In my last corporate job, I had a boss who was fond of saying “What gets measured gets done.” Mind you, it didn’t always make our editorial staff happy. (If you can show me something that makes a graphic designer crazier than being measured with metrics like “page output per day,” I’d be stunned.)
As a freelancer, I try to avoid such micro measures, not just because they make me crazy, but because I find them unhelpful. I don’t really care how many words I write per hour or day, because it simply doesn’t matter. At the risk of sounding crass, the only measurement that does is income, expenses, and savings. And since I spent much of last weekend doing my taxes, well, I have a pretty good idea of what went on last year, and even some insight into the first quarter of 2013.
Your taxes don’t lie. And as much as I hate doing taxes, they’re as good a reality check as a freelancer can get, and that’s an important part of being self-employed. Here’s what I learned this year:
- Revenues were an improvement over the previous year, and expenses were about the same. Yippee!
- Starting up a Solo 401(k) saved me a significant amount on taxes, and gets me that much closer to retirement. Double yippee!
- I had one client that was a four-figure income stream in 2011 that dried up entirely in 2012 because they hired a full-time person who now does all their writing. Same thing happened with one of my clients that was great for the first half of the year, then my main contact left. Losing a client stinks.
- I did work for 19 different entities, most of which sent me a 1099, meaning they’d spent $600+. Eight of them represented 75% of my total income, and no single client was more than 25%, so I feel comfortable with my diversification.
I know Catherine is a believer in hiring a CPA to do your taxes — and I do have a CPA double-check my work. But, call me a masochist, there’s a value to getting into the numbers yourself that can’t be measured.
When he’s not doing his taxes, Jake Poinier can be found at DoctorFreelance.com or @DrFreelance.
Photo by Jakub Krechowicz