Running a business, especially a creative business, is hard work. Whether you’re a freelance solo-preneur, or the owner of a small creative firm, the business side of creativity always demands a significant amount of your time and attention. One of the most common business problems I’ve encountered, as I’ve consulted creative business owners, flows out from a basic mis-allocation of their time—based on wrong assumptions about the amount of overhead time involved needed to run a business. This week, I’ll share some specific breakdowns for your overhead time—so you can reevaluate your overall business plan, and plug holes that may be slowly sinking your ship.
Are you ready to take the struggle out of finding new clients?
In the creative service business time really is money. Therefore the time pressures you feel in running your business can almost always be tracked back to corresponding money issues. Because of other complications in the creative service business model, such as the unearned revenue problem I talked about in episode 36, it can be difficult for creatives to connect the dots between profitability problems and time problems—but they are in fact connected. If you’re not operating profitably, you will suffer under mounting time pressures.
Since time and money are so connected, in order to solve your time issues, you’ll have to address your money problems, and the first place to start is to more realistically account for all the overhead time that goes into running a creative service business.
The very first principle to keep in mind is your maximum billable capture rate. If you track all the time you spend running your business, including overhead time—you’ll begin to see that your average maximum percentage of billable hours per week tops out at around 60%. When I’ve done time analysis for clients, it’s quite often much lower than that!
One of the main causes of low profits, and their corresponding time pressures, is a failure to take this 60% maximum into consideration when calculating your rates and fees. A thousand painful downstream consequences are the result of failing to take this benchmark into account. Flipping this around, the remaining 40% of your time will be taken up by other business related activities. In order to ensure you use that 40% optimally, let’s break down all these other activities—for reference I’ll be using a 45 hour work week as a basis.
One of your overhead roles is taking care of your finances. In the case of managing your books and billings, you’ll want to set aside about 5%, or roughly two hours every week. And I highly recommend that you do your finances every week, without fail, religiously.
Another 5% should be allocated to managing time itself, including tracking, reviewing, analyzing your hours, and planning your overall calendar and schedule.
Another 5% will be taken up with general office administration—some of which should be devoted to professional development.
Now, never underestimate how much communications time goes into running a business. And I’m not talking about project communications—that’s all billable and should be counted in that 60% productivity benchmark. But on top of that you should assume another 5% of your overall time will be taken up with general business emails, correspondence, and perhaps the occasional cat video.
That leaves us with 20%. And this is your sales and marketing time. What you do with this time is so important that I’m going to pick this subject up back next week and analyze your marketing time in more detail.
Of course most weeks won’t actually play out exactly according to these percentages, but if you neglect these guidelines, or if certain roles are omitted—serious problems will follow. You might not feel them right away, but they will be waiting for you down the road. But if you plan realistically, and give attention to these business necessities, your creative practice will thrive.
Until next week: don’t let the business of creativity overwhelm your creative business.