Business of Editing: Getting Ready for the New Year

In a matter of hours, the new year will arrive. Are you prepared?

Preparation for the new year involves mundane tasks like getting your “books” (accounts receivable and payable) ready for the new fiscal year and esoteric tasks, such as analyzing the past year’s business and trying to predict (and prepare for) the trends of the new year.

Getting my fiscal books in order is pretty easy. I use QuickBooks Pro because of all the analytical tools it offers. Using QuickBooks means that I have nothing to do to prepare for the new year, at least as far as that program is concerned. An advantage to QuickBooks is that it is easy to compare time periods. Knowing how the ending fiscal year stacked up against the prior year gives me an idea of how accurate my predictions for the now-ending year were and how successful my efforts at self-promotion were.

I also use Excel. I have found Excel to be the best (for me) method of tracking project information that QuickBooks doesn’t in the absence of expensive customization, such as the number of hours a project took and the pages-per-hour rate. (QuickBooks will let me input the information, but there isn’t a built-in analytical tool that will make use of the information or make it readily accessible.) For me, this information is very valuable because it allows me to track my actual performance against my required Effective Hourly Rate (EHR) and my desired EHR.

Excel also lets me see at a glance the projects and the rates I have received from clients. Because Excel is intended for customization, I have been able to create data sheets that provide me with valuable business information. And because I created a master version of the forms, it is easy to set up the spreadsheets for the new year.

Those are the mundane tasks; they require little creativity or speculation to set up each year. Most of my time, however, is devoted to the esoteric tasks — trying to determine trends for the upcoming year and how I can improve my business.

The esoteric begins with an analysis of the closing year. For example, was my business up or down or neutral? Did I generate, more, less, or the same revenue as the prior fiscal year from more, fewer, or the same number of projects as the prior year? The answer to this latter question is particularly important in my year-ending analysis. What I do not want to discover is that I generated the same income but from more projects; what I do want to discover is that I generated more income from fewer projects.

I also want to know whether clients have changed over the year. I also want to know if the types of projects changed. And I want to know whether any (and how many) projects were unique and unlikely to be replicated in the new year. By this, I do not mean subject matter or title; rather, I mean, for example, was a project’s size unique and not likely to be replicated or were a larger number of projects on shorter schedules, which results in a higher fee, than usual.

With your sharp editorial eye, you will have noticed that I am a great believer in data and the data-driven business, and the planning that the data lets me do. Planning is important for lots of reasons, not least of which are taxes and investment. I have learned over my now 31 years in the business that I can fairly closely predict what my business will be like in the new year if I follow a plan. I have also learned the importance of creating a plan for the new year.

When I analyze the data of the ending fiscal year and the data of past years, I can see what steps I took that brought me new and “improved” business and what steps did nothing and what steps cost me time, money, and effort for no reward and perhaps even a loss. No plan is perfect and no plan is guaranteed to succeed, but having a plan is like having a compass in the woods.

Consider just one element: advertising. At the end of the fiscal year I carefully analyze what I spent advertising, how I spent it, and on whom I spent it. I compare that information to the same information from past years. What I learn is that dollars spent on method x generated little to no business, whereas dollars spent on y generated a significant increase in business. But I also learn whether the dollar amount spent on y is excessive for the amount of business generated — it makes little sense in my business plan to spend $1,000 to generate $1,200 worth of business: the ratio is wrong. However, it does make sense to spend $250 to generate $1,200 in business: the ratio is right.

And because I track my time carefully, I can also discover whether the time required by a particular advertising campaign is worth spending: sometimes one is better off spending the time “regenerating” oneself by reading a book than spending it on promotion efforts that bring little reward.

This analysis is particularly important when much of the “advertising” that is done to day amounts to participation on social media. Does the time spent on LinkedIn, for example, bring in sufficient business to justify the spending of the time? A common mistake that is made in making such a determination is not assigning the time spent a dollar equivalent; that is, each hour spent on social media should be “charged” at least at your required EHR (and better yet, at your desired EHR). If you spent 100 hours on social media in 2014 and your required EHR is $50, then the time should be valued at $5,000. If, as a result of your spent time you brought in $2,000 in revenue you would not otherwise have had, then social media is a losing proposition. (The value of social media is not just in new revenue, and those other values should be factored in if important to you. For some people, those other factors are more important than revenue; for others, only revenue matters.)

However, as part of that analysis, you also need to analyze the $2,000 in revenue. Was the work you did to earn that amount at, above, or below your required EHR?

The point is that with the change of years, it is time to prepare for the new year and make a plan to tackle the challenges you can expect. If your business was not where you wanted it to be in the ending fiscal year, then it is time to set it on the correct course. Analyzing the ending fiscal year and past fiscal years is the start, but it is not the end. You also need to try to analyze and predict industry trends. (See Are Boom Times Coming? for an example of trying to trend spot.) If you can identify a trend for your niche, you can try to exploit it in the upcoming year.

Get prepared for the new year now!

Richard Adin, An American Editor

The Business of Editing: New Year, New Books

It’s a new year and one of the first tasks I undertook as the calendar changed from 2012 to 2013 was to create the “books” I will use during 2013 to track how my business is doing. It doesn’t take me long to create the new books, less than an hour, but it is — aside from obtaining business to keep track of — the most important task I will undertake in the new year.

I know that there are many ways of keeping track of how well one’s business is doing. Over my 30 years as a freelancer, I have modified not only what information I keep, but how I keep it. About 10 years ago, I settled on my current system, which has been holding up well for me.

But before deciding how to keep the records, the decision as to what records to keep must be made. Once I decided on the information I needed, I then decided on how I was going to keep and use the information.

Basically, in addition to the usual chores of tracking income and expenses, there is certain information I want to know about each project I work on. Item #1 in the must-know column is how much time I am spending working on a project. Even the editors who subcontract to me are required to include on their invoices the number of hours worked.

Don’t misunderstand: I do not care if a subcontractor takes 10 hours or 30 hours to complete a project; I care that the effective hourly rate I am receiving from a client is sufficient to warrant continuing to do work for the client and I care that the subcontractor is making a reasonable effective hourly rate. (I discuss effective hourly rates in Thinking About Money: What Freelancers Need to Understand.) As part of the effective hourly rate discussion, I also keep in mind my Rule of Three, which is a critical determinant of whether I keep or fire a client. (Note, however, that this rule does not apply to one-shot projects such as are often encountered when working directly with authors.)

Keeping track of hours and my effective hourly rate also serves as a clue as to whether I am working as efficiently as I can. The data give me information so that I can determine that over the course of time my effective hourly rate for a project should be at least $x; that is, the average of all my projects over that period. If that number is $75 an hour and I find that my most recent projects came in at $35 to $50 an hour, I know I need to do some investigating. So, accurate hours are important — even though I charge a per-page or project rate rather than an hourly rate, my thinking is geared toward the effective hourly rate (EHR) statistic.

Another bit of information that I want to know is how projects break down by individual publishers and within individual publishers, by inhouse editor. Am I getting a balanced workload from a publisher/editor or are the projects skewed in one direction? If skewed, are they skewed toward a low EHR or a high EHR?

Along with that information, I also want to know how problematic a project was. For example, was the project loaded with incomplete references that were almost uniformly in the wrong style and thus requiring an excessive amount of time to edit? Consequently, I also rate a completed project on a scale of 1 to 10 (1 being easy, 5 being average or “balanced,” 10 being excessively difficult). If I find that a particular inhouse editor sends me only projects that rate 8 or 9, I think about whether I want to continue to accept projects from the editor.

There are a lot of factors that go into my rating a project, including how much information I did not receive about a project that I needed and how extensive the client’s style exceptions are (e.g., it raises the difficulty number if the client tells me to adhere to AMA 10th ed. style, but then sends me a list of 100 exceptions). This is the most subjective of the data I keep, but it is important because the last thing I want is to find that nearly all my projects are in the 8 to 10 range, but is without compensation that matches the difficulty level.

Of course, I also track page count, but do so for more than calculating the EHR: I want to track ratings along with manuscript length. This ratio is one reason I prefer very large projects (i.e., thousands of manuscript pages) — such projects allow me to get a rhythm going and make more effective use of editing tools such as EditTools. Page count also tells me how busy I am and whether or not I should consider doing more books in a particular series.

There are other little bits of information I track, but the above are the keys. I use both QuickBooks Pro and Microsoft Excel to maintain my records. QuickBooks Pro makes it easy to compare performance over time; for example, I can easily compare income and expense information for the first month of 2013 against the first month of 2012, 2011, and as far back as my first use of QuickBooks Pro. QuickBook Pros also allows me to check on sources of revenue in detail. And tracking accounts receivable is a breeze. (It also makes it easy to generate the reports I need for my accountant for tax filings.)

Excel lets me easily keep duplicate information about billing (I like to know that should one program fail for some reason, I have an alternative handy) and it allows me to track the bits of information I am interested in collecting and to manipulate them for analysis. QuickBooks Pro doesn’t require a resetting of the forms each year — it is a continuous history; Excel, however, does require me to reset the forms each year. I’m sure that a more advanced user of Excel wouldn’t have to reset the forms, but using Excel is not my job, editing is, and it is pretty easy to reset the forms for each new year. (I do retain, however, the prior years’ forms for a comparative history. I have Excel information going back to my first days as a freelancer.)

Now that we are at the beginning of a new year, you should think about what data you want to keep and how to keep it. The key is to make sure that you have enough data to make business-related decisions on facts and not on supposition. Keeping track of data is not time-consuming; it is necessary to maintaining a healthy and prosperous business.