Success Story: An Artist’s Collective Turns the Corner

The CLIENT

The arts economy in New England in general and Greater Boston in particular, is significant.  ArtsBoston, a 175-member not-for-profit arts service organization that researches  important statistics regarding the local arts community, found that more than 18 million visits are made to arts and cultural events every year, ticketed and free events, including dance, musical and theater performances; visits to museums and art galleries; and attendance at ethnic cultural festivals.

It has been my pleasure to work with two of the three most respected collectives of visual artists in Boston including the largest, whose membership exceeds 200.  Eighteen months ago,  the larger organization referred to me the smaller, 80-member, loosely  affiliated sister organization. The two have overlapping memberships, where nearly the entire membership of the smaller are also members of the larger group.  The membership of both collectives consists primarily of painters, sculptors and photographers, with a smattering of ceramacists and artisans such as bookbinders and calligraphers. Management for each group is separate and independent.

All artists in the collectives maintain studios in an art and design district consisting of several 19th century former warehouse buildings and the artists of the smaller collective are all located in one of those buildings.

Both collectives offer nearly identical special events programming as a method to reach out to potential art collectors.  Each holds an annual open studios art walk event, where member artists open their studios and invite the public in at no charge to see, discuss and when visitors choose, purchase artwork.  Since 1986, the larger group has held its signature open studios event in September and the smaller group holds its annual event in May.  Additionally, since about 1998, the smaller group has held the monthly open studios event branded as First Friday.

The CHALLENGE

The smaller arts collective was facing increasingly diminished audiences for First Fridays, which are held on the first Friday of every month from 5:00 – 9:00 PM January through December.  Attendance at its May open studios event was likewise softening. Artist membership in the group had stagnated.

Competition between the local artist collectives has in recent years become intense, the result of a proliferation of open studios events that has diluted the target audience of middle class to affluent collectors who reside in the tonier city and suburban enclaves.  Boston has 22 neighborhoods and 12 annual open studios events, with dates coordinated by the city and held from April to November each year.  Additionally, nearly every city or town contiguous to Boston, plus numerous outlying suburbs, have over the years launched open studios art walks.  In July and August the action moves to the historic summer artist colonies in MA, including Cape Ann, Provincetown and towns in the Berkshire mountains that beckon to vacationers from around the country.

The DECISION

The collective is managed by two member volunteers.  They reached out to their counterparts in the larger organization and asked how that group managed to maintain attendance for its annual open studios event, which has reversed previously declining numbers.

Within two weeks I met with the leaders of the smaller collective and after listening to their story,  recommended that an energized marketing plan would most likely provide the remedy.  Over the past three or four years,  a shortage of time and a dose of complacency had caused the managers to slack off on marketing their events to the target audience.  Recently, First Fridays had been listed in only one print and three online events listing services.

Member art sales were shrinking because fewer collectors or potential collectors visited studios.  Membership in the collective was dropping slowly, as artists re-examined the value of the collective at renewal time.  Operating income was negatively impacted. Artist participation in First Fridays waned, which could only cause the target audience attendance to wane.  It was an impending death spiral.

The SOLUTION

A comprehensive and consistently implemented marketing campaign was launched in an increased number of targeted print and online media outlets, which was the core of a strategy to greatly improve outreach to collectors and potential collectors.  More visits to studios would enhance the possibility of art sales and promote the conversion of aspiring collectors to collector status.  Over the subsequent months, additional media outlets were identified and included in the campaign.  Presently, 14 online media outlets and five print outlets now carry the First Friday listings each month and the listing for the annual open studios event in May.

A paid display ad (one-quarter page) will now appear annually in a free print publication that has high readership among tourists to Boston, since outreach to that group has become a priority.  To estimate the potential impact of tourist dollars on contemporary art sales in Boston, in 2016 the Institute of Contemporary Art/ Boston, which features 21st century art only, received 210,000 visitors, according to the Boston Business Journal (and the Museum of fine Arts, the New England Aquarium and the Museum of Science each received in excess of 1.1 million visitors).

Content marketing is also part of the campaign launch, designed to reach the collective’s members and non-members through the collective’s newsletter.  Membership retention and recruitment are in many ways the heart of the marketing campaign for without active and engaged members who believe in the mission and are happy to carry it out, the collective will cease to exist.

The monthly newsletter now includes a member artist spotlight that features an image of the artist’s work plus a brief artist bio.  The artists volunteer to participate and the response has been enthusiastic.  As a way to persuade the 10 -15 non-members in the building of the collectives’ benefits, an annual newsletter customized to provide an update of the work that the collective’s members find especially useful and making an appeal to join is now being sent.

The RESULT

The number of visitors to First Fridays has gradually climbed to about 500 on average each month.  As documented by the managers, historic lows occur in January and February, when attendance can dip as the temperature drops, the snow piles up and only 200 or so art aficionados will attend First Friday.  Months with the highest visitors are April through June and September through December, when up to 700 visitors may appear.

Membership in the collective has risen over the past 12 months from just over 70 to 80 members.  There remains 10 -15 artists in the building who are non-members.  The group hopes that one or two non-members will sign up each year.

I hope you enjoyed the case study.  Thanks for reading.

Kim

 

 

LLC vs. S Corp: Which One for Your Company?

At any point in the life of your business venture, you may choose to create for it a separate legal entity.  Creating a separate entity is essential for those businesses where the potential for liabilities associated with normal operations is an issue.  There are also potential tax advantages that derive from the establishment of a separate business entity.

There are two categories of business legal entities: corporations, Chapter S and C, and Limited Liability Company (LLC). Corporations are tax structures and are regulated by the federal government through the IRS.  LLCs are created and governed by the states.

Founded in the state of Wyoming in 1977 and now available in all 50 states plus Washington, D.C., the LLC is a comparatively more lenient structure than either the S or C Corporation and for this reason, it is the preferred entity for the majority of small businesses and Solopreneurs.  Unlike the S Corp, LLC members, as they are called, are unrestricted in number and are not required to be U.S. citizens nor must they reside here, with the exception of the Registered Agent, who receives official correspondence such as tax and legal documents on behalf of the entity and must reside in the state where the LLC was formed and operates.

Multi-owned LLCs are advised to develop an operating agreement (not required in all states) that along with the percentages of member ownership also specifies member titles and responsibilities, such as Managing Partner and Registered Agent.

In the LLC, whether single or multi-owned, all business income and expenses “pass through,” meaning they are reported on the members’ tax forms.  There is no double taxation of business and personal income for single-owner LLCs, but multi-owner LLCs must file U.S. Form 1065 Return of Partnership Income to report profits and losses.  All LLC owners must pay the self-employment tax, due quarterly (multi-owners pay on their share of entity ownership).

Real estate investors will find that the LLC is the only available legal entity option that allows passive income (rents) to exceed 25% of gross annual revenues.  A big added bonus of real estate LLCs is the ability to create a separate LLC for each property owned, thereby shielding the owner(s) and other properties held from cross-liabilities.

A drawback for owners who plan to attract investment partners (as opposed to those partners who operate the business) is the lack of stock, preferred or otherwise, and this represents a deal-breaker for venture capitalists, who do not invest in businesses structured as LLCs.  Even smaller investors prefer stock certificates to LLC member shares.  A positive for this structure is that it’s much less expensive to set up than are corporations, costing just a few hundred dollars for the filing (plus the initial set-up fee charged by your accountant or attorney).

If you are considering establishing a legal structure for your business, consider your plans for business growth and also your exit strategy as you do.  Growth may cause you to seek money partners, which could point you in the direction of the S Corp.  If you see venture capital or an IPO in your future, then only a C Corp will do.  If you might want to sell your company to employees as your exit strategy, or if attracting key C Suite level talent to your team would also point you toward the corporate structure, so that stock can be offered as an incentive.  If some of your business partners live outside of the U.S., or if acquiring real estate holdings is your business model, then only the LLC will be allowed.

It is strongly recommended that you consult with a business attorney or accountant before you file legal entity paperwork at the Secretary of State’s office.

Thanks for reading,

Kim

Business Structure Face Off: S Corp vs. LLC

Whether you are preparing to launching a new venture or you’ve been operating as a Sole Proprietor (Sole Trader in the U.K.) for a few years, you may decide to establish a business legal entity for the enterprise. The benefits of creating a business legal entity, whether you operate as a Solopreneur or participate in a partnership that consists of independent professionals who occasionally collaborate (like dentists or physicians) or co-owners who run a business together, are:

1.) protection of business assets from (certain) financial liabilities

2.) reduced tax liability

Entrepreneurs and Solopreneurs who have no worries about legal actions that might arise from bankruptcy or other business debts (or client litigation) may comfortably operate as Sole Proprietors.  Business owners of any kind, plus the self-employed, may at some point decide to organize their venture as a corporation (either the original C Corporation or subchapter S Corporation) or a Limited Liability Company (LLC).

FYI in the U.S., corporations are tax structures that are overseen by the IRS (a federal entity) and LLCs are created and governed at the state level.  Application to form either entity is made at your state’s Secretary of State office or in Washington, D.C. at the D.C. Corporations Division.  In the U.K., business legal structures are obtained through and governed by your regional Companies House.

Regarding protection from financial liabilities derived from a business legal entity, actions that can be construed as negligence are considered to “pierce the corporate veil” and neither a C or S Corporation, nor an LLC, will shield negligent business owners.  But if the business goes into bankruptcy or serious debt, only business assets can be applied to cover those debts and if that amount is insufficient, the owner(s) will not be forced to use personal assets to pay what is owed.  Furthermore, the entity will not be liable for debts that exceed the value of the owner’s investment in that entity.  In other words, if an owner’s investment was $20K, that’s all the owner will be liable for, even if $30K is owed.

Now for a look at potential tax savings.  Unlike the older U.S. corporate structure, the C Corporation, there is no simultaneous tax of business and personal income in the S Corporation (i.e., no double taxation) and all the usual business deductions that you’ll find on IRS Schedule C  may be taken.  The S Corp allows owner(s) to pay themselves and all employees with W2 salaries, meaning that owners avoid the self-employment tax if it’s decided that you work for the corporation (instead of yourself).

A portion of what can be reasonably considered excess net profits can be paid to the owner(s) as a dividend distribution, in addition to the W2 salary, and the distribution is taxed at a much lower rate (from zero- 15%, depending on circumstances) than the W2 earnings.  This is one way that the rich get richer, Baby!

The owner’s salary must be considered reasonable for the industry, because the IRS will be looking.  Contact a savvy tax accountant so you’ll refrain from paying yourself $20K annually when $80K would be closer to the minimum for your industry and business Income Statement.  Shenanigans like that can cause the business to lose the S Corp status and land you in double-taxation-ville.

If business income is not so flush, your accountant may recommend that like a Sole Proprietor, S Corp owner(s) should choose the “pass through” tax format, where all income and expenses appear on the personal tax form(s) of the owner(s).  Be advised that partnership S Corps are taxed like a partnership and S Corps that elect the pass-through tax option will pay the quarterly self-employment tax on reported income.  Corporate taxes are filed no later than March 15, earlier than the rest of us.

In both the C and S Corp structure, the owner(s) is a stockholder, and multiple owners are assigned shares of company stock and receive a portion of business profits and losses according to their percentage of ownership. The S Corp allows only one class of stock.

On the downside, the rules for maintaining a corporate entity of either form are somewhat strict. S Corp owners must be citizens or residents of the U.S. and their number is capped at 100.  Every corporation is required to have a board of directors or officers (the owner and a Recording Secretary to take the annual meeting minutes, at least) and even solo corporation owners must hold an annual stockholder’s meeting.  Financial documents must be in good order. Minutes must be taken and kept on file.

Because there is only one class of stock allowed, those who plan to seek venture capital or take their company public must form a C  Corporation, so that the preferred stock that investors demand will be available.  Finally, the legal and accounting fees, as well as special state taxes where they apply, make the choice of either a C or S Corporation a four-figure annual commitment, so consider your choice of this option prudently.

Next week, we can resume the discussion with a look at the Limited Liability Company structure.

Thanks for reading,

Kim

 

When Freelancers and Employees Collaborate

External agile talent provided by Freelance consultants has a presence in a growing number of organizations in the country, from huge multinationals that hire dozens of external experts to solo consultancies, who may hire a Freelancer colleague to obtain  help with SEO, website design, or project subcontracting work.

Freelancers are brought in to ensure that a high-priority project will be successfully completed, on time and within budget. While it is the responsibility of the hiring manager to onboard the Freelancer and create the conditions for smart collaboration  and productivity, in fact, a good deal of that responsibility will be transferred to the Freelancer because s/he is temporary, an outsider, and is positioned to take the blame should things go wrong.

Therefore, it is highly recommended that Freelancers take the lead and do what is possible to establish a working relationship with in-house collaborators that is productive, pleasant and lays the groundwork for repeat business and referrals.

  1. Ask the hiring manager to onboard you, so that you will be able to “hit the ground running” and quickly get to work on producing the project deliverables.
  • Request an overview that explains why the project is important to the organization.
  • Have a contract for the project, signed by you and the hiring manager, that specifies your duties, in-house support that will be provided, the budget, project milestones, the deliverables and the deadline, your hourly rate or project fee and what you’ll charge for client requested change orders and additional services requested.
  • Request the names and titles of any in-house project collaborators.
  • Specify the details of the lines of reporting and authority, so that you and everyone else knows who you answer to, since the hiring manager may not be the internal project lead.
  • Determine where your work will be done—off-site, at the organization, or a combination. How many hours must you spend at the company office? Where will  your work space be located? Must you bring your own computer and phone?
  • Request an introduction and meeting with your in-house collaborator(s), so that you can understand the organization culture (“how things get done around here”) and understand what you can do, or request from the company, to make the experience pleasant and productive for all parties.

2. Anticipate employee anxiety around the presence of an external consultant and work to quell the discomfort. Show respect for your collaborator’s deep knowledge of the organization and the project. Solicit their opinions on how to efficiently get the work done and political situations that can help or hurt you. Copy your collaborator(s) on important emails. Uncomfortable subjects might include:

  • Why was a Freelance consultant hired to do the interesting, mission-critical project and not long-term, loyal employees?
  • How much money is s/he being paid—is it more than me?
  • Will the consultant’s expertise and opinion be more highly valued than mine?
  • Is a company lay-off on the horizon?

3. Communicate frequently with your in-house collaborator(s), to promote transparency, build trust and ensure maximum productivity.

  • Make use of email and write reports that keep collaborators and the hiring manager updated on your work.
  • If you hit a stumbling block, ask for help, in writing.
  • Suggest a weekly or bi-weekly conference call or meeting at the client’s office, to compare notes and confirm that milestones and expectations are being met.

Thanks for reading,

Kim

Will That Be Check or Credit Card?

As every Freelance consultant knows, it is our pleasure and privilege to perform interesting and often mission-critical projects for clients whom we like and respect.  However, getting paid is the endgame and without exception, we all breathe a sigh of relief when the check arrives.  One vital element of maintaining adequate cash-flow in your business is to invoice on time, a topic that I covered a while back  Invoicing Inertia: The Cure .

Invoicing is only half of the battle, alas; it is smart and proactive cash management to make payment of invoices as swift and seamless as possible for the client.  In good economic times and bad, every once in a while clients will experience constricted cash-flow, even if they are the larger entity.  The ability to use a credit card to pay one of your outstanding invoices can be a great relief to them and could get accounts receivable into your hands as many as a few weeks earlier.

Let’s explore the basics of accepting credit cards and how to get started as a merchant who accepts the cards.  Twenty years ago, I spent a couple of years as an independent merchant payment services agent, selling Master Card, Visa, Discover and American Express processing services and card terminals to small business owners, so this topic is a nice walk through history for me.

Let’s start with some likely good options for a Freelance consultant.  Along with credit cards, you will also want to accept debit cards and eChecks.  You’ll choose the card not present processing option, so that clients can call you when the invoice arrives and phone in payment.  You may also decide to accept mobile payments, meaning that you will be able to accept client payments through your smart phone or tablet while you are at their office, or other location and to make that possible, you’ll also select the card present option.  In all scenarios, 48 hours post-transaction, the payment will be deposited into your business bank account.  You may not choose to invest in a (costly) credit card terminal unless clients visit your office.  Your card present transactions, if you do them, will most likely be mobile device payments.  You may decide against accepting American Express cards, since its processing fees are at least a point higher than Visa, MasterCard or Discover.

Call your business bank to get information about processing fees (about 2.5% of the transaction amount and 3.5% for AmEx cards).  There is also a separate fee called a transaction fee.  Freelance consultants will process few credit card transactions in a month and your transaction fee will be higher as a result.  In addition, there will be a service initiation fee and maybe also an annual fee.  Finally, there will be a statement fee if you’d like to receive  the hard copy of card, eCheck and mobile payments that you accepted.

The merchant approval process will center around an evaluation of your credit history and credit score, so if you need to pay down/pay off bills to improve your financial picture, do that first.  The associated merchant services fees will probably be impacted by your credit score.

If mobile payments will be explored, I can almost guarantee that Square will offer good service at very competitive processing rates  https://squareup.com/  You can also call Discover, Visa and Mastercard directly and find out what they’ll charge for your chosen merchant services.  Your bank may be where you buy eCheck processing services but then again, you may be able to negotiate a good merchant services package with your bank and get all that you want in one place.

Then there is the matter of security during the age of hacking, phishing and data breaches. If you belong to a business networking group, find a colleague who does internet services and ask how you take security precautions on your end.  The merchant services industry stays on top of security matters, but they are not infallible.

To sum up, be advised that although the various merchant services fees are an issue and you’ll want to secure the most competitive processing rates, good service and convenience matter.  As much as the process of expert payment transactions, you must seek out a system that will be reliable and user-friendly for both you and your clients.  A positive, glitch-free experience and excellent customer support are usually worth somewhat higher fees.  Consider it the cost of doing business. Getting paid by clients ASAP is, after all, the endgame.

Thanks for reading,

KIm

 

 

 

 

 

 

 

 

Outsourcing Your Content Marketing: Legal Safeguards

Regarding the process of content marketing, I work both sides of the street.  In addition to generating original content for this blog, for the past 6 or 7 years I’ve worked as an outsourcer, both generating and editing content for two monthly newsletters and serving as editor only for a third.

The practice of content marketing has taken root in many organizations, from Freelance consultancies to multi-national corporations.  The responsibility for generating a good deal of that content has been outsourced.  President Trump is apparently the author of his own tweets but many corporate execs, government leaders, celebrities and other public figures are not.  Text, images, audio and video content destined for blogs, newsletters, webinars and an array of social media platforms might be created by an in-house social media specialist or, increasingly, the function is performed by an external marketing firm or a talented and plucky Freelance consultant.

Ideally, your content marketing will become an effective inbound marketing strategy and “pull” self-selected potential prospects who will be primed to become your customers.  Along the way, good content will also enable customer engagement and enhance and promote your organization’s brand.

Producing top quality marketing content is time-consuming and you may at some point decide to outsource all, or segments, of it.  Before you finalize that decision, take the time to consider what you would like your content to do for your organization; how much content it makes sense to produce; and how you can protect your intellectual property (because the content represents you and your business, whether or not you write it).

Determine the best content marketing platforms for your business

As always, it’s necessary to know your customers and target markets to determine the type of content that will resonate.  B2B clients will have different expectations than B2C or B2G customers and you must reflect that in your platform choices.  Be advised that you cannot and should not attempt to be all things to all people.  Consider picking one or two options, depending on the size of your organization and budget.  Develop an editorial calendar so that you will feature relevant seasonal topics throughout the year.

  • Weekly blog
  • Monthly newsletter
  • Semi-annual webinar
  • Email marketing
  • Social media updates
  • Semi-annual case studies
  • Annual video (with audio) featuring you or other key team members

Specify the outsourcing requirements

Clearly describe what you would like your outsourced content specialist to do.  Do you want content creation and editing, or do you want editing services only for content that you create? Will your content be original, or will you mostly feature short preludes that introduce links to other articles that tell your story? Would you like images included in your newsletter or blog? Might you like short videos to be embedded in your blog or newsletter and will that function be the focus of the outsourced duties?

Finally, when would you like your blog or newsletter to publish (for example, every Tuesday at 6:00 AM or on the 15th of every month?) Share your proposed editorial calendar and publishing schedule with your outsourcer, so that s/he will know what to create and when to have the content ready.

Assign the content copyright

Stay on top of this one, people.  Be advised that unless you specify in the outsourcing contract that all content belongs to you, then ownership will lie with the outsourcer who creates it.  On your own, or after your outsourcer is no longer in your employ, you may want to repackage text, images, or video from your blog or newsletter and use it on your website, in email marketing letters, or in a book (that could be written by you or by the original content outsourcer, a ghost author) and you must ensure that you will have the unrestricted use of what you paid for.

Further, you are advised to include an indemnification clause against possible copyright infringement of text and images that the outsourcer may (unwittingly) commit.  Some images are free, 95-year-old plus images are in the public domain and others are for sale.  Misinterpretation can be costly.  Also, proper credit must be given to images and failure to do so will cause legal problems for you.  Your business entity is the publisher of the content and is the responsible party.

Address the potential legal liabilities of your content

If your content addresses a subject that requires some manner of official licensing—medical, legal, investment, architectural, engineering, or nutritional, for example—it will be wise to include disclaimers or some assurance to readers that the information provided meets accepted regulatory standards and best practices.

Contract with outsourcing termination clause

Include all points detailed above in a contract that is signed by both you and your outsourcer and send a signed copy to the outsourcer.  Hire an intellectual property attorney to review your draft contract to ensure that both you and your outsourcer are protected.   Be certain to specify  who owns the content and how it can be used after the work relationship has ended.  Non-disclosure of potentially sensitive information can also be included.

Thanks for reading,

Kim

 

 

Budget Plan: The Unexpected Windfall

Now check this out—what if Santa Claus comes to town and leaves a nice financial windfall under your Christmas tree? What a sweet surprise! You took a chance and competed for a very lucrative assignment and by some miracle, you won.  Along with making sure that you’ll deliver, if not surpass, your new client’s expectations, you should as well think about how you can most effectively utilize the proceeds from the billable hours.

Most often, we approach the subject of financial contingency planning from the negative side and prepare ourselves for unexpected expenses that could ruin a budget or seriously deplete our savings.  But why not manifest prosperity and think about what you can do if your ship comes in? Here’s a sampling of where extra money can be applied:

Erase debt.  Without a doubt, pay down and pay off all outstanding debts.  Interest rates are at loan sharking level and eliminating the burden will increase your credit score and decrease your stress level.  If you are not in debt, then pay ahead monthly installment obligations such as health and auto insurance policies or renewable business licenses and certifications.  Payment of these types of accounts payable is recorded as an asset on your Balance Sheet.

Professional development.  Are there continuing education workshops and courses or certifications that if acquired stand to enhance your stature and brand? Is there a conference that not only provides good business information, but also excellent networking opportunities? Explore how you might be able to raise the bar on your qualifications and make yourself a more employable Freelance consultant.

Business investment.  Maybe your billable hours are sufficiently generous to allow you to buy a new car? Ask your accountant or business attorney if the proposed new automobile can be designated as a company vehicle and permit you to write off some portion of the expenses plus depreciation, so that you could sweeten the investment.  You might also consider computer or other technology upgrades, or office equipment such as a new desk or an ergonomically correct office chair.  Much smaller but still significant branding upgrades include personalized business note cards, holiday greeting cards, stationery and your invoice statement.

Retirement account.  Fund your retirement account to the maximum annual amount with pre-tax dollars.  If you have extra money, open a Roth IRA account in tandem with your primary retirement account and enhance your financial future with after-tax dollars. Verify first the financial guidelines required for simultaneously holding these two retirement funds.

General savings. You might also meet with a wealth manager, if you meet the investment minimum and can find someone who can be trusted.  Alternatively,  on your own you can research and invest a couple of thousand dollars in a mutual fund that is indexed to the stock market and watch it grow (and it will, despite some ups and downs along the way).

Splurge.  Oh, go ahead! When’s the last time you took a wonderful vacation? Freelancers work so hard and we worry so much about how we will be able to satisfy our clients, find new clients, win back lapsed clients, generate relevant content marketing, distinguish ourselves from our many competitors and on and on.  I don’t know about all of you, but I am so exhausted it’s absurd.  I’ve been able to take brief local vacations, but I dream of taking two weeks or even more in Marrakesh, Morocco. Or Bahia, Brazil. Or Shanghai. Or Rome. Or Tokyo. Or Buenos Aires. Mmmmm….!

Thanks for reading,

Kim

Invoicing Inertia: The Cure

Freelance consultants are no strangers to cash-flow crunches and as quiet as it’s kept, the problem can be of our own doing, or not doing.  The reason for our cash-flow problem could be a slow-paying or, horrors, a non-paying client (an acquaintance who is a business accountant estimates that 5-10 % of professional services providers’ receivables will be uncollectible in a given year).  But we can be our own worse enemy in these matters and it is time to tame our invoicing inertia.

As example last week, I sent an invoice to a client that was worth four figures and was four months late.  Why was I so negligent, when I had important accounts payable to resolve? Why is it so hard for so many small business owners and self-employed professionals to stay on top of our accounts receivable and send out invoices on time?

In my consultancy, and I imagine this is true for most, client work, both performing it and networking to bring more of it in, are the priorities.  Billable hours are the name of the game. Then there is content marketing activity (this blog!) to send to my preferred social media platform (LinkedIn) and my website.  Other revenue streams—teaching twice /week, which entails responsibilities to my students, and producing a monthly post for the online magazine for women entrepreneurs where I am a staff writer—claim another chunk of time and creative energy.  Being in business requires considerable mental and physical stamina.

The invoice was for hourly work, rather than a project fee, meaning that detailed information was expected (and not unreasonably so).  The very thought of generating the thing nearly made me nauseous, so I found several avoidance-behavior activities that on the surface appeared to be ambitious, but in reality served mostly to enable my procrastination.  Then the client asked me about the invoice.  I was so embarrassed!

As I worked on the detailed, multi-page invoice, I thought about what I might do to simplify the process, so that I could easily generate scheduled invoices and would be motivated to do so.  Invoicing for a project fee is much easier than the hourly rate version and it was project fee invoices plus the job income  that sustained me while I neglected the hourly invoice.  Here’s what I recommend (my business accountant friend approves):

Collect in advance

Whether the assignment is paid by hourly rate or project fee, collect a percentage at the contract signing or email-documented agreement (20 % – 35 % of the project fee, or an estimate of the first months’ billable hours).  Discuss with the client a mutually agreeable invoicing schedule and honor it.

Create two all-purpose invoice templates

In the top left of a Word document, type in your name and/or DBA as the vendor, tax I.D. and contact info. This will become the permanent part of your template.  Below that, type in separate lines  for the client name, date, project deliverables, total amount of the project fee and the amount of the invoice.  All you’ll need to do is copy the template, drop in the specifics and presto! You’ll have an invoice to send.

The hourly rate template will have a cover sheet that is similar to the project fee template, but with the lines for rate (the dollar amount you’re charging/hour) and hours (total billable for this invoice) substituted for the project fee info.  A second page of the hourly rate template will have lines for four “week of” headings, ready for you to insert the dates and specifics of your weekly client work.

Either invoice can be used for retainer contracts.  If you are brought in to work a standard number of hours per month for a particular client, or you’re asked to perform predictable functions as needed throughout the year and you can reasonably estimate how often you’ll be asked to perform those services and your cost to provide them, then you can calculate invoice amounts in advance and determine a retainer fee.  If this is the case, then suggest a retainer arrangement at the next contract signing and bolster your income security.

BTW, it is not unusual to invite a client to pay the year’s (or quarter’s) retainer in advance. Offer some attractive incentives for yearly or quarterly advance payments, like a good discount or service add-ons.

On all invoice templates, indicate how the check should be made out (your name or DBA) and indicate that the invoice is due immediately (although it is accepted practice to pay invoices within 30 days). Finally, state that it is a pleasure doing business with your client.

Invoice on time

Whatever the agreed-upon payment schedule, be sure to follow it (not more than one week late). When you honor the invoicing schedule, you communicate to clients that getting paid within 30 days, if not sooner, is what you expect and deserve.  Timely invoicing also benefits your clients, who will be able to better manage their own accounts payable and cash-flow.  If you start to bring in more lucrative assignments, investigate the process of accepting credit card payments.  You’ll be paid faster, but a small processing fee will be deducted.

Invoice as marketing collateral

To date, my invoices are created on an unembellished Word document, but that is about to change.  I plan to align my invoice design with my other marketing collaterals.  Very soon, I’ll design an invoice PDF that contains a scan of my (lovely) business card, that will appear at center top.  All the other info will be written as described here.  You can also investigate free invoice templates in an online search.

In our hyper-competitive business environment, where clients hold the keys and seem to be looking for reasons to cancel projects that Freelance consultants depend upon, it is imperative that we project professionalism.  All interactions with clients, from the first meeting, to the excellence of our work and concluding with an accurate and timely invoice, must reflect well on our brand.

Thanks for reading,

Kim

 

Freelancers: We Are the Future

Presented for your perusal are relevant statistics and observations gleaned from the third annual “Freelancing in America” survey, conducted by the Freelancer’s Union.  According to the organization, “Freelancing in America” is the largest and most comprehensive measure of independent workers conducted in the U.S.

Who we are

In 2015 55 million of our fellow citizens, representing 35% of the nation’s workforce,  participated in the Freelance economy to greater or lesser degree and we earned $1 trillion.  The survey found that 63 % of us were Freelancers by choice, rather than by necessity, and we enjoy this way of working.  Freelancers reported feeling positive about our work and 79 % preferred Freelancing to traditional employment.  We’re much more likely than our traditionally employed counterparts to feel respected, empowered and engaged in our working environment.  The survey assigned categories to different types Freelancing:

  1. Independent contractors (35 %, 19.1 million) — Full-time Freelance Consultants whose only income is derived from client work.
  2. Diversified workers (28 %, 15.2 million)– Freelance Consultants who regularly do client work, but provide themselves a guaranteed income floor by working part-time (maybe as an adjunct professor at a local college or maybe as a bartender and possibly both!).
  3. Moonlighters (25 %, 13.5 million)– those who take occasional side projects along with their traditional employment.
  4. Freelance business owners (7 %, 3.6 million)– Full-time Freelance Consultants who put together a more-or-less permanent team to form a consultancy, so that more complex and lucrative client work can be taken on.
  5. Temporary workers (7 %, 3.6 million)

What we like

Flexibility is a huge perceived benefit for the majority of Freelance Consultants and 60 % felt that a Freelance Consulting career is a respectable choice.  Further, more than 50 % of workers who left full-time employment to join the Freelance economy were able to earn more money within the first year of Freelancing.  46 % of us raised our project fees/hourly rates in 2015 and 54 % said they planned to do so in 2016.

Serious challenges

Money is an issue for Freelancers.  Survey respondents reported that adequate billable hours, negotiating fair project fees or hourly rates and receiving timely payment of invoices (or receiving full payment of accounts receivable) could be problematic.  On average, full-time Freelance Consultants obtain 36 billable hours/week. When the billable hourly rate or project fee is considered inadequate,  cash-flow is impacted and there can be a struggle to meet financial obligations.  As a result, the survey also found that debt is a real concern for us Freelancers.

Access to health insurance and retirement benefits remain major concerns.  Full-time Freelance Consultants rank medical and dental insurance as a primary concern; 20 % of us have no health insurance.  Of those who had health insurance, 54 % faced increased premium rates or deductibles in 2015 as compared to 2014.

Surprisingly, the matter of retirement funding was not addressed by the survey.  Freelance Consultants, unless we are moonlighters who have full-time traditional employment or we’re married to a spouse who receives that important benefit, must completely self-fund our retirement and many millions of us do not have the income to build a worthwhile retirement account. Please see my recent post on retirement planning for Freelancers Exit Strategy: The Retirement Plan

Shaping the future

As traditional full-time, middle class paying employment continues to disappear, the ranks of Freelance Consultants can only increase, making us a fast-growing segment of the American workforce.  Sadly, politicians have paid no attention whatsoever to either our special challenges or our voting-bloc potential.

85 % of survey respondents said that they planned to vote in the 2016 election cycle.  If that statistic can be applied to the entirety of Freelance Consultants in this country (and I feel it is unrealistically optimistic) it would represent nearly 47 million voters, more than enough to influence a presidential election.  70 % of survey respondents would appreciate candidates and political representatives addressing Freelancer needs, because no matter how lovely things may be for the chosen few who command lucrative project fees, Freelance Consultants (and most part-time workers) are vulnerable.

The holiday season approaches and that means drastically fewer billable hours will be available to the vast majority of us, as many clients limit work from about December 15 to January 2.  We will not receive holiday pay for Veteran’s Day, Thanksgiving, Christmas, or New Year’s Day.  How do we fund our retirement accounts and buy health insurance when it may be all we can do to cover basic living expenses? We need political representation, advocates and activism.  The Freelancer’s Union is what we have now.  http://www.nytimes.com/2013/03/24/business/freelancers-union-tackles-concerns-of-independent-workers.html

Thanks for reading,

Kim

 

 

Write an Effective Business Letter

All writing is about the intended reader (that is, the audience).  Whether it’s a book, song, movie, opera, website, marketing brochure, grant proposal, or fundraising letter, the one priority for the writer to keep in mind is that the intended recipient matters most.  Writing is a basic means of communication and we have many reasons to choose to express our thoughts or requests in writing, rather than verbally.  Usually, we write to make our thoughts official, to communicate with someone whom we do not know, or to communicate with a large number of people.

We write to express our point of view or to make a request.  We may write to persuade the reader to take a particular action based on information that is presented or to consider a new perspective and modify his/her opinion.  In other words, writing is selling. Writers will benefit from the following guidelines:

  1. Purpose: Why are you writing?
  2. Audience: Who is the reader (audience)?
  3. Outcomes: How can you persuade the reader to care about your subject or request?

The first question is actually about you, the writer.  What motivates you to write? Are you in search of funding for a project that you would like to advance and so you must write a business or grant proposal? Might your objective be to write a sales or marketing letter that will be sent to those who you feel are potential customers for your product or service? Are you producing content for a website or other promotional material that will communicate your expertise to potential customers and give them the confidence to contact you? You will be an effective writer only when you develop the self-awareness and confidence to acknowledge what you would like your written material to achieve, so that you will choose vocabulary that reflects your intent.

The second question ensures that you tailor your message and vocabulary to resonate with your intended reader or audience.  The successful writer will consider the point of view of the reader and craft a message that is likely be understood and accepted by that reader.  If it is a proposal that you will write, then you must address the interests of several stakeholders who will be able to speak favorably or unfavorably of your request.  Grant applications and business proposals always include financial information as well as operations and marketing information, for example, to satisfy those three important decision-making constituencies.

The final question addresses the perceived benefits that the reader or audience can expect to derive from what you have written.  Here, the writer must tightly focus on the readers’ priorities and preferences and consider the outcomes attached to the expression of the thoughts or creative expression, or the relative value of your request.  What will be in it for the reader if s/he buys your book, devotes time and money to attend a performance of your music, or approves your grant or proposal?

The writer is advised to utilize a communication style and vocabulary that are familiar and reassuring to the reader or audience,  as a way to build confidence, encourage acceptance and approval and result in mutual success.

Thanks for reading,

Kim