Don't Ignore Monthly Goals, Either

Earlier this week I discussed how you can put too much emphasis on monthly goals, wasting time and effort chasing something unnecessarily. But there is a flip side: complacency. Yes, it is possible to make up a month's revenue short-falling, but the possibility shifts with the circumstances.

Pushing additional revenue needs into a following month is fine if the amount is small. But the larger a deficit you try to cover, the more difficult your task becomes. Now you've committed yourself to longer hours and more work just to get back on track. The key is percentage by which you misss your goal. If you're down by a few percent, that probably isn't going to be impossibly difficult to attain. Hit 15 or 20 percent, and you're working some longer weeks; 50 percent, and you might be giving up sleep.

You might need to spread a large enough deficit over several months, but what happens if you have another off month? Or if you're crowding the end of the year and you want to hit your annual goal? You may have set yourself up to solve a problem that you cannot.

If you find yourself missing a monthly goal, don't panic, but do see what you can learn from it:

• Have you fallen short because of an unexpected event? Consider whether it really was a something that you could not have forseen, or if you might be essentially lying to yourself through overly optimistic estimations of the likelihood of closing business.


• Does your goal show unrealistic expectations for the markets and types of work that you've chosen to do? If so, you must revisit either your business model or your expectations.


• Are you working hard enough in marketing and selling? If not, the work won't come in. You should be pitching to get more business than you need, because not all of your marketing will turn into assignments.


• Are you working hard enough to finish the assignments? It doesn't matter if you've got an assignment; it won't help you meet a monthly goal if you don't finish in time to invoice during that month.


• In a similar vein, are you being realistic in the amount of work you can complete in a month, and how long it will take to do each assignment? If you find that important parts of your goal are going to be done right at the end of the month, assume that the schedule could slip and your revenue could slide out of one month and into another. That's not a big problem (assuming that the client is fine with the change) if you're finished at the beginning of the next month, but let it go too far and you'll be bumping revenue for that month as well, creating a situation where you cannot catch up by earning more than your goal.

When Not to Focus on Monthly Goals

I'm a big advocate for monthly goals, but they can cause one big problem. It's easy to focus so much on what you're supposed to make in January - going through a panicked rush in the last week when you find yourself a bit short - that you forget there's more to a year of revenue than any one period. To focus too much on what you make any given month can cause you to waste time and lose your grasp on the big picture.

Ultimately, the important thing is what you average over a quarter and, then, the year, and not every single month taken absolutely on its own. One reason is that it's difficult to turn around a significant amount that drops out of a month, as by the time you make the sale and start work, generally you will find your deadline into at least the next month. And if the amount is small, it's probably not worth diverting your attention from where your business is going overall.

If you do find yourself short, consider whether you would better take your time and work on getting assignments for larger amounts. Could you split up that shortfall and make it up over the next two or three months?

Be more flexible in your planning. Look at what you are doing per month, certainly, but also per quarter. I know some writers who combine quarterly and daily views, to make sure they're on track in the short and long terms. Personally, daily can be too widely variable for me, but if it fits your business model, then by all means use that approach as well. Whatever you do, though, remember that planning and goals are there to help you run your business and keep on track, not to run you.

Tallying Your Yearly Financial Results, Part IV

Once you've completed your end of year review, it's time to look foward. As you look at what has worked and what hasn't, you want to consider what you need to change for next year:

• Do you need different clients?



• Should you consider more aggressive pricing?



• Would more efficient business processes help you make your goals more easily?



• Have you been too easy when planning annual goals?

Don't let the review be something that makes you feel good or bad. Make it useful and let it guide you to better business next year.

Tallying Your Yearly Financial Results, Part III

Once you've considered income and expenses, you can consider profit. This can be a tricky area. Although from one view your profit is revenue minus expenses, that's not entirely true. Ideally, a business creates a profit over and above the regular income requirements of its owner. If you've made at least your bottom line goals that cover all business, personal, and tax expenses, then congratulations - you can consider yourself in the realm of business profit. Anything above that is gravy that the business brings in. Consider keeping at least some of this out as working capital so that, if clients are late, you can float your needs without trouble.

Another area of profitability is the per client view. You should review how long it takes to do assignments overall and then on the average for each individual client, and multiple the revenue for those assignments by the time it took to do them. That will let you know what you actually make per hour, and not what you think you make per hour. Then, as part of your end of year planning, you can review how your clients stack up and see which ones might be worth replacing with ones that either are more profitable or that offer a chance for personal or professional expansion that might offset a lower than optimum level of profitability.

Tomorrow, looking forward.

Tallying Your Yearly Financial Results, Part II

Yesterday we talked about revenue. Now it's time to bring in expenses. You may have created a budget for the year - and certainly you should have done so if your financial goals were to have any meaning. If not, you're simply making up numbers, and the could as easily be wrong and misleading as they could be right.

Now it's time to take those numbers and see how they added up. You aren't just interested in the grand total, but how your individual categories came out. Say that your cost of food was significantly higher than you had expected. Overall, you could still get things to work out by cutting back in other areas. But if you take away from a non-discretionary area - like retirement savings - then you might be taking a problem and making it appear to go away, but actually causing it to ultimately be worse, though at a later time.

If, in general, you find yourself under-estimating expenses, then you're actually under-estimating the amount of revenue you need, throwing off your markenig and sales planning. I think writers are best off treating expenses on an accrual basis - that is, treat them as though you have to pull the money out when the expense comes in, and not at a later time if you can delay payment. It's a bit more pessimistic than looking at them only when you pay, because that can provide some breathing room. But in planning, you're not interested in being comfortable. Instead, you want to be more conservative and know that you can cover what you need, not depending on the ability to procrastinate.

Tomorrow, some words on profit, and profitability.

Tallying Your Yearly Financial Results, Part I

There have been some online discussions about reviewing your results versus your annual goals. I think it's important to take periodic stock of your goals and progress during the year, and I keep a monthly eye on both assignments and cash coming in. But if you're doing an annual look, you might keep the following things in mind. On the revenue side, there are actually three basic numbers you can consider:

1. the value of the assignments you receive during the year
   
2. the amount of money that publishers become obligated to pay you because of assignments you turn in


3. the amount you actually get in cash from payments

The first number gives you an idea of how well you are selling - the total response to your marketing. The second lets you know how much revenue you actually generate and are owed, and so whether your attempt to make money is doing well. The third says how much cash came in, which generally controls how easily you can meet your financial obligations.

Success on one area isn't enough - you really need success in all three. For example, you might be pleased because you have enough work booked, but if some of that came from a continuing contract, or was carried over from the previous year, then you have to see whether you are, indeed, selling effectively. Maybe you didn't care if you could have made any more, maybe you were maxed out for your work days, or maybe your sales efforts weren't as effective as they should have been.

Another analysis is whether you are completing enough assignments, and so, technically, earning enough money. It doesn't matter whether you've sold enough; your revenue is only what you could actually do and bill. That lets you know whether you are working efficiently enough and/or making enough per assignments. If it takes too many assignments to meet your goals, something is wrong and you need to consider how to change that so you can hit your revenue target in the time you have available.

A third, important, analysis is the third point: cash flow. It doesn't matter how much you book if you don't bring in enough cash to pay all your obligations. It's easy to whitewash this number by looking at the work completed, or even booked but not completed. However, don't get distracted. If you calculate that you need to bring in $50,000 for what you need for the year, it doesn't matter if you technically make $50,000, but only get paid for $40,000. That leaves you $10,000 in the hole, and is an example of why you generally need to complete more work than your economic goals, because you want enough cash to come in when you need it, and not afterward.

Tomorrow, I'll look at expenses and profitability.

Keeping Your Eye on the Right Numbers

In my business planning classes, I've often advocated knowing how much money you need to make in any month to reach your goals, and that's fine as it stands. But there is a danger when you think that you directly affect those numbers. By force of effort, you cannot force people to do business with you or to work on your schedule. What you can control, though, is the amount and quality of your effort.

To be successful, you don't keep saying "I have to sell X to this client." That feeds a sense of neediness which can actually drive customers away. Your target number is supposed to be a goal that you can use to see how your progress goes. But if you're hiking, you don't get to the summit faster by thinking, "I have to get to the summit faster." Rather, you put one foot in front of the other, concentrate on keeping your cadence, and continually look for the best route.

In business, and that's what we're all in, the equivalent is that you focus on making another sales call, on generating another idea, on following up with another client. You can't compel someone to send a check your way, but you can make yourself work for another hour on efforts that to go marketing and sales. When you do that, you get on the right side of statistics and have the law of averages working for you. You take care of that one extra thing to keep a client happy or call one more source to set up a greater chance that a client will ask you to do more work in the future.

So, there are two numbers. There is the goal that shows you the way, and then there are those numbers you can directly influence. Know where you want to go, keep directing your efforts where you can effectively, and eventually you will succeed.