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OK, I've made sure that I'm covering my cost of doing business. Equipment depreciation, travel expenses, insurance, even Internet access, are all covered. I can relax now.
Doh! I forgot to pay myself.
If you don't include your own pay in your CODB, you're missing the whole point. "Pay yourself first" as the old saying goes. You are your primary expense. All those other costs are your "overhead."
When you figure your CODB, make sure that you include a reasonable salary for yourself. You can't just pay yourself what's "left over" after other expenses. Start with how much you want to make personally. Then budget your costs around that. If you don't have enough to make your own payroll, you'll have to either increase revenue or cut costs.
One of the best ways to increase revenue is by budgeting enough for marketing. The Small Business Administration suggests that new businesses devote as much as 10 percent of their expected gross revenue to marketing. Some pros suggest as much as 20 percent for a new business. The SBA Web site has a simple roadmap to help formulate a marketing plan. It includes things like targeting customers, tracking the competition and developing a pricing strategy.
Developing new products is another way to add to your revenue stream. If you're an editorial generalist, try to find a niche market that you can dominate. You can usually command higher rates if you can provide something nobody else can. (See August 2004 Common Cents.)
Sometimes you also have to mix in a bit of cost-cutting.
You may have more fat than you realized in your budget. Do you really need international insurance coverage? Can you trim your equipment budget? If you eliminate it, that money can go into your pocket rather than to one of your vendors.
Remember, even if you love what you're doing, you're in it for the money.
* The New Jersey Jewish News for paying reasonable fees for one-time rights. Plus, they pay promptly.
* The New York Post for requiring its contributors to sign over unlimited all-media rights with no additional compensation.
* No Ugly this month. But that doesn't mean it's not out there. (Cue the scary music.)
Please let me know of any particularly good, bad or ugly dealings that you have had with clients recently. I will use the client's name, but I won't use your name if you don't want me to. Anonymous submissions will not be considered. Please include contact information for yourself and for the client.
* There's a difference between public relations use and advertising use. PR use is for things like outside requests to the client for images to accompany an article. Advertising is for material created on behalf of the client. Advertising licensing rates are a lot higher. It doesn't hurt to include a "Not for Advertising Use" notice in agreements, just to avoid misunderstandings with PR clients.
* Don't forget to include time limitations in your agreements. One year is a good starting point for promotional use.
© Mark Loundy
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