Evaluating your freelance business using key performance indicators

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FREELANCER TIPS
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• Evaluating your freelance
• business using KPIs

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Evaluating your freelance business using key
performance indicators

• A freelancing business has a lot of sides to it.
  How much money youre getting is one, but it
  isnt necessarily the most important. Other
  aspects you might want to keep track of include
  how many clients youre getting, what youre
  really earning per hour and the extent of your
  marketings effectiveness. If you want your
  business to do well, going with the flow isnt
  really going to cut it. Using key performance
  indicators (KPIs) is an excellent way to
  effectively measure your business development.
• KPIs are essentially ways to keep track of both
  long- and short-term developments, allowing you
  to intervene if a certain area isnt living up to
  expectations. It will help you see whether youre
  spending too much time on something thats not
  worth it. Here are four KPIs to get you started.

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Profit

• Profit is an obvious indicator of how well your
  business is performing. Mind you, profit can be
  very different from your total revenue. Profit is
  the money that goes directly in your pocket,
  after taxes and business expenses. Consistently
  measuring your profit can do several things for
  your business. For one, it helps you identify
  so-called famine periods, the months when you
  tend to have less work and get less money.
  Additionally, its a good indicator of how your
  business is developing over time.

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Growth

• To really know how well youre doing in the
  long-term, you want to measure growth. You can
  measure that by dividing profits on a monthly or
  yearly basis. If you earned 20,000 last year and
  25,000 this year, you get a value of 1.25. Where
  you want to go with that depends on your business
  situation.
• If youre looking for increased growth, try to
  keep it in an upwards year-over-year trend
  (monthly values tend to be too skewed to be
  useful in this case). But maybe youre happy with
  how things are going and would like to keep them
  that way you should still measure growth and
  try keeping it in a flat line or slightly upwards
  to account for inflation and changing expenses.
  Not doing so might lead to negative growth being
  ignored until its too late to do something about
  it.

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Hourly Rate per Client

• Regardless whether you are charging clients per
  hour, parts of projects or entire ones, measuring
  the hourly rate is a good idea. Doing so is
  relatively simple track the time you spend on
  something, add up the hours when youre finished
  and divide your profit by those hours. Across
  different clients, youre probably going to end
  up with a decently large range of hourly rates.

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Hourly Rate per Client (Contd)

• On the top of that range are clients that pay you
  the most for your time and services. On the
  bottom, every freelancer will invariably have
  black sheep - clients who take up a lot of your
  time but dont contribute that much to your
  business financially. Ideally, you want to
  exchange the kinds of clients on the bottom for
  the kinds of clients on the top. Once a certain
  amount of time passes, say one or two years,
  rinse and repeat for a steady increase of hourly
  rate and, consequentially, profit.

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Social Media

• Last but not least, by using the previous and
  additional metrics you can see what your social
  media marketing is really doing for you. If
  youre using Facebook for getting more clients,
  how much clients does it land you? Compare that,
  for example, to how much you get using
  freelancing websites. Additionally, what kinds of
  clients do you get through that particular
  channel? If theyre always on the bottom of the
  hourly rate per client scale, you might want to
  reevaluate your strategy or give up this
  particular aspect altogether.

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Social Media (Contd)

• To sum it all up, KPIs can help you determine
  whats going right or wrong with your business
  and act upon that data. Every freelancer does
  this subconsciously, but crunching the numbers
  will give you a crystal-clear perspective,
  without excuses and rose-colored glasses.

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