Do you instinctively know which clients and areas of your business bring in the most income? This article explains why it’s better to base your freelance business planning on facts rather than instincts.
Facts not feelings in financial business planning for translators
Good business planning for freelance translators involves getting an objective picture of what’s happening in your business. Otherwise, it’s easy to make the mistake of thinking you can “feel” whether your business is going well or not.
If all you use is feelings, your goals for the next period of time, or the next year, could well be based on emotions and subjective perceptions, rather than objective facts. This is why it’s essential to find time to step back and look at what’s happening in your business.
A method to help you plan your translation business
It’s probably fair to say that many of us who work as freelance translators were drawn to the profession by a love of languages, rather than an appreciation of Excel spreadsheets and number crunching. Getting to grips with the numbers, though, is crucial for anyone who wants to apply an objective and thought-out strategy to their business.
I’d like to share the method I use to organise my finances and formulate a strategy for the future, in a step-by-step guide. You can apply this process to a particular period of time: a three-month period, a six-month period or a year.
You’ll feel more in control of your business, making you stronger.
Collecting your data
To start, I keep a spreadsheet of all the translation projects I’m assigned throughout the year. I’ve got different columns for the assignation date, due date, project reference number, net total, VAT, net total minus income tax and overall monthly total minus income tax. While this sounds obvious to me, I’m sure other freelance translators do it differently, and it’s always interesting to compare methods.
At the end of each month, I issue my invoices based on the totals for that particular month and then register the invoice quantities and dates on a separate page of the spreadsheet. Some freelance translators use accounting programs, which organise this information automatically. A good one for freelance translators operating in Spain is Infoautónomos.
How to use Excel to make sense of your data
At the end of the year, I use my list of registered invoices to work out different statistics.
– Total annual earnings.
– Total annual earnings per client.
– Total annual earnings per client over a three-year period (or more years if you’ve got the available data).
– Percentage increase or decrease of earnings for particular clients for each year analysed.
– Percentage of earnings for each line of business (eg if, besides translation, you offer copywriting, editing or proofreading services).
– Percentage increase or decrease of earnings for each line of business for each year analysed.
– Analysis of which months bring in the highest earnings per client and comparison with monthly earnings per client for previous years.
How to do the calculations
To calculate these statistics, you’ll need to know how to perform basic calculations using Excel spreadsheets. If you’re unsure how to use Excel, there’s a lot of information and free training available online. Again, if you use an accounting program to manage your finances, calculating these statistics is straightforward.
Once I’ve worked all this out, I create graphs or pie charts on the same spreadsheet to illustrate each point. I find this really helps me see what’s happening.Love this guide to using data in financial planning for freelance #translators. Check it out now! #t9n Click To Tweet
Summarising the data
The next stage, which is probably the most important of all, is to create a separate document using the information you’ve learned from the statistics, graphs and pie charts. By doing this, you can ask questions and make objective conclusions. This year, I opted for a PowerPoint presentation. I copied the graphs and pie charts from my spreadsheet into my PowerPoint presentation and then thought about what they meant. Although this may sound excessive, I found the outcome surprising and extremely helpful.
It’s essential to find time to step back and look at what’s happening in your business.
What questions should you ask about your freelance translation business?
– What does it mean that my overall earnings with a particular client have gradually increased over three years? Is it positive, or am I relying too heavily on that client?
– What does it mean that copywriting now accounts for 40% of my earnings when in the past it only represented 25%?
– What does it mean that the client I have frequent contact with, and seemingly do lots of assignments for, only represents 5% of my total earnings?
– Which months of the year are slow months? Is this consistent across all years analysed?
Sometimes you won’t be able to answer these questions. You might find that monthly earnings for a particular client go up and down erratically, without an obvious explanation. This is where having data for more than three years is useful, as it helps you identify more general trends. It can also be useful to combine these data with time-tracking data accumulated using an app like Toggl, find out how.
Set objective financial goals for your freelance translation business
When you’ve got answers to these questions written down next to the graphs in your document, you’ll have an objective overview of what’s happening in your business. Instead of “feeling” that a particular month is slow or a particular client is giving you less work than usual, you’ll be able to look at your analysis and find out if this is objectively true. You’ll no longer need to base your decisions and goals on subjective emotions and perceptions.
It gets easier with time
After doing this, you’ll probably find that your goals for the coming year or period of time become more obvious. You’ll know which lines of business to focus on, which clients you want to promote a business relationship with, when you should take holiday the following year and when you can expect to be busy. In a nutshell, you’ll feel more in control of your business, making you stronger. The whole process takes me around five hours and I consider it time well spent.
Sign up for our newsletter!
Stay up to date with our news and posts by signing up for our newsletter in the column to the right.