Artwork donated by Pati Nagle. 

The Freelancer’s Survival Guide:  Money, Part Six

Kristine Kathryn Rusch

I’m sitting in my office at the exact moment my alarm normally goes off.  I’ve never been in the new office this early in the morning.  The main window faces east, and I’m squinting as I write because I’m too lazy to lower the blinds.

I’m here early because I’m so scheduled today that this is the only time I have to write the Freelancer’s Guide.  I’m teaching a workshop this week.  I thought I would have time in the evenings to write, but I don’t.  In fact, I’m busy every single moment I’m awake, and for the past week, I’ve been sleeping two hours less per night than I normally do.  So here I am, doing exactly what I used to do when I had a day job, crawling out of bed at what my husband calls O-Dark-100, and trying to make my brain work.

Ah, the flashbacks. 

Those of you who still have day jobs do this every single day.  You get up early, you snatch a moment to work on your freelance business at lunch or in the evenings when you’re as groggy as I am now.

You’re reading the Freelancers Guide so that you know what you’ll face when you go fulltime freelance.  (Okay, the usually energetic kitten has just dozed off on the window sill; this is much too early for her as well…and she’s not helping.)  A number of you have written to me, particularly when I was dealing with the expenses section of the Guide, saying you’ll hang onto your day jobs longer or you’ll plan better—and those are good things.

But then there’s this extended schedule, something I usually don’t have to face.  I don’t write when I’m tired any more.  When I’m sick, yes.  When I’m distracted, yes.  But tired?  I say I write tired, but I don’t.  I write until I’m very tired (ready-for-bed tired) but almost never do I write when I’m this exhausted and pressed for time.

I used to.  I remember this feeling—and I’m glad I don’t have to do it very often.

That’s one of the perks of freelancing, and one I forgot until this morning.

But…going back to the discipline post, you’ll note that I’m up at O-Dark-100, working on the Guide.  I don’t have an outstanding deadline on this Guide.  Just the obligation to post a new one on my website every week.  I could, as I said in the discipline post, put up a short notice—Teaching This Week; Guide Will Return Next Week—but I didn’t.  Because, as I said before, being a successful freelancer is all about discipline. (Dammit.)

So…

Last week, I promised we’d discussing billing and toughness.

Those two things go together.  In order to have income, you must charge for your work.  Once you set the price, you must demand payment in some form or another.  If you don’t get that payment, you must go after it, somehow.

This week, I’ll deal with setting price.

Oddly enough, this is often the toughest thing for the freelancer.  You must set a price for your work.  This price must do three things: it must reimburse you for your time and effort, as well as whatever costs you already have in the project; it must be within the range of whatever the customer can afford; and it must indicate value.

The last is the most nebulous.  But when Dean and I started teaching our own writers workshops, we learned what these means.

We started our workshops as a way to pay forward.  Other professional writers had helped us along the way, and we couldn’t help them in their careers.  So we pay forward, to the other professionals and up-and-coming writers who need help.

Initially, we did a lot of work for free, or for the expenses (and somehow, what we got paid never did cover expenses).  These workshops, while giving us some practice, never really attracted the writers we wanted to help. Sometimes one or two of them would come, but the bulk were people who had thought of writing, but weren’t writing.

We used price to weed out the wannabe writers who weren’t serious.  But we had other considerations.  The workshops had to pay their own expenses.  And we had to keep the price relatively low, because most professional writers and serious writers trying to become professional, often didn’t have much money.  We certainly didn’t in their shoes.

So we set the price as low as we could and still cover expenses.  We had to donate our time to do this—and once in a while, we still miss.  Last fall, for example, after the Master Class for professionals who  need to jumpstart their careers, we were $3000 in the wrong direction.  So not only did we donate our time, we lost $3000.

Not the best way to run a business.

Fortunately, we don’t make our living teaching.  If we did, we would charge a lot more.  For example, a writer I know who has published no novels and maybe twenty short stories (who would, in short, be a candidate for our Master Class if he were so inclined) makes his living teaching and charges $5000 to $10,000 per student for his weekly workshops.  We charge $2500 for two weeks, and that includes room and breakfast.

The price difference comes from two areas.  He needs the money to make his living, and he doesn’t care who comes to his workshops. In fact, most of the people who do come are upper middleclass and retired, and see the workshop as an adventure vacation.

We make our money writing, and we care who comes to our workshops.  We screen heavily—and even at our discounted prices, a lot of our students struggle to get the time off and to pay for the workshop itself.

Note the considerations in setting price.

Each freelance group sets price differently. Contractors bid for projects.  The bids are estimates, but they become binding when the client takes the project.  Anything over the estimate becomes a cost-overrun that the client must approve.

When a contractor bids, he’s setting his price based on several factors:  the cost of materials, the cost of labor, the cost of overhead, and the cost of intangibles (discovering, for example, that the floor he was going to use as the base for the new wall is rotted and must be replaced).  The contractor must also make a profit, or he will go out of business.

  Contractors have another consideration:  contractors bid against each other.  So the contractor must factor his competitors into the mix.  The cost of materials should remain the same for all the contractors.  The cost of labor should be similar. And all of the contractors have to factor in the intangibles.

The only areas where the contractor has discretion are the cost of overhead and the profit.  However, the contractor can only trim his overhead so far. Sometimes a contractor will forgo the profit to get the job, with the guarantee of being the sole contractor on future jobs.  In those jobs, the contractor will add the profit back in.

Over the years, contractors have learned to shave expenses in other areas.  They work with their suppliers, getting excellent deals which brings down the cost of materials.  They decide when they can use cheaper labor—or just do the job themselves.

All of these things factor into price.  And it becomes a real balancing act.  Most independent contractors go out of business because they undercharge too much.  They get the job, but just like our Master Class last year, the job costs them more money than they expected.  They don’t make overhead and they certainly don’t make a profit.

Contractors aren’t the only ones who get paid for the job.  Plumbers and a variety of other service providers do the same, with the same considerations.

Consultants have an even more difficult task.  They ask to be paid for their intellectual ability in a certain area—again, the ability to do a job. But often there are no materials. There are no other employees.  There’s only one person’s knowledge, and the value it imparts to the client.

Lawyers, psychologists, money managers, all must set their fee, whether it’s an hourly rate or a fee per job or—in the case of agents (from book agents to insurance agents to real estate agents), a percentage of the gross money they bring in for their client.  In many of these fields, there are reasonable and standard rates.  But the more in demand the consultant is, the more she can charge.  Starting in these fields, however, can be difficult, because the consultant’s worth is at that point unproven.

When we owned the collectibles shop, we had other considerations on setting price.  We sold comic books, marbles, cookie jars, jewelry—all kinds of things that people collect.  (Dean collected them and finally decided to use the shop to sell off his collections.  It didn’t work because he bought new collectibles while there.  That is, it didn’t work, until he sold the store.)

We had owned many of the items that we sold for decades.  Some of the items had risen in value; some had lost value.  Dean set the prices because this is his area of expertise. The shop was in an antiques mall at the far end of the tourist town where we live.  (You can still visit the shop, which has been run by its new owner for longer than we had it.  Pop Culture Collectibles, in Streetcar Village, Lincoln City, Oregon.)

Dean knew his customer base, and that set not only the prices, but which items he had in his store.  Most of the traffic would come from tourists, looking for souvenirs.  So he needed to provide cheap impulse buys. 

Some of the traffic would be true collectors, who would find the one item they needed to fill out their collection.  For them, he needed to offer that item at its value or higher, so that he could negotiate the price down to something they’d be willing to pay.  Collectors will often pay more than something is worth so that they can finish their collections.

Other collectors would want an item, but would be like Dean himself: they wouldn’t buy that collectible unless it was beneath the price listed in the various price guides.  So for them, he needed collectibles priced enough under guide to be tempting, but the price had to be high enough so that Dean made a profit on the item.

Finally, he would had repeat customers—also collectors—who checked the store every month or so to see if something new came in, so that they could add to their collections.  Often these collectors fell into the last category.  But their presence meant that Dean’s inventory had to change on a regular basis.

So he had to price to move product out the door.

So the prices in his store varied for extremely high to extremely low.  His main thought with the store—our original reason for owning it—was to move product.  So most of items were priced under market value.  But he had a few that he knew only the specialty collectors would buy, so he priced those at or above market value.

And then there were the truly special items that he had in the store mostly as decoration.  In other words, he didn’t want to sell those items, but he wanted people to see them.

Those items had the price that Dean called ridiculous.  The ridiculous price was so high that he would part with the item and feel good about the item leaving his life.  Needless to say, he didn’t sell many of those, but when he did, he laughed all the way to the bank.

Most writers reading this are feeling a bit confused at the moment.  Writers don’t set price the way that retail store owners do.  Writers mail their materials to a market that will pay them an established rate.  From many writers’ points of view that means that the magazine or the book publisher sets the price.

But that’s simply not true.

Writers place a value upon their work in a different way.  The value for their work comes in the markets they pursue.

For example, pay rates for short stories vary from payment in copies of the magazine (in other words no money at all and very little value) to thousands of dollars per story.

The competition for the thousands-of-dollar markets is high; the competition for the pays-in-copies markets is extremely low.  Even as a beginning writer, I refused to submit stories to the pays-in-copies markets.  My theory was—and is—this:  I’m a professional.  I get paid for my work in actual money.

I started then and continue to mail my work to the high competition, high paying markets.  Those markets often invite high-end contributors, so the room for an unsolicited story is quite small—maybe one or two slots per year.  Some years I hit that slot, some years I don’t, but I always try.

Then I work my way down, figuring out two things: Price and audience.

Why audience?  Simple.  As I grow the number of people who like my work, I can increase the price I demand for that work.  I become one of the invitees instead of someone knocking on the door trying to get into the highest paying markets.

The attitude remains the same for my work with book publishers.  I factor in the time it takes me to write a novel, what I need to pay my bills, and how much profit I want at minimum.  (Of course, I will take money above the minimum, so setting the minimum price is the best.)

I’m fast and prolific, which gives me the luxury of taking some lower-paying project because I want to write it.  If I only wrote one book every five years, I would have to demand a higher price for it—if I were a fulltime freelancer.  (Most people who write one book every five years have day jobs.)

How do I demand price?  In the book publishing industry, price is negotiable.  The publisher makes an offer for my work. The offer includes a price (among other things).  I then accept the price or negotiate it upwards.  The publisher has a limit of what he will pay me on the upper end, and I have a limit of what I will accept on the lower end.

Sometimes we come to an agreement, and sometimes we don’t.

Occasionally, I screw up.  A project takes more work than I expected, for example.  In one case, I had deliberately  priced myself out of the market (I thought), and the publisher exceeded my price.  I was stuck with a project I really didn’t want to do.  I learned, in that instance, to set the bar higher for a project I don’t want.

Note: rarely do I say no to a project I don’t want.  I want the publisher to return to me with other projects and/or to consider future projects I send him.  So instead of saying no, I set my price so high that the publisher will decide to hire a different writer. This is the writer equivalent of Dean’s decorative collectibles.  My problem early on was that I didn’t set my price high enough to laugh all the way to the bank.

Sometimes, the publisher screws up.  He pays me more than the project could ever earn.  This usually happens on projects that originate with the publisher and he asks me to do the writing.  It does happen with my original work, but rarely.  Usually the publisher and I know what the market will bear for that work, and we both set our prices accordingly.  I set mine by demanding an up-front payment of a certain amount, with a royalty in case the book does better than expected.  He sets his with that upfront payment and with the price point he puts on the later book.

Which brings me to the Freelancer’s Guide.  I could have written 50 pages, added a proposal, and marketed this book to the top nonfiction publishers.  If I had done that, I would have had a dollar figure in mind for my advance payment.  If no publisher offered that, I wouldn’t write the project.

For years, I had thought of doing that but never did.  Part of that was because, as fulltime fiction writer, I never made the time for the speculative nonfiction work.  All of my nonfiction these days is commissioned. 

I have received a lot of nonfiction book offers in the past twenty-five years, and I’ve accepted none of them.  Mostly I’ve priced myself out of the market on purpose.  In the one case where the publisher accepted my price, I would have completed the book—except that it was a rush job, and a legitimate family emergency arose.  (I had to go to Hollywood to work with a production company for two weeks, and two days before I was to leave, my mother died.)  No money had changed hands.  I begged out of the project, and the publisher found someone else to write the book.

When I realized in March that the Freelancer’s Guide needed to be on the market right now, I still could have gone to a mainstream publisher.  Right now would have become a year from now, but the book would still have had its uses.  And a book publisher in today’s market would have understood the need for such a project.

Instead, I decided to answer the siren song of now and use the opportunities available to me as a freelancer in the modern market to publish the book immediately. 

I was thinking of my audience, mostly.  Just like Dean and I do with teaching, I wanted this Guide to benefit people who are struggling right now and trying to succeed in a new profession—one some of whom might have been forced into due to the wretched economy.  (Many longtime professional freelancers started in recessions or [if you read history] the Great Depression.  If you can’t find work, you create your own.)

Even with this self-publishing option, I had a variety of routes.  I could have posted the Guide as proprietary e-files.  People who had e-readers could download the book for a price that I would set.  But many people don’t have e-readers, although most people have computers.  So I could have posted the Guide privately on my website.  It would have taken a password to access the Guide.  I could have set a price for that password.

But I had two considerations against that option:  first, most of my new audience wouldn’t have discretionary income.  I want to reach the folks who were living on unemployment benefits, suddenly and frighteningly unemployed, and looking at all of their options.  Those folks couldn’t pay for the Guide.

The other consideration was pure marketing:  People now know me as a fiction writer.  No one knows I wrote nonfiction for years unless I told them.  So the value of the Guide would be hard for the customer to determine without actually reading it.  I could have given the first installment away for free and made people pay for the rest, but that automatically limited my market.

So I decided to publish on my site.  But I had the internal problem of the deadline.  I don’t write for free.  I never have.  I need some kind of payment for my expenses (which are my time, my webspace, my research [which can be extensive], and my overhead).  So I put up the donation button.

Even then, I could have set price.  Paypal gives me the option of accepting a set fee for the donation.  I decided to let the consumer chose what price she paid for the Guide.  And I’m up front about this.

Here’s how I see it:  Those of you who are donating (thank you) are paying for more than my expenses.  You’re buying free copies of the Guide and giving them to the people who actually need it.  In other words, you’re making the “free” part of this Guide possible.

Setting price is probably the most important part of your freelance business. It’s also the most difficult.  You will miss on occasion, especially early on.  Chalk that up to a learning experience—and don’t make the same mistake again.

Here are the factors to consider as you set price:

1) your expenses

2) the amount of time the project will take (or that you’ve already invested)

3) the cost of materials (if any)

4) the cost of labor besides you (if any)

5) the minimum you need to make on the item/project to make a slight profit—or to gain an intangible, like getting the client to return (in retail, that’s called a loss leader; you give something away for free, so that the client will purchase another similar item at a much higher cost).

6) the maximum you can charge a client without chasing the client to something or someone cheaper

7) the profit (and there needs to be a profit most of the time)

There are many other factors, some mentioned in this section.  Next time, we’ll move from setting the price to actually making the client pay for the item.  And that’s the really tough part of billing.

Well, you’ve seen why I’m doing the Guide if you’ve read this post.  So let me simply present the donate button and hope a few of you click on it.  Thanks.

 “Freelancer Writer’s Survival Guide: Money, Part Six” copyright 2009 by Kristine Kathryn Rusch.

I have an essay on Audible.com about reading.  Check it out here.

Stunned to hear this morning that Locus publisher, Charles N. Brown, passed away on the way home from Readercon.  The last few times I’d seen Charlie, he hadn’t looked all that healthy.  He’d been struggling with his health for years, so in some ways this wasn’t a surprise.

But his Locus essays had become very interesting, as he got back to reading the books he loved, and he was reminiscing about the field in fascinating ways.  

Charlie is a major part of the sf field.  With his passing, the sf field will change.  It was already changing, and he held out against that change for a long time, although he gradually came to understand it–and maybe even accept it. But Locus had been the center of the old-fashioned sf field for decades.  Locus change hands and focus and will become something else.  Seems odd to me.

We spent a lot of time with Charlie especially in the early 1990s.  He was always opinionated and always fascinating.  We saw less of him as our interests diverged, but we could still have great conversations.  He introduced me to Korean food and some spectacular restaurants, as well as some marvelous people.

It seems odd to think of sf without Charles.  But that’s what we face now.  We will miss him.

Artwork donated by Pati Nagle.

The Freelancer’s Survival Guide:  Money, Part Five

Kristine Kathryn Rusch

Thought we were done with money, didn’t you?  We discussed expenses (a lot) and profits (a little) and you thought that was the end of it.

Nope.  There’s a lot more to income.  A lot more.

If we were discussing writing, I could probably deal with income for the rest of the summer.  Income is complicated, no matter what business you’re in.

But I’m trying to keep this freelancer’s guide general, and I don’t know all the ins and outs of income for, say, a building contractor.  Or for a quilter.

I can handle retail store owner, therapist, restaurateur (sometimes), landlord, publishing, and writing because I’ve had hands-on experience in all of those industries—some because I’ve owned the business and some because some poor misguided soul put me (at the time, an hourly wage earner) in charge of handling the finances. 

But I can’t cover everything for every freelance business.  I’ve been getting forwards and pingbacks from all sorts of industries, from realtors to financial advisors to travel agencies.  And I’ve been getting comments and donations from places as far away as Canada, Norway, and Japan.  (Thanks, y’all.)  So rather than try to write everything for everybody (and in no way do I know the business tax laws of Japan!), I’m trying to write a little for everyone.

Before I go any farther, a few bookkeeping things for the site.  If you are new to the Freelancer’s Guide, go back and reread from the beginning.  Every now and then, I post a guide to the guide (I’ll do the next around the 20^th, after I finish teaching a workshop).  You can find the most recent guide to the guide here, but that doesn’t include the money posts, which you should read in order before you get to this one.  In last week’s post (http://kriswrites.com/2009/07/02/freelancers-survival-guide-money-part-four/), I list links to the others.

Those of you who have been reading the day the Guide comes out might want to go back and read the comments section, particularly in the money sections.  Lots of wisdom here from folks who have been or are in the trenches.  If I don’t have an idea that works for you, I’m sure someone else does.

Which brings me to e-mails, comments, and donations, as well as website statistics.  The number of people coming to the site keeps growing, which means you’re all forwarding the guide.  I appreciate that.  I also appreciate the occasional donation to keep me going on this.  I really, really appreciate the comments because—believe it or not—I don’t know everything (I did when I was a teenager, but I have since forgotten most of it) and so anything you have to add, however small, will benefit the readers.

So a big round of thanks to all of you reading, commenting, and contributing in whatever way you can.

I do have to say that I’m enjoying this a lot more than I expected to.  I put off writing the guide for years because I knew what a slog writing nonfiction is for me. This hasn’t been a slog at all, and that’s because of the interaction.  If I didn’t know you were out there, I don’t know if I would have made it to Part 5, let alone Part 15.

Okay.  Enough mushy stuff.  Let’s move onto the things you really want to read.  Like income.  Profits.  Money.  Or as the e-mail in my spam file puts it: Income! Profits! Money!!!!

We still have a lot of topics to cover, including (but not limited to) income streams, billing, and toughness.

First, income streams.

I know a lot of freelancers who have one client.  Just one, who pays a lot of money to the freelancer, and that single client keeps the freelancer in business.  It’s a freelance arrangement, because the freelancer works from home, handles her own taxes, and is usually paid by the task.

One client and one client only is the riskiest way to run your freelance business.

If the client dies, has financial troubles, or shuts down his business, your business disappears along with it, just like your day job would disappear if you worked for a sole proprietor at, say, a dentist’s office.

If the client dies—even if he dies suddenly—you’re actually better off than you would be if he has financial troubles or if he shuts down his business.  I hate to be crass about this, but if your single client dies and you’re quick about billing, your final bill will be paid by the estate.

If your client has financial trouble, you’ll probably be one of the last people paid.  Or you might get paid, but only when the client needs you.  Chances are that you’ll get stiffed on your last few bills, and you’ll never be able to recover that money.

Getting stiffed is part of doing business.  The key is to minimize the losses.  I’ll discuss some of that in a later post on billing.

If your client goes out of business—especially if it’s sudden—you’re probably out of luck.  Not only will you never see the final payments on your last few bills, you will lose the income source for your business forever.

Just like employees at a restaurant that locks its doors one night and never reopens, you’ll be outside in the cold without your final check, looking for a new job.

How do you solve this problem?  Simple.

Work for more than one client/company.

That way, if your main client shuts down, you’ll have income while you’re getting through the tough times.  You’ll have income while you’re looking for someone to replace that really big client.  While you’ll be struggling to fill that financial gap, you won’t be going from large checks to no checks. You’ll have something to tide you along the way.

Sometimes, however, entire industries shut down. The tried and true example, used in every single economics class I ever had is buggy whips.  When Henry Ford invented the automobile more than 100 years ago, he destroyed the buggy whip industry.

Before cars, you’ll recall, people rode horses everywhere.  And often, they rode in a carriage with either a single horse or a team of horses pulling a carriage.  This, by the way, is the reason we still use the term “horsepower” as a measure of the power of a car’s engine.  The term “horsepower” was an advertising term for early automobiles, telling prospective buyers that the new car was the equivalent of 5 horses or 50 horses.  

Horses didn’t go away.  People still ride them, mostly for pleasure, although some do so as part of their job.  Carriages didn’t go away.  Every major city in the U.S. has a horse-drawn carriage ride around some romantic or historic part of town.  But buggy whips—I’ve only seen one in use in my entire life, and that was for show.

Many in the carriage industry moved over to building carriages for cars.  (That’s why your car’s middle is called its carriage.)  My grandfather, a rural mail carrier who started his route with a horsedrawn carriage, kept his horse until the horse died, long after my grandfather moved to using a car.

But buggy whips were an accessory, replaced year after year, and were a hugely profitable industry.  The whips were also specialized—can you think of another use for them?  I can’t, off the top of my head—and over a relatively short period of time, whips went from something most households owned to something of a curiosity.

An entire industry wiped out in the space of about (I’m not looking this up; you can) twenty years.  It declined within five years of the day Henry Ford introduced the idea of credit into the economy, making cars affordable to everyone.  (But the introduction of credit into American life is a topic for another day—and a different guide.)

Have I seen industries go away in my lifetime?  Yes, dozens of them.  Some were blips—how many of you have a dedicated fax machine these days?—and some were essential, like daily milk delivery.  In the early 1960s when I was a little girl, we had an aluminum box outside the front door of our 3-bedroom ranch house, and every morning (or at least once a week), a delivery man put a glass quart of milk inside the box.  I have no idea how my parents paid him or when that service ended.  I only remember it because I got my butt paddled one day for putting garbage in that box (a bag of dog poo if I remember right) and the look on my mother’s face as she pulled that garbage out of a place that was built to house milk.

Every industry changes.  Every industry goes through boom and bust cycles.  One industry’s bust is another industry’s boom.

For example, realtors are hurting right now.  A few years ago, realtors could sell a shed with an outhouse and call it a fixer-upper.  Now, perfectly good homes are not selling at all, which means that realtors are suffering great losses in their income.  Those realtors who understand boom and bust cycles saved during the boom, and those savings are helping them ride out this bust.  But several others are probably looking for a new profession right now.

On the other hand, an entire industry is growing right now.  People who clean out empty houses and prepare them for sale have more work than they can handle.  With the rise in foreclosures, former owners have left their homes in a hurry and often in a disaster.  The cleaners make sure the house is show-ready (as much as possible).  Often the bank hires the cleaners in the hopes of making the property presentable and saleable.

Sometimes, however, work in all industries simply stops.  It has happened to me at two different times in publishing.  The first time is too arcane to explain here, having to do with distribution system changes and an industry reacting in fear.

But the second time is memorable, and easy to explain.

I work for a variety of publishers.  Eight years ago, all of my publishers were in New York City.  When 9/11 happened, several of my publishers were only a few blocks away from Ground Zero.  They were closed for a month, unable to get to their offices.

Other publishers lost key people or had people on family leave because those people had lost a loved one.  For six months after 9/11, my husband and I didn’t receive a single check from a large New York City publisher, even though we had several due—in September.

Business simply stopped for a few months—at least in New York.

Fortunately, I have other publishers in France, Germany, Israel, and Russia, just to name a few places.  They didn’t stop publishing—although for a while, science fiction and fantasy publishing in Germany went through such a bust that German sf publishers weren’t buying any books from anyone.

So I learned.  I have different publishers—different clients, if you will.  But I also work in a variety of related industries.

For example, I write science fiction novels.  Those sell to one set of publishers.  I write fantasy novels.  That’s a wider set of publishers.  I write mystery novels.  Yet a different set of publishers.  And romance fiction—a fourth set of publishers. 

I continue to write nonfiction, even though I complain about it.  I sell that to magazines and online publications.  I write short stories, which sell all over the country to magazine, online publishers, and anthology publishers.

I also sell books and short stories overseas.  Each publisher in each country represents a different client. 

I also teach.  And I give speeches.  Mostly, I charge a nominal fee (I’ve learned that people don’t value something they don’t pay for).  I don’t make a profit on that, but look at teaching as paying forward.  Other professional writers taught me, and I can’t pay them back.  But I can teach newer professional writers as a way of continuing that giving.

I look at speeches as a bit of promotion and as a way of giving to my readers.  I don’t do many speeches, and I suppose a time will come when I will have to charge the going rate, just to keep the demand down.  But right now, I choose not to.

However, both of those skills—teaching and speechifying—could become additional income streams if I need them some day.

So, the lesson here is simple:  Diversify

Offer more than one product (short stories, novels in different genres) to more than one market.  Use all of your skills, not just a few, and you’ll make more money.

I can’t tell you how many opportunities have come my way because I work in more than one part of the publishing industry.  When I went to the World Science Fiction Convention in Denver last year, I got offered three different editing jobs.  I turned them all down because I don’t want to edit any longer.  But I had worked in that part of the industry for so long and people liked what I did well enough that I still get job offers for that work, more ten years after I quit.

When possible, get paid more than once for the same work

That’s not possible in every industry.  But in a lot of freelance industries, you produce a product that you might be able to sell in more than one place. For example, I have an entire inventory of stories and novels that have sold in the United States.  I can remarket all of those stories and novels overseas.  I can also resell those stories and novels to different U.S. markets, depending on the rights I initially sold.

The nice thing about writing as opposed to, say, plumbing is that my work from twenty years ago still generates income.  If you have a freelance gig like mine, figure out how to make your past work earn for you and how to make your current work do double and triple duty.

Keep good records

It’s easy to keep track of everything if you only have one client.  But if you have dozens of clients and hundreds of products, like I do, the only thing that will keep you afloat is excellent record-keeping.  If you work alone, then your record-keeping system can be as idiosyncratic as you are.  If you have employees, you’ll probably need to develop set systems for record keeping.

But I keep an extensive tickler file (a reminder file, for those of you who haven’t worked in business), and I use it not just to keep track of my own deadlines, but also my clients’ deadlines.  In other words, I keep track of when money is due and how much to expect, so that I don’t have to dig through files or back e-mails to find information.

I keep my records by project and by client.  For example, if a book sells in the United States, that’s one project and one client.  If I resell that book to Germany, then I create a new file for that project with a different client.

Then I have my accounts payable file.  I know who owes me money and how much.  I’ll discuss this more in-depth in the billing post, but suffice to say that my record-keeping keeps my business afloat.

Finally, keep track of industry changes

Right now, huge changes are going on in publishing, mostly because of connectivity, social networking, and the web.  I am doing my best to explore new markets created by these changes.  I don’t automatically close my mind to online publishing as so many of my colleagues have.  They’re afraid of theft.  I’m more interested in expanding my audience.

This blog is an experiment in new media.  Cutting out the publishing middleman is appropriate for some projects—like this one, which is timely.  However, I need to be paid per project, and that’s why I have the donation button up.  Frankly, the more I earn from the project, the more likely I am to repeat this experiment.

Right now, I’m exploring various venues to get my out-of-print novels and stories back in the hands of readers.  I haven’t decided if I’ll republish some of them or if I’ll find a publisher to do so.  I also haven’t decided if I’ll use my own website as a forum for those stories.

But these opportunities exist now. They didn’t exist ten years ago.  Ten years ago, an out-of-print novel remained out of print unless a new publisher was interested or a writer hit the New York Times list with a similar book.

A lot of my colleagues are stuck in the past.  They won’t publish anything on their websites.  They won’t join social networks.  They won’t explore online markets.  They’re overwhelmed by the changes or they’re not working to understand them. 

Most of what I hear from these folks is uninformed fear.  And that fear may limit or curtail their careers in the future.

Just this weekend (the Fourth of July!), I received two different business opportunities, one through a Facebook contact and one through Twitter.  Both opportunities wouldn’t have come to me if I weren’t exploring these new social networking sites.  Whether either opportunity will turn into income remains to be seen, but I suspect at least one of them will. 

And—honestly—I’m happy to have the chance.  I always feel that way about new opportunities.  The chance is important, whether or not it ends up going my way.

Let’s go back to the buggy whips, carriages, and the introduction of cars.  I’m sure a lot of carriage makers went out of business in those years as well. But the far-sighted ones learned how to change one part of their industry to suit the newfangled machinery. 

That’s what every small business owner should do.  Keep up with all the changes in your industry and see how you can profit from those changes.  In the beginning, the profits might be small.  But in the end, you’ll be ready to make the changes long before everyone else in the industry, and that will help you survive.

So, in short, here are a few things you need to do to maximize profits for your business.

1. Have more than one client

2. Diversify

3. Get paid more than once for the same work (if possible)

4. Keep excellent records

5. Take advantage of changes in your industry

The more sources of income you have—whether it’s an abundance of clients or an abundance of opportunities—the more chances you have for success. 

I told you a few weeks ago that you need to be a realist and/or a pessimist when you’re looking at your expenses.  When you look at potential income, you must be an optimist.  Always assume that a new client will be interested in you, or that you can learn the new computer program that will allow you to streamline your business. 

Approach each new thing, client, or opportunity with an open mind and an eye to the future.  You’ll be much more successful if you do.

 I’ve heard from a number of you who have either lost jobs or have had your hours reduced.  You’re hoping to take that difficult event and turn it into an opportunity.  So many businesses start in a recession, and I want to make sure that your business starts out right, which is why I think this information needs to be published now. When I write the Freelancer’s Guide, I give up time that I would normally spend on an already commissioned project.  I know many of you can’t afford to donate anything.  If that’s the case, please comment or forward this Guide to others.  As for the rest of you, please pay what you’d pay for a paperback book. You’ll be mitigating my risk, which I’m taking in the middle of this recession as well.  I appreciate it, just like I appreciate the e-mails, the comments, and the forwards.

My husband, Dean Wesley Smith, has a great post on copyright–postulating what the world would be like without copyright. Check it out at http://deanwesleysmith.com/index.php/2009/07/06/life-after-copyright/

And, um, you writers who don’t understand copyright, you really want to read this post.