Before launching your freelance career, write a business plan. It doesn't have to be lengthy or involved, but you must have a business plan from the get-go. A business plan is a roadmap to your goals. A written plan will give you a clear sense of how to get where you want to go in your writing career. Keep your plan flexible, and revise it on a regular basis—say, every six months. Your business plan should evolve as conditions change and your career grows.
You might well object, "I don't write business plans! I write novels, stories, plays! Business is boring! I care about ideas, characters, and imagination—not marketing, cash flow, and pro-forma income projections!" I understand. In fact, I fully empathize. But I have a two-part response to that:
First, as a fulltime working writer, you are now a businessperson—like it or not. Writing is your vocation, not your avocation, so you've got to approach it seriously and professionally. And that means you must plan.
Second, planning isn't boring, it's fun and fascinating if you do it right. When you write a business plan, you envision your future on paper—and what could possibly be more exciting than anticipating and planning your future?
So what is a business plan and what does it do? Well, whenever an entrepreneur starts up a new company, he or she draws up a business plan to lay a firm foundation for the company. Normally, the purpose of a business plan is to prove to investors, such as banks and venture capitalists, that you know where you're going and what you're doing in this new business. Investors want to know what product the business will produce, how the company will market itself, how it will be capitalized, where the break-even point is, and how profitable it realistically projects to be a few years down the road.
You may think, "What does that have to do with me? I'm not going to ask venture capitalists to fund my writing career." True. Nevertheless, it is important that you answer to your own satisfaction all the same questions that a venture capitalist would ask:
1. What product will you produce as a freelance writer? Novels, nonfiction books, short stories, magazine articles, screenplays, greeting card poems? Is there a market niche that you can target and take over as your exclusive domain? How big a market is there for the kind of writing you do? This portion of your business plan forces you to focus on your "product line" and think clearly and realistically about the kind of writing you will produce.
2. How will you market yourself to publishers? Which publications and book publishers buy the kind of writing you produce? How will you make contact with editors in those companies? Are there people you know who are connected with the publishing industry, and who can introduce you to editors and publishers? What steps will you take to build your list of published credits and make your name more marketable?
3. How will your writing business be capitalized? Where will your funding come from? Do you have savings or an early retirement incentive that will carry you for a year or two until you get established? How much money do you have on hand? How much will you need, month by month, to stay in business? What are your anticipated expenses? What kind of cash flow can you expect? What net profit (or loss) can you expect in your first year of operation?
Plan a sound, sober budget by determining the actual amount of money needed to open your writing business (start-up costs) and the amount needed to keep it open over the long haul (operating costs). Your start-up budget includes one-time-only costs such as office set-up (furnishings and supplies), computer and software, legal and professional fees (particularly if you are incorporating), accounting (setting up your record-keeping system), and so forth. Your operating budget describes the on-going expenses you will incur and how you will cover them, including insurance, rent, loan payments, travel, supplies, utilities, legal and professional fees, dues and subscriptions, repairs and maintenance, taxes, depreciation, and miscellaneous costs.
If you write shorter freelance pieces, such as stories, magazine articles, or advertising copy, long-term budgeting is largely a matter of guesswork, at least until you have established a steady work flow and cash flow. Writing books makes it a little easier to budget for a year or more at a time, because the money comes in large lump sums that are easy to plot out on a calendar. But it can still get tricky.
Let's say that every month you need $5,000 to meet your personal and business expenses. A publisher offers you a $15,000 advance to write a book—half on signing the contract, half on delivery of a complete manuscript. You know it takes you three months to write a book, so you figure you have met your budget for those three months, right? Wrong. Let's walk through it.
You sign the contract, and the publisher writes you a check for $7,500, or half of the advance (the "front end" of the advance). Notice, first of all, that $7,500 only covers a month and a half worth of living expenses. Just 45 days into the project, you are out of money, and you still have to keep writing. When do you get the second half of the advance (the "back end")? Check your contract. It probably states that the back end will be paid within 30 days after you turn in a manuscript that is "in quality, length, content, and form satisfactory to the publisher," or words to that effect. In other words, your back end check may not be cut until a month after the manuscript has been read and accepted by the editors. In fact, you may be called upon to make time-consuming revisions before the manuscript is accepted. Did you think you could write the book in three months, then pick up your check? Ain't gonna happen.
So as you budget, you need to make sure you have a constant stream of new contract signings—and a constant stream of books rolling off the assembly line, one after the other. You can't afford to line up book projects end to end—finish one project then contract for another. You must schedule projects on top of each other, overlapping each other. I always have at least three books under contract at once. Fewer than that, and my cash flow is liable to dry up just when I need it most. Cash flow, scheduling, operating costs—these are some of the hard realities of the life of a working writer, and they must be carefully accounted for in your business plan.
4. What risks does your writing business face—and how will you insure against them? What sources of emergency funds do you have if there is a big air-bubble in your cash-flow pipeline? Can you tap into savings? Credit cards? A line of credit? If push comes to shove, do you have a Rolls Royce or a Rolex you can pawn? Do you have a spare kidney or other organ you could sell on eBay? It's crucial to know where your money is coming from—and if the money doesn't come, what emergency measures you can take to carry you through the crisis.
5. What are your goals as a writer? You should have clear, well-defined goals for your writing career, segmented by timeframe. They should be ambitious, but achievable and realistic (realistic goals encourage you to reach for success; unrealistic goals set you up for failure and discouragement). Here are some examples:
Every month . . . . Produce one book proposal and three queries.
In six months . . . Save enough to quit day job and write fulltime.
In one year . . . . . Earn $25,000/year from writing. Complete first draft of novel.
In three years . . . Earn $50,000 per year from writing. Concentrate on fiction.
In five years . . . . Write bestseller, sell movie rights, move to Tahiti.
Your goals are not carved in stone. You can adjust them periodically as circumstances change. The purpose of goals is to inspire you and enable you to plan and prioritize, both short-term and long-range. It's a good idea to attach a five-year calendar to your business plan, and to plot your projects on that calendar. It helps to have a visual blueprint of the next few years of your writing career, with contractual deadlines marked in red, and with start and stop points of various projects shown. Also, having your writing schedule calendarized will show you, in clear visual terms, where there may be gaps in your cash flow that need to be filled.
A final word on your business plan: Keep a paper copy of it handy for quick referral. Keep a file of it on your hard drive, so that you can easily revise it and print out a new one. Revise it every six months. Review it every week, to remind yourself of your goals. Follow it religiously. It's your roadmap to success.