The thought of creating an income plan fills most freelancers with dread.
It’s usually because:
- They tried creating a plan in the past but they couldn’t stick to it.
- They tried creating a plan but they never used it. It just sat gathering dust on their laptop.
- The thought of planning anything just seems booooring.
If you’ve struggled to stick to your income goals and plan in the past, I’m going to explain where you went wrong in today’s post.
Watch the video below or continue reading to learn the 3 income plan mistakes to avoid!
According to a Harvard business study:
- 83% of the population does not set goals.
- 14% have a plan in mind, but not written out.
- 3% of the population have goals written down.
The study then found that the 14% of people who have goals are 10 times more likely to succeed.
I can vouch for that statistic firsthand. Creating an income plan helped me triple my freelance income! That’s how powerful an income plan can be if you take a little time to create one.
Maybe you know you need a plan but you doubt you’ll be able to stick to it. Maybe plans have never worked for you in the past? If that’s the case, you’re probably making one of these three mistakes:
3 Income Plan Mistakes To Avoid
1. Creating a business plan, not an income plan.
When I started freelancing in 2012, I created a 20-page Word document that covered EVERYTHING I needed to know about my business:
- Who my target market was
- Who my competitors were
- What my pricing and packages were
- My income goals
- My income predictions for the next five years (BAH!)
- And more.
I did this because this was what Google said should be inside a business plan. What I didn’t realize at the time was that these kind of business plans were for people who needed to show their plan to the bank to get a business loan. Once I realized that I was the only person who was going to see my plan, I realized I could make it whatever I wanted it to be!
That’s when I decided to create an income plan, not a business plan.
Sure, it’s important to know about your target market, competitors and pricing etc. But your income plan should be separate. You’re going to use and refer to your income plan every week or every DAY if you do it right, so you need your plan to be simple and easy to take in.
That leads me to my next point...
2. Overcomplicating your plan
Your income plan should be SO easy to understand, even an idiot could make sense of it.
Here’s why: Business is fun when it’s simple. When it starts getting complicated, it becomes unfun. That’s all there is to it!
If the thought of opening up your income plan feels daunting, not exciting, you need to simplify your plan.
Stop thinking that ‘real’ business owners having complex-looking graphs and use business terms like ‘gross profit’, ‘net profit’ and ‘profit margin’. Write your plan in a way that’s easy to understand.
An effective income plan is one that’s easy for you to follow. If that means using zero ‘business terms’ then don’t use them!
3. Choosing the wrong format
Here’s something not many freelancers realize: your income plan can be in any format you want! It can be a Word document, a spreadsheet, a slideshow, a couple of whiteboards on your office wall or even a board of colour-coded post-its!
Your income plan should be in whatever format you find the simplest and most fun to follow.
My income plan is a one-page spreadsheet because I love how easy it is to edit. Since business goals and financial projections change all the time, it’s important to me that my business plan is easy to update.
Here's an example of what it looks like:
I open my income plan every day to remind myself:
- What my goals are.
- What I should be focusing on right now.
- What I'm going to achieve if I buckle down and do the work!
I'm also continuously tweaking the numbers in my plan. Income plans are not do-it-and-forget-it plans! They're meant to evolve and change as you do.
This is another mistake a lot of freelancers make when creating an income plan for their business. They feel like writing down a figure means that's it, they've got to stick with it. But that's not true! Plans and goals are there to guide us, but they have to change as we change.
Every day, you learn something new . Every day, you're a wiser version of yourself. That's why your income goals and plans will and SHOULD change as weeks go by! As long as your income goals align with your purpose, it's fine.
Still not sure if creating an income plan will have much of an impact on your business?
Here's what Cat, a freelance designer, thinks:
"I only started setting income goals since I relaunched my business earlier this year. Before that, I just took clients whenever they got in touch and had a vague idea of what my income would be each month.
Setting goals for my income has given me the motivation to work hard and book clients to make sure I hit my targets.
Also, one of the challenges of being self-employed is managing a inconsistent income but with a plan in place, this becomes more manageable and much less of a stress!"
Here's what Kayla, a freelance copy writer, thinks:
"I used to be a business owner who was afraid to look at her numbers. I know, that seems odd, but I always prized my ability to create over my ability to make a profit. It wasn't until the end of my first year in business when I realized I couldn't ignore the numbers any longer. This is also around the time that I faced my limiting money mindsets and created income goals.
Pricing and income goals aren't something that comes naturally to me, but now I've found a method that feels as comfortable as a pair of worn-in jeans. It's taken some experimentation to get here, but I'm so happy to have found my own way through understanding my finances.
When I think about income goals, it terrifies me to only have one number in my head. What if the number is out-of-this-world crazy and I have to worry about not reaching it? What if the number is way too small and I end up limiting my potential?
Instead, I've learned to set 3 income goals for myself every year:
- Floor income goal: This refers to the minimum income I need to make in order to keep the lights on. This includes all of my living expenses andnecessary business expenses.
- Desired income goal: This is the number I'd like to be making. It's more based in reality with my current skill level, what I've made in the past, how many client projects I want to book, and so forth.
- Reach income goal: This income goal is something to shoot for. It's somewhat of a pie-in-the-sky number that can motivate me to think big and pursue new income streams that may help me get there.
The most fascinating thing about setting income goals is that once you have the numbers down on paper, they aren't scary anymore. It's taken the emotion out of money so I can get back to doing my best work, charging what my work is worth, and not feeling guilt about it.
Oh, and I've also nearly hit my reach income goal this year and it's only August. I highly recommend setting income goals now and into next year!"
Here’s the bottom line: An income plan will help you be more strategic about making money.
Freelancing isn’t just about doing what you love; it’s about making MONEY from it! If you’re not, or you’re not making enough money, you need to plan how to change that.
If you’re ready to make more money from your freelance business and you believe a strategic plan will help you do that, stick around because I’m sharing EXACTLY how to create an income plan in next week’s blog post. I’m also sharing my income plan template!
For now, I have a free worksheet that can help you understand the 9 things you need inside your income plan.