to be made for writers and other freelancers, but the basic concepts hold true.

To determine what to charge, how to charge, and whether we are doing the best we can, we need to have data. Consequently, we need to keep records of what we do and know how to analyze those records.

Rule number 1 is to always track your work time. All analysis begins with knowing the amount of time spent on a project, how much time was spent working during a week, how many weeks of work we have over the course of a year. And we need to distinguish between billable work and nonbillable work. Every business has both, but it is the billable work that has to pay for both itself and for the nonbillable work. Nonbillable work includes the time we spend marketing and participating in online discussions and anything else that is work-related but for which we have no client to whom we can bill the time.

Rule number 2 for editing is to always convert a project to pages. It doesn’t matter what formula you use as long as whatever constitutes a page remains constant. By constant I mean that you use it for all your calculations, including how you would charge a client if you were/are charging using a per-page method.

Rule number 3 is that you collect the data for each project as a standalone as well as for projects cumulatively. That is, Project Alpha may provide data of 32 hours, 210 manuscript pages, and a fee of $800, and we need to know that information for Project Alpha. Project Beta’s data may be 21 hours, 250 manuscript pages, and a fee of $525. Project Gamma’s data may be 41 hours, 207 manuscript pages, and a fee of $1025. Cumulatively, Alpha, Beta, and Gamma’s data equals 94 hours, 667 manuscript pages, and $2350 in fees. As additional projects are completed, the cumulative numbers will grow.

Hours should be kept in quarter hours, rounded up; that is, if a project takes 5 hours and 3 minutes according to our timer, it should be calculated as 5.25 hours. There is always some unaccounted for project time and the rounding up to the nearest quarter hour accounts for at least some of it. My experience has been that over the course of time, the rounding up actually undercounts the actual time spent on work, but not by enough to matter for our purposes.

What do we do with this information?

The data used for Projects Alpha, Beta, and Gamma above assumed the billing method was $25 per hour. But we need to analyze the data to determine if this was the best billing method for us.

The very first bit of information we need to determine is what our effective hourly rate (EHR) needs to be. Is $25 an hour sufficient? It may be all that we can charge our clients for competitive reasons, but that does not mean $25 meets our required EHR. (Again, see the discussion of EHR referred to above.)

If what we can charge our clients and our required EHR do not at least match, or, better yet, exceed our EHR, then charging by the hour is not in our best interests. Even if the hourly rate we are charging meets or exceeds our EHR, charging by the hour may not be in our best interests.

Next we need to analyze each project on its own merits. Always remember that when we charge by the hour, the hourly rate we are charging is the most we can earn. Alpha was 210 pages, took 32 hours, and earned us $800. If we had charged $3.50 per page, we would have earned $735, or $22.97 an hour. In this instance, it appears that the hourly rate was advantageous.

Beta was 250 pages, took 21 hours, and earned $525. At $3.50 per page, the fee would have been $875 or $41.67 an hour. Here we took a beating charging by the hour. Gamma was 207 pages, took 41 hours, and earned $1025. At $3.50 per page, we would have earned $724.50 or $17.67 an hour. Again, on an individual basis, the hourly rate was best.

But what about cumulatively? Together the three projects were 667 pages and 94 hours for a total fee of $2350. At $3.50 per page, the fee would have been $2334.50, or $24.84 per hour — in other words, either choice was about the same. And if our required EHR is $25, the data, so far, shows that either hourly or per-page is an OK choice.

Where we have trouble is if our required EHR is higher than the $25 that competition will let us charge. We also have trouble if clients balk at paying for 41 hours for a 207-page project. Also, as we add more projects to the databank, we may find that Project Gamma was an anomaly and Project Beta was more typical, in which case we are losing significant sums by charging by the hour.

But the point is the importance of recordkeeping. Because we have the data, we can verify our choice of how to bill. In the absence of the data, we do not know if we are making the smart choice or not.

The data also gives us insight into projects. For example, I would want to know why the shortest project took the longest amount of time to complete and the largest project took the least amount of time. What was the difference? Did I do something differently? Is there something different that I could have done?

Although the data indicates that financially we chose wisely for these three projects, it also points out that there is something we are doing incorrectly. Our goal should be to do more in less, that is more pages of editing in less time editing.

The other purpose of recordkeeping is to take a long view of our work. I discovered early in my career, that as the data included more projects, I was losing significant amounts of money adhering to the hourly based system. Year after year the data demonstrated that while on some projects I lost money charging by the page, overall I did much better, which is why I have charged by the page for 28 years — the yearly and multiyear data keep reinforcing that per-page is best for me, in addition to being the only effective way to meet and exceed my required EHR.

I review my decision regularly. Should the data change, I would change. But I would not base a decision on just a few projects nor on anecdotal evidence. Consequently, I maintain records on every project. Recordkeeping is vital to business success because that is how the data needed to make business decisions is obtained.

(For the next part, see The Business of Editing: Recordkeeping II.)

Richard Adin, An American Editor