Five figures turnover hides

Turnover tells you almost nothing

The number most independent creatives watch is how much came in this year. It is the least informative figure available, because it hides every mechanism that produced it. Two people with identical turnover can be in completely different positions: one working four days a week with eleven clients, the other working sixty-hour weeks for two.

Five numbers, reviewed quarterly, tell you what turnover cannot. None of them require software beyond a spreadsheet, and all of them come from the project record you close each job with.

1. Effective hourly rate

Total invoiced, divided by total hours worked: all hours, including quoting, admin, revisions and the trip to the printer.

This is the single most useful figure in the business and almost nobody has it. It is nearly always lower than the rate people believe they charge, often by a third or more, and the gap is where underpricing hides.

Calculate it per project as well as in total. You will find a pattern: certain kinds of work, or certain clients, sit far below your average. That is the information you need for what to stop doing, and it is invisible without the arithmetic.

2. Utilisation

Billable hours as a share of working hours.

For a one-person practice, a realistic figure is somewhere between 50% and 65%. Below that and you have a pipeline problem or an admin problem. Substantially above it and you are probably not doing the business work that keeps next year full, which will show up as a gap in about six months.

The number matters less as a target than as a trend. Falling utilisation with stable income means your rate is rising. Rising utilisation with stable income means you are running harder for the same money.

3. Client concentration

What share of this year’s income came from your largest client, and from your largest three.

A single client above roughly a third of income is a risk worth naming; above a half it is the defining fact of the business. This gets its own treatment, because the response is not obvious and the danger is not intuitive.

4. Pipeline

The value of work that is agreed but not yet delivered, and the value of live proposals.

This is the only forward-looking number in the list, and it is the one that predicts the quiet quarter. A comfortable-feeling month with nothing in the pipeline is three months from trouble, and the feeling and the fact diverge exactly when it matters.

Keep it crude. Agreed work, total value. Proposals out, total value. Two figures, updated when they change.

5. Money set aside

Tax reserve, and months of runway in the buffer.

Expressed in months rather than currency, because months are what you actually decide with: how long could you go with no new work before something breaks. That number is what determines whether you can refuse a bad project, hold a price, or take two weeks off.

The monthly ten minutes

Once a month, from your invoice records and your bank:

• Invoiced this month
• Received this month
• Outstanding, and how old the oldest is
• Pipeline value
• Months of runway

Once a quarter, add effective hourly rate, utilisation and concentration.

Ten minutes and forty, respectively. The habit is not about discipline for its own sake; it is that every one of the decisions in this course (raise the price, refuse the client, hire someone, start a product) is a guess without these figures and an arithmetic problem with them.

What to do with an uncomfortable number

The value is in acting on the specific figure rather than reacting to the general feeling.

Low effective rate on a client type: stop taking that work, or productise it so the efficiency pays you.

Low utilisation with a full pipeline: an admin or process problem; find the hours going missing.

Low utilisation with an empty pipeline: an outreach problem, and the most urgent one on the list.

High concentration: the outreach work is now the priority regardless of how busy you feel.

Thin runway: raising the price is riskier than usual, because you cannot afford to lose anyone. Build the buffer before you build the rate.

Keeping it honest

Two ways people corrupt their own records.

Not counting unbilled hours. The free revision, the “quick favour”, the long call. Those hours happened and they belong in the denominator, or the effective rate is fiction.

Counting a project when it is invoiced rather than when it is paid. A large invoice at ninety days is not income yet, and a year that looks strong on invoicing can be a cash-flow crisis in practice.

The limitation

Numbers describe what happened; they do not decide anything. A client with a low effective rate might be the one who refers everybody else. A year of low utilisation might be the year you built a product that pays for a decade. Optimising any single figure in isolation produces a worse business.

What the measurements do is remove the guessing from decisions you are making anyway. Most independent creatives run on impressions (busy, quiet, struggling, fine) and impressions lag reality by about a quarter, which is exactly long enough for a solvable problem to become an urgent one.