An American Editor

October 2, 2017

The Business of Editing: Do You Know Your Business’ Health?

Discussions in online forums are fascinating. Pick an editorial forum and you are bound to find that sometime in the forum’s recent history, at least one, and even more than one, editor has asked “What should I charge?” or “What’s the going rate?” Both persons new to editing and experienced editors ask that question.

There are a lot of things wrong with the answers that are usually given, and we have discussed any number of times how to calculate what you, individually, should charge for your services. Yet there is another aspect to why the answers are generally wrong and why the question should not be asked of colleagues — your business’ health.

Let us assume that you ask “What should I charge?” and that the consensus responses are $25/hour. That is the extent of the online exchange. No analysis of the response is made that goes beyond “This is what I charge” or “The XYZ survey says” or “This is what seems to be what most responders to such questions give.” It is the lack of analysis that will hurt your business the most.

When someone responds $25/hour, what do you know about the responder’s business? For example, do you know

  • how many hours of editing they do a year
  • how many clients they have
  • how many years of experience they have
  • what types of manuscripts they edit (e.g., fiction or nonfiction, romance or biography, academic or nonacademic, STEM or medical)
  • who their clients are (e.g., independent authors, bestselling novelists or barely selling novelists, doctoral students, well-known publishers, small presses, academic presses, packagers, law firms, pharmaceutical companies, journals, English-as-a-second-language authors)
  • among their client types, the percentages of each type
  • their annual gross income solely from editing for the past year; the past 5 years
  • whether editing is their full-time occupation
  • whether they have another, primary source of income so that the household is not dependent on their earnings or if they are the sole income source for their household
  • whether their editorial business is profitable year after year
  • what their local cost of living is in comparison to yours
  • what debts, if any, they have that would affect the amount they charge

The list can go on but you get the picture. You are taking advice for your business from someone whose circumstances you do not know.

General advice about how to calculate what you should charge doesn’t require in-depth knowledge of the person offering the advice — but advice on precisely what to charge does. It matters greatly whether the person offering the advice runs a business that loses money year after year or turns a large profit. It matters greatly whether they work 25 hours a week for 40 weeks a year or 35 hours a week for 50 weeks a year. And it matters greatly whether what they earn is supplemental income on which the household is not dependent for survival or their income is the only household income and its absence would jeopardize survival.

In other words, you need to know your business’ health and their business’ health.

A healthy business is one that is satisfactorily profitable. The profit may be $1 or $100,000 — the number that satisfies you is personal to you. But profitable it must be; it cannot be costing you money to be in business.

So we come back to the fundamentals of the required Effective Hourly Rate (rEHR) and the desired Effective Hourly Rate (dEHR). You need to know your rEHR before you can accept advice to charge $x/hour or that $x/hour is the “going rate.” Even if $x is truly the going rate, what does it matter if by charging $x/hour you do not earn enough to be profitable?

When assessing your business’ health, you need to have all your data at hand. You need to know, for example:

  • how many hours and weeks of work have you averaged over the past few years
  • the likelihood of your being able to maintain that amount of work over the coming year
  • how much you owe others
  • your living expenses
  • how much you need for a rainy day fund
  • your costs of doing business (e.g., marketing, internet access, computer hardware and software)

With this information, you can calculate your rEHR, which represents the minimum amount you can earn per hour to support your lifestyle. This number is fundamental to many business decisions you need to make, starting with whether you can afford to continue editing space opera novels for independent authors and ending with figuring out how to expand your business through marketing.

If your rEHR is high, that is, higher than you think or know the market will bear, then it will also act as an impetus for you to devise ways to make your workflow more efficient. I’ve told the story before about the origins of my EditTools macros, but I’ll repeat it here. I found that to earn my dEHR (not my rEHR) I had to either work longer hours every day or become more efficient in my workflow. The smarter way for me was to become increasingly efficient. As my efficiency grew, my work hours became fewer but my EHR grew. Eventually, I found that I could reduce my working hours by 25% yet raise my EHR so that it approached my dEHR. I was able to do this by creating EditTools macros. I invested upfront time, money, and effort so that I could repeatedly, over the long term, increase efficiency.

The dEHR is the hourly rate I would like to earn. It is not an hourly rate I can charge my clients, few would be willing to pay it. It is an EHR that is greater than my rEHR, which represents the minimum EHR I can earn to meet the costs of lifestyle. When I earn more than my rEHR, my business is healthy and profitable; when I earn just my rEHR, my business is healthy but not profitable; and when I earn less than my rEHR, my business is unhealthy and unprofitable — it is losing money and thus costing me money.

When someone online tells you that the going rate for copyediting is $25/hour and you do not know your rEHR, you do not know whether your business will be healthy, healthy and profitable, or unhealthy and losing if you charge that $25/hour. If you know your rEHR, then there is no need to ask others what to charge because you will know what you need to earn. Instead, you will need to focus on determining how to calculate your fee — hourly, page, project, word, character — to meet your rEHR and to work toward your dEHR.

It is important to think in terms of efficiency and EHR. And it is important to remember that if you charge your client by the hour, whatever you charge as your hourly rate does not change — $25/hour remains $25/hour — whereas if you charge by the page, project, word, or character, your EHR can fluctuate up and down so that the more efficient you are the higher your EHR can be.

Regardless of how you calculate your fee, the bottom line is that your business being healthy relies on your knowing your rEHR, not on what someone responds in response to “What should I charge?” or “What is the going rate?”

Richard Adin, An American Editor

September 13, 2017

The Business of Editing: Undercharging?

Recently, Jake Poinier wrote an essay titled “Stop Worrying About Freelancers Who Undercharge.” It is an interesting essay and one certainly worth reading, especially as the advice he gives, which is summed up in the article title, is sound — as far as it goes.

Overall, I agree with Mr. Poinier’s advice. However, two things particularly struck me about the essay. First, “undercharging” is never really defined. The implication is that people who charge on the low end of the fee scale are undercharging, or if your competitors charge less than you think is the correct rate, your competitors are undercharging. The second item that struck me is that the essay fails to give guidance as to what is a proper amount to charge. After all, undercharging only has meaning if there is a universally accepted amount against which to measure.

(Okay. Actually there is a third thing that I find bothersome: the use of “undercharge” to describe the issue. Undercharging and its opposite, overcharging, are generally associated with a seller–buyer relationship, not with a competitor–competitor relationship. Competitors underbid and undercut. The reason is that there has to be a universally definable and applicable sum against which under- and overcharging can be measured for everyone. That can occur with a readily defined product in a seller–buyer relationship, a good example being price shopping a specific model of automobile. In contrast, with undercutting [or underbidding] there is rarely [if ever] a standard sum; there are too many variables that are unique to each competitor so no standard price exists. Undercutting is relative to the competitor’s pricing strategy, not to identical goods and services. But for this essay, I’ll accept that “undercharging” is the correct term.)

These issues are not only intertwined but need to be tackled in reverse order. So I begin with the measure.

What is the proper amount to charge?

In the world of editing, there isn’t a readily definable, measurable, or acceptable “going rate.” When someone asks the question, “What is the going rate for copyediting?,” no single, universal rate is ever quoted. Just as importantly, there is no universal definition of what constitutes copyediting. True, there are some commonalities that nearly every editor will name but then there are the variations that appear when defining their own services.

If the service does not have a universally definition and if editors cannot state a “going rate” that every editor recognizes as the “going rate,” then how can anyone determine “what is the proper amount to charge?”

More importantly, this is a question that cannot result in universally accepted answer because for each of us the point at which loss becomes profit differs. As importantly, this number changes as circumstances in our life change. This doesn’t mean that there isn’t an answer to the question. It means that the answer is personal and cannot be found by asking in online forums.

The proper place to begin is — as I have stated numerous times — with determining your required Effective Hourly Rate (rEHR). (For details on how to determine your rEHR, see the five-part series, The Business of Editing: What to Charge.) If you do not know what you need to charge in order to be profitable, you cannot know whether you are undercharging — you need something to measure against.

This raises another point, which is implicit in saying that the answer is personal: each editor’s rEHR is personal and different from that of another editor. For example, in my case, my rEHR 25 years ago was significantly higher than my rEHR of today. Twenty-five years ago I had to plan on paying for college for my children, I had to support two automobiles, I had a mortgage to pay, I needed to fund my retirement. Today, my children are years out of college, my mortgage is paid, I only need one automobile, I no longer need to fund my retirement. My circumstances have changed and so has my rEHR. If 25 years ago my rEHR was $50 an hour, then I needed to earn the equivalent of at least $50 an hour to meet my expenses. If I earned $49 an hour, I wasn’t earning enough to break even — I was losing money.

It made no difference if my colleagues were charging the equivalent of $20 per hour — I couldn’t charge that and put food on the table if my rEHR was $50. Were colleagues who were charging $20 undercharging? Or was I overcharging?

Colleagues charging $20 were undercharging if their personal rEHR was higher than $20; if they had calculated their rEHR and it was $15, then they were not undercharging for themselves. That they were able to charge less than me and still be profitable has nothing to do with undercharging — instead, it is a reflection of their business status (and, perhaps, acumen).

That today my rEHR is significantly less than it was 25 years ago and thus permits me to charge significantly less than what a colleague can charge for copyediting (assuming my colleague knows her rEHR and doesn’t charge less than her rEHR) does not mean I am undercharging — underbidding, perhaps, but not undercharging.

What is undercharging?

Editors do not define the services they provide under the rubric “copyediting” identically. Each of us defines what we will do in exchange for a quoted fee. That is the basis for the adage “quality, speed, cost — pick any two.” The idea is that something must be sacrificed and we often define “copyediting” based on this adage.

If, for example, “copyediting” usually includes basic fact checking but the client wants the 500-page manuscript edited in 2 weeks and is willing to pay $500 for our efforts, our definition of copyediting might change to exclude any fact checking. The point is that the definition of the services we each provide is both fluid and not universal.

Yes, some professional organizations and some editors do post online a definition of copyediting, but those are not universally accepted definitions and, at least in the United States, not mandated. So, in the absence of a universally accepted and applied definition of what constitutes copyediting, how can it be determined that someone is “undercharging” for copyediting services? If you include fact checking and I exclude fact checking, our services are not comparable and my lower price may reflect my exclusion of fact checking.

In the end…

What all of this amounts to is this: Ignore what colleagues are charging unless you can determine that everything about your and your colleagues’ services (both as defined and as provided) are identical in every possible way and that everyone’s rEHR is identical. Absent that you should focus your energy on determining what your rEHR is and making sure that you can meet (or better, exceed) that number.

Asking what a colleague charges is a waste of time except for satisfying curiosity. Your fee should be based on your needs (your rEHR). There will always be someone who charges less and the reasons are many, including they are less skilled, they offer a lower-quality end product, their rEHR is very low, or, most likely, they have no clue what their rEHR actually is and have picked a number out of the air because it seems in line with what others charge or has been mentioned online somewhere.

If you haven’t read it recently (or at all), in addition to reading The Business of Editing: What to Charge, take the time to read The Business of Editing: “I Can Get It Cheaper!” A client can always get it cheaper because there is always someone who is willing to work for less. Fighting back by lowering your price is a losing proposition. Instead, learn how to set a correct price, stick with it, and convince clients you are worth it.

Remember this: If you do not think you are worth at least your rEHR, you probably aren’t, and clients will think the same. Clients almost always believe the same about you as you believe about yourself.

Richard Adin, An American Editor

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