How to assess your freelance business and choose annual goals

Once you’ve done a financial analysis of your freelance business (see previous post) you can start to think holistically. Financial success is important for freelancers, but it’s just one component of success. Chances are that when you got into freelancing you also dreamed about things like having more free time or being able to pursue creative work that you love.

Now’s the time to assess those nonfinancial aspects of your freelancing. The point of this exercise is determine the answers to four questions:

  1. What do you want to do less of?
  2. What do you want to stop entirely?
  3. What do you want to do more of?
  4. What do you want to start?

Measure money and meaning

I like to start by charting out my clients in a “money and meaning” matrix.

Money-meaning-matrix.png

For the financial portion of this, low and high profit should be pretty self-explanatory. You should already have this information from your financial analysis, so it should be easy to determine. Meaning refers to the nonfinancial satisfaction you get from work. This will vary from person to person, but it might include one or more of the following characteristics:

  • People you like and enjoy collaborating with. If you have a client that you love spending time with, even for work, then that’s a “high meaning” client.
  • A particular purpose that aligns with your personal values. For example, if you provide services for a nonprofit whose mission you strongly support – work you might even consider doing on a pro bono basis — then that’s a high meaning client.
  • Creatively challenging work you really enjoy. This might include work where you get to stretch your creative abilities, are constantly learning new things or that’s simply fun to do.

By charting out each of the clients in the money and meaning matrix you can assess how different clients contribute to both your financial wellbeing and your overall professional happiness. Many freelance businesses will have clients in each of the four quadrants — and that’s OK.

If you have a lot of repeat and retainer clients, you can simply identify them and put them into this matrix in the appropriate quadrant. If you mostly work with one-off clients, then you might want to break them into groups — perhaps by industry (financial services clients vs. manufacturing clients) or company type (small businesses vs. large corporations vs. nonprofit organizations).

This matrix will help you get clearer about where your income and professional satisfaction are coming from.

You may find, for example, that you have some clients in the Quadrant IV — low profit and low meaning — that it makes sense to drop. Or you may find that you have too many clients in Quadrant II or Quadrant III, and that you’ve ended up trading away too much money in exchange for higher meaning, or vice versa.

Or, you may find one or two clients in quadrant I. These are clients that you enjoy working with and who pay you well. How can you find more clients just like these or do more work with these clients?

Assess the business environment

Once you’ve assessed your current client base, it’s time to take a quick look at the overall state of your business and the business environment you operate in. One of the best tools for this is a SWOT analysis. SWOT stands for strengths, weaknesses, opportunities and threats. It’s probably one of the most commonly used tools for strategic planning in corporate America, and it can be helpful for freelancers and microbusinesses, too.

SWOT matrix.png

The top two quadrants — strengths and weaknesses — are focused on the attributes of your business and you. A strength could be “strong Javascript skills” or “extensive professional network.” A weakness might be things like “poor time management skills” or “very little money in savings account.”

The bottom two boxes — opportunities and threats — represent the business environment you operate in. A threat might be something like economic conditions that could hurt one or more of your clients or increasing competition from agencies. An opportunity, for a web developer or SEO consultant, might be Google making a big change to its search algorithm that requires companies to change their websites.

While the SWOT analysis may not lead you to any immediate changes, it’s important to remind yourself of your own strengths and weaknesses as well as business environment when you’re doing planning for the following year.

Dream a little bit

Now the fun starts. At this point you should have a good bit of information in hand:

  • How you did financially last year.
  • Your financial outlook for this year.
  • Your best and worse clients.
  • Your own strengths and weaknesses.
  • What the overall business environment looks like.

With all this in hand, you can answer those four questions we considered at the beginning of this post. Here they are again:

  1. What do you want to do less of?
  2. What do you want to stop entirely?
  3. What do you want to do more of?
  4. What do you want to start?

Dreaming up freelancing goals.jpeg

Some answers to these questions have probably already occurred to you. You might decide, for example, that you want to stop serving those low profit/low meaning clients, or that you want a few more clients that pay better — or that provide more personal satisfaction. Remember those clients in quadrants II and III of the money and meaning matrix? Can move any of them into quadrant I?

You may also see, from your SWOT analysis, where you could make improvements in your current business, take advantage of your strengths or seize new opportunities.

At this point, you can write down some business goals for the coming year. At a minimum, I’d recommend those goals include:

  • At least one goal related to revenues and profits. How much money do you want to make this year and what’s an ambitious, but reasonable target?
  • At least one goal related to the meaning you get from your business. This might mean starting a new initiative or choosing to focus more on a particular type of client.
  • At least one goal related to strengthening your business in some way. This could be learning a new skill, improving the way you do something or eliminating unnecessary expenses.

If you’ve been freelancing a few years and have some confidence in your ability to sustain the business this year, this is also a good time to consider other big life or business goals. This might range from launching a new side project (such as a blog or podcast) to taking a month-long vacation to travel the world.

How many business goals you choose to pursue for the year is up to you, but I think the sweet spot for most freelancers is probably somewhere between three and six. Some of those goals, like hitting a certain revenue target, may take the entire year. Others you might achieve in the first three months and not have to think about again for the remaining nine months of the year.

In the third and final post in this series, I’ll explain a process to take an annual goal and break it down into measurable and manageable actions that you can carry out over the year.

(This the second of three-part series on end-of-year business planning for freelancers. Read Part 1 here; Part 3 is here.)

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