Maximizing an Indexing Business
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By Carol Reed
Spring 2015 At our spring meeting in Richmond, small business consultant Larry White led a workshop on business practices for indexers. Larry has been a small business advisor with the Indiana Small Business Development Center and currently teaches business classes at Indiana Tech. The workshop gave practical tips that can make a big difference in how much we earn and how satisfied we are with our career choice.
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Larry started out with a review of the basic business concepts that affect our bottom line: Gross profit = sales revenue – cost of goods sold ($0 for indexers) Net profit before tax = gross profit – operating expenses Our business finances boil down to maximizing revenue and controlling expenses. We then looked into how these basic business practices play out for indexers. First, we considered ways to maximize revenue. The Pareto Principle, also known as the 80–20 rule, suggests that around 80% of effects come from 20% of causes. For indexers’ revenues, this means roughly 80% of our income comes from 20% of our clients. If this is the case, indexers benefit by taking good care of the top 20% of their customers. We discussed ways we can develop those relationships, communicate regularly, differentiate ourselves, and express appreciation for our top clients. While innovative marketing schemes are appealing, we agreed that we get a lot of mileage out of occasional emails and holiday cards if we take the time to send them. We can also expand our revenues by reaching new customers, and then converting some of the initial contacts into paying jobs. In addition to contacting publishers we discover online or through Literary Marketplace, we agreed that LinkedIn is becoming an important resource, especially for the younger editors we work with. Optimizing our ASI Indexer Locator listings is also well worth the time it takes. Connie Binder’s webinar, “How to Increase Your Business Using the Indexer’s Best Secret Marketing Weapon,” was recommended as a great value at just $20 for ASI members. Larry’s third tip for expanding revenues is creating and tracking a marketing outreach plan. When we talk about reaching new customers, what does that really mean? If we hope to gain three new clients, how many marketing touches should we expect to make? (Answer: Usually way more than we think.) If we track our marketing efforts, we’ll be able to estimate how many responses we can expect to receive from our introductory emails or calls. We’ll also be able to estimate how many of those turn into paying work. But first we need to put a specific plan on paper. How many marketing touches will I make, over what period of time? How will I contact prospective clients? How will I follow up? How much time should I plan to spend on marketing efforts? The Pareto Principle also applies to a freelancer’s division of work: it’s very reasonable to spend 80% of time on paying projects and 20% on marketing and building relationships. Once you have an idea of the numbers, you can work on increasing your response rate and conversion rate (“Should I rework my introductory email? Tweak my follow-up schedule?” etc.). Containing costs and expenses is also basic business practice, but it only happens when we’re intentional about it. Making a budget and tracking spending give us the information we need to make good spending decisions. Larry also suggests figuring expenses as a percentage of revenues in order to analyze trends from year to year. We may make more money this year than last, but if expenses have grown, the picture changes. We can apply the Pareto Principle to expenses by keeping an eye on the top 20% of our expenditures. |
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The other key factor we have some control over is our hourly rate. Ideally, freelancers determine their hourly rate by factoring in their expenses, average hourly rates in the industry, and their pre-tax income goals. Whenever possible, it’s best to aim high, since there will always be variables that pull the hourly rate down. Realistically, indexers don’t have a lot of latitude in the rates they can charge; we need to stay competitive. But keeping track of our numbers—revenues, expenses, and hourly performance—enables us to tweak our processes proactively. A great resource for improving indexing speed is Kate Mertes’ webinar, “Creating and Maintaining Speed in Indexing.”
Larry closed with some other general suggestions for staying on top of our businesses:
To take these ideas further, Larry suggested working with a small business counselor or mentor through the Association of Small Business Development Centers (use their locator to find offices in Illinois, Indiana, Kentucky, Michigan, and Ohio). SCORE also offers free counseling with retired business professionals. The challenging part of all of this is the discipline of looking at this stuff regularly, in the midst of work deadlines and life’s demands. Think of it as a monthly business meeting with your boss. Larry suggests reviewing the following each month:
Both new and established indexers came away from the workshop with the tools and the motivation to take charge of our businesses. Our thanks to Larry for a great presentation! If you'd like to work with Larry directly, you can reach him through LinkedIn. © 2015 by Heartland Chapter of ASI. All rights reserved. |