5 Key Metrics I Track in My Creative Business
Like many English majors, I don't consider myself good with numbers.
I spent at least one night a week crying over my algebra homework in junior high. I only made it through pre-calc by the grace of my now-husband's endless help. And let's not talk about the college math class that resulted in the lowest grade of my undergrad career.
I used this dislike of numbers as an excuse to ignore any sort of analytics during my first few years of business. Which was a huge mistake.
I want to run my business on purpose, only taking actions that will move my business in a very specific direction. That's not something I can do if I continued ignoring key metrics in my business.
You can't run an intentional business if you don't know what's working and what isn't.
I've gotten serious about tracking my numbers this year. I run my business in less than 20 hours a week, and I need to know that every minute of that time is being spent wisely. These are the five key metrics I track in my creative business. See how they can help you take back your business and your life!
5 Key Metrics I Track in My Creative Business
Before we get started, I'll share which tools I use to track these numbers.
Many of the metrics I track revolve around time and money. I use the free version of Toggl to track my hours (both for client work and for nonbillable work like admin tasks or time spent on continued learning---you'll find out why in a minute). I use Wave's free accounting software to track my income and expenses.
At the end of each month, I plug all the info I need into a Google spreadsheet so I can easily see usable information and patterns instead of a jumble of meaningless numbers.
1. Hourly rate
I don't charge my clients by the hour. Instead, I charge a flat rate for each project or package. (The reason I run things this way is a whole other discussion. I recommend checking out the free ebook Breaking the Time Barrier for a great breakdown of how to price your services.)
But just because I don't charge by the hour doesn't mean my hourly rate doesn't matter. If you don't pay attention to this metric, you could look up one day and realize you're earning $8/hour! I used this tool from Freelance Boost to calculate my minimum hourly rate. As long as every project I take on is at or above this minimum, I know I'm earning enough money to cover my regular expenses and taxes.
How it's improved my business: Knowing my average hourly rate for each type of job helps me set fair project rates so I'm not over- or undercharging. It also helps me see when it might be time to give myself a raise or if certain types of projects aren't earning enough. If you're not confident about the rates you're charging, start tracking your hourly rate ASAP.
2. Billable vs. nonbillable hours
Nonbillable hours are business tasks that need to be done but that don't actually earn you income. Things like invoicing, accounting, replying to emails, blogging, marketing, attending conferences, and planning for the future of your business all fall into this category. If someone isn't paying you to do it, it's nonbillable.
Why do you need to track these? Because nonbillable hours have the potential to drag your hourly rate into the gutter.
Let's say you decide you want to charge an hourly rate of $10. (I chose this number for easy math. If you actually charge $10/hour, email me so I can give you a pep talk about raising your rates, stat!) You plan on working 20 hours a week. Ten of those hours are billable client work. Ten are nonbillable admin work. You earn $100 for the week and are feeling pretty good about it . . . until you realize your actual hourly rate was only $5!
It's simple math, but it's a formula many creatives forget to take into account when setting their prices. This is why so many entrepreneurs complain about working all the time and not making any money!
That's why I don't just track how many hours I work, I track what percentage of those hours are billable or nonbillable. If I keep my nonbillable hours as low as possible, I have more time for billable hours. That means I can earn more money without working more or raising my prices.
How it's improved my business: Knowing how much my nonbillable hours are really costing me has given me the freedom to outsource and/or automate many of those tasks. Many creatives want to DIY everything for their business, but that mindset could be costing you in the long run!
3. Estimated Hours vs. Actual Hours
Raise your hand if you're an eternal optimist about how much you can get done in a day. Yeah, me too.
Two strategies have helped me get past this problem: Learning to set realistic to-do lists and tracking estimated vs. actual hours. This metric has made the biggest difference in reducing my stress level and allowing me to spend more time with my family.
I keep a running list of every project I take during the year. In the first column, I write how many hours I expect the project will take. In the second, how many hours it actually took. In the third, the difference in either direction.
I think I'm pretty good at estimating my time . . . but my spreadsheet tells me that as of just a few months ago, I was underestimating by about three hours per project! That may not seem like much, but it makes a huge difference in setting project rates and scheduling your workweek.
How it's improved my business: I now set more accurate rates based on similar projects I've done in the past. I can also schedule my workload more evenly. Instead of wondering if I have time for a project, I can look at the numbers and know for certain.
4. Hours Worked Each Week
Do you know how many hours you work each week? Unless you're actually tracking your time, you probably don't.
I used to think I worked 20 hours a week, but Toggl tells me my average is closer to 14. On the surface this is a good thing. Who wouldn't want to work fewer hours? But it actually meant I constantly overscheduled myself. I'm willing to bet I'm not alone in this problem.
How it's improved my business: This metric can tell you so many things. Do I have room or another retainer client? Do I really have time to do my own accounting, or do I need to hire a bookkeeper? Am I working more than is healthy? Am I not working enough to keep my business functional? How many weeks will it really take me to create that passive income product?
5. Percentage of Income from Each Client/Product/Income Stream
This is where I get super nerdy. I like knowing exactly what percentage of my income is from each client and each type of work (writing, editing, content strategy, affiliate income, etc.). This metric has the potential to save your business from huge losses and help you earn more money from month to month. Here are a few scenarios where knowing this metric can save your business:
Although editing is something I love, it's not nearly as profitable as content marketing. If I see that editing makes up a significant percentage of my income, I know that my overall earnings are going to decrease. I need to limit how many editing projects I take if I don't want to see a loss in profits.
I also found myself receiving 60% of my income from just a single client last year! That's bad news if that client ever needs to reduce or terminate our work together. Now I'm focusing on building up a wider client base.
Or let's say you have several products for sale. Knowing which ones bring in the most income can tell you where advertising money would be best spent and which products are worth updating.
How it's improved my business: I share an in-depth income report every quarter with my email subscribers. You can hop on the list here if you're interested in seeing the details of how I put this metric to work! (You'll also get my free content strategy cheat sheet. Good deal, right?)