Around this time last year, we produced our 02012 Annual Report detailing where our time and energy went throughout the year. It was a useful guide for us and hopefully to other readers. We are continuing this with the 02013 Annual Report and see how that compares to 02012.
Most of our projects in 02013 were spread over 9 customers; 8 external plus 1 more for all our internal projects. 25.8% of our time was spent on our own company in 02013. Only around 10% of that 25.8% was billable time. The vast majority of the 25.8% time was spent on conferences, both preparing and attending. Programming was the next largest category of time spent. In 02013 we started to develop a few software products; Mosfell and Tindfell. The time spent on these projects is sunk costs. We needed to spend the time and money developing these projects so they can in the future be sold to others to supplement our current income. After that, writing articles like these took the third most amount of time on par with Design.
Work Hours
In 02013 we averages around 42h per week. This includes holidays and vacation days. A more sane average would be around 30h per week taking into account holidays and vacation. This means we were working quite a bit more than you probably should, so any seeming profit might be offset by the fact that we working 25% more than average and may not be compensated.
Not all of this is billable time, even with our average of 42h per week, that is just time logged. We’ll need to dig further into this to find out how much of this is billable. This directly connects to our hourly rate. Once we know our average billable hours per week and we know our weekly/monthly expenses we can get a better handle on how much we need to charge to stay afloat.
If we look at all the time spent on client projects, not counting any hours logged on the company, we have ~74.2% of our time is billable. For a normal 40h work week, that is ~30h of billable time. In 02012, ~80% of each of our weeks were billable. The 6% decrease is probably due to better tracking of time throughout 02013.
Last year we were averaging around 29h tracked per week. The jump from 29h to 42h is an incredible increase. This can be attributed to a few factors. Better use of the time-tracking software made it easier to log the time. Several large projects at the beginning of 02013 also inflated the number of hours worked greatly. Having increased hour tracked doesn’t mean we were more productive, it just means we got better at tracking.
In 02012, we were pretty good at tracking billable time, in 02013 we improved tracking all those non-exciting things to track, which coincidentally aren’t billable.
Something to focus on in 02014 is not only to keep the tracking relatively consistent and high, but being more mindful of the work we are doing. It is better to track less time, but have more of it productive, than to increase our time tracked and time at the office, but get less done. That is one of the major goals in 02014.
Work Categories
We kept the same work categories as we did in 02012. This makes for nice comparison of the changing duties of the team.
| Category | 02012 | 02013 |
|---|---|---|
| Administration | 6.17% | 14.38% |
| Consulting | 1.16% | 0.0% |
| Design | 3.60% | 4.07% |
| Meeting | 26.27% | 16.68% |
| Presentation Preparation | 2.28% | 6.78% |
| Programming | 48.98% | 52.97% |
| Research | 6.31% | 1.66% |
| Writing | 5.23% | 3.47% |
The numbers between the two years is not strikingly different. The amount of time we spent on Administrative tasks increased. We suspect that we just got better at tracking these boring, non-billable tasks. In 02012, we probably weren’t as comfortable recording time for writing invoices or sorting out taxes, whereas in 02013 we made it more of a point to get organized as a business. We also pulled in 2 freelancers and 2 new employees, so the amount of time spent just making sure all their needs were met also increased this category’s time.
The Consulting category vanished in 02013. In 02012 it was already small and 02013 saw little work outside of the core companies we were servicing.
The Design category was roughly the same amount between years. Partly because we’re not providing design as a service it is a small part of our hours.
Meetings dropped significantly over the two years. We lost a big overseas client in late 02012 and without them on the books in 02013 we nearly halved our time in meetings. This is both good and bad. It is good because it freed-up time for other categories such as programming, but in other ways it does mean the we were spending less time planning and searching for new work and just had our head down grinding through existing projects. We certainly want to avoid having a meeting for a meetings sake, but in 02014 we need to get back out there and meeting with customers, checking-in as well as pitching for new work. Ideally, this category could be broken down further into meeting types: Meeting, Planning, Pitching. This would give us a better understanding and attempt to reduce the time spent in “meetings” as well as tracking our “Pitching” time to hours later on. We might find we need to lose 30 hours in pitching before making 1 hour of billable time. Ah, metrics for 02014!
Presentation Preparation went up in 02013. The number of conferences attended hasn’t increased, but our tracking of that time probably has. This means we probably need to split this category too. “Presentation Presentation” and “Conference Trip” would probably be more useful in the future.
Programming has gone-up both in percentage and absolute hours. This is good news because this is what we do best. Overall it is roughly the same area as 02012. We can safely say that only half our time is spent programming and the other half on other duties. Still a strong reminder than if you start your own company to do what you love to do, you are still only doing it 50% of the time. Maybe working for someone else is the best option?
The Research category dipped, this is probably also due to the lose of the big over-seas customer from 02012. Without them asking for opinions on topics there was less research into their needs and requirements being done.
Finally, surprisingly Writing also decreased. In 02013 we started writing weeknotes and more and more articles. In an absolute sense we spent more hours in 02013 writing than we did in 02012 so that makes sense, but it was a smaller portion of what the company did, therefore the percentage is less. We want to try to keep writing more and more while keeping the content as high-quality as we can. We understand that this takes time and effort. We also suspect we aren’t tracking as much time as we are actually writing, which is something else to consider and watch for in 02014.
Overall, what does this breakdown tell us? We have a fairly stable work diversity right now. Meetings is the category with the largest drop, which we’re OK with, and Administration has jumped. Both are explainable. As we move into 02014 we’ll continue to track all of this and continue to see how the services trend.
Client Workload
There were 9 companies, including ourself which we tracked time and invoiced. This is up by 1 from 02012 and given that several of 02013’s customers were tiny, there isn’t much change. 7 of 02012’s customers were also customers in 02013, which is a great retention. We did a small, one-off project in 02012 which was not repeated in 02013. We also picked-up 2 new customers in 02013. One was a small, one-off project for a colleague within an existing customer and the other is a new business relationship we are continuing through 02014. We are looking forward to that growing since it is also an international customer.
As with 02012, we had a single customer dominate our time. 67% of our time was spent servicing a single customer in 02013. That accounts for the vast majority of our time and income. These projects will continue at this pace through-out most of 02014 as well.
The customer with the second most time spent on them is ourself at 25.77%. After that it drops off sharply, 5% then everything else under 1%. Some of these tiny customers are the remains of projects which didn’t continue through 02013. One company canceled our contract and with another the work wrapped-up. Sadly, we won’t see them in 02014.
That means we are losing customers which we didn’t actively work with, but at the same time we are consolidating our income into two companies representing nearly 72% of all our business. We knew that there would be a lot of work to be done and 67% of our time is a great safety net to have. We knew we’d make payroll and be able to pay the rent, but when that contract is done, we’ll be in dire need to pick-up new work to fill that vacuum. Rather than have it all collapse in a day and have to restart our client base, we need to be mindful and start to bring in more medium sized work.
Effort vs. Income
This is an interesting breakdown. With affectively only two customers this information is very skewed. We have variable billing practices. Depending on the size, scope and length of a project we have different rates.
Hourly vs. Product
This too has been skewed. With only two real customers, we are bringing in most of the work load from hourly work.
Domestic vs. International
With the exit of our largest client in 02013, we lost almost all of our international income. With only a small project this year we see that difference.
Expenses
We can also look at our expenses between years to see roughly how we are spending our money. We are getting better at finances and we are looking at expanding our categorization of how and where our funds are going.
| Category | 02012 | 02013 |
|---|---|---|
| Office Supplies | 7.06% | 7.73% |
| Tax | 41.91% | 37.29% |
| Salary | 46.90% | 29.60% |
| Conferences | 3.26% | 16.16% |
| Projects | – | 3.71% |
| Education | – | 1.25% |
| Professional Services | – | 4.24% |
We added three new categories in 02013, Projects, Education and Professional Services. Professional Services includes our Accountant and Legal fees along with other miscellaneous professional services. Education is pretty self-explanatory. We paid for courses for some of the team. These were specific enough not to count into our other new category, Projects. Projects are funds spend on items which are not directly client related. This includes things like our quarterly contest winners. We need to post objects around the world and rather put that into Office Supplies, we added a new category. We’ve also invested in arts and crafts equipment, not really office supplies, for exciting projects like our Bead Art.
As you can see the trends are roughly the same for Office Supplies, salary and taxes have shifted around and dropped. They are similar in absolute values, but with the new categories costs have shifted around.
We’ll continue to track these categories and probably more into the future. It helps the accountant and makes it easier to defined what is deductible and what isn’t.
02014
Our goals for 02014 are more internally focused. We want to develop more of the normally boring administrative paper work. As we slowly grow, we need to keep in mind that every employee is different. That means we are going to need a bit more structure to our unstructuredness – if that makes sense. Putting things down more formally about our informal nature. With a small team, we need to give people their space and we don’t worry about minor things like ridged working hours or days off. If you are sick or need to deal with some personal stuff, the rule has been to just let us know. We want to keep this company culture but better solidify it into an employee welcome manual.
We have also re-evaluated our hourly rate and adjusted it accordingly. This includes currency inflation, more overhead time, new office space, a change in project types and length as well as more team members. All these contribute to adjusting our rates and applying them to all new projects going forward.