Hunting The Muse

I am a Gnumeric Addict.

I am a Gnumeric Addict. Gnumeric is the spreadsheet I use on linux. I'm going to geek out for a blog entry here. Hope you don't mind. I've been in complete business mode all week since it's really the first time I've felt this freelance thing start to "take". So bear with me.

So I've got a spreadsheet that has a separate worksheet for each client. It adds up my hours for each week for each client, and that client's rate, and gives me my income for the week as well as my effective hourly rate for the week. If I work for Cheap Client more than Medium Client, then my effective hourly rate goes down (even though gross income might go up).

So then I decided to total up my month expenses and turn them into average weekly expenses. I wanted to see if I was meeting expenses yet or if I was merely just competing with unemployment.

Then I started getting a bit fancy. First I thought I would recalculate my average weekly income at the end of each week and watch the average grow. So for instance, at the end of my first four weeks freelancing, I had an average income of $240/week. Less than unemployment. But then the next week I billed about $1100, so all of a sudden my average weekly income was up to around $410. More than unemployment. Hooray!

So I thought I would make it a goal that each week I would try to beat my cumulative average weekly income. Like this week I wanted to beat $410 dollars. Since I had a lot of hours booked, I figured, no problem.

But I don't have many hours booked NEXT week, so I started rethinking that goal - freelancing is by nature spikey. I might have an average income of $1000/week, but regularly bill $1500 one week and $500 the next. Then I'd be failing my goal half the time which would make me feel lousy. So I had to figure something else out.

I was thinking, okay, what's something that would show me I'm doing better in a recent timeframe than I have been as a whole? Like, what would show me that I'm trending upward, WITHOUT making me feel like crap for just having an income pattern that is spikey by nature?

So then it hit me - moving averages! Actually I didn't realize that was what I was doing until after I finished. But now my spreadsheet has a six-month rolling average (which is what I was already using, I just decided to start rolling it five months from now), and I *also* have a four-week moving average. The entire goal now is to always have the current week's four-week moving average ABOVE the current week's six-month moving average.

So how does that work out? Well, with the hours I've put in this week, my 6-month average is about $560/week. However since I've had two good weeks in the last three, my four-week rolling average is $780/week. So right now I'm trending upward very nicely. And what's nice is that even if I bill *no* hours next week, I'll still be trending upward. It can still keep me focused on my month, but not desperate about every single week.

What's nice is that it also gives me a three-week outlook. Right now I can see that my 4w will be above my 6m for at least the next three weeks no matter what I do (although then it sinks like a stone). So I can coast a bit right now if I want - focus more on landing new clients for a month from now, rather than doing anything I can to fill up my hours this week with anything billable.

There's still something that bugs me about this - I'm not sure that this gives me my goal of one super-cool all-powerful indicator that tells me exactly what my business health is. The Magic Number. For instance, I know the trending of both averages is important. I don't have a number that takes the trending into account. And it bugs me that if I don't work for two weeks, I can beat both my 6m and 4w averages in week three and still see the 4w average go DOWN the next week. But maybe that makes sense... because even if I have a killer week, it doesn't mean I'm doing really well overall if I was a complete bum for the previous two weeks.

Eventually this is going to put pressure on me. My ceilings are two-fold - one, my hourly rates, and two, the amount of time I put into this per week. Or in other words, the fact that my earning power is directly linked to when I am actively putting thought into my clients. I can't clone myself or double-bill or externalize myself to bring in money when I'm not physically (or mentally) there. So there will probably be a point where I'll be maxed out on a reasonably hourly rate and the amount of hours I'll be able to work, and I'll have a hard time keeping my 4w above my 6m. I think when that happens I'll have to start figuring out the next step... perhaps starting up a real business, perhaps designing a product or a hosting service so I can earn money that isn't connected to my active effort.

Well, I'm done being a money-obsessed mercenary. For the night. I also thought a ton about music today. And the new personal dynamics I'm running across in business relationships - entirely different than what you find in the land of corporate salaries. But I'll write about them another time. Posted by Curt at April 5, 2002 01:14 AM