My two-year anniversary of hanging out my shingle was a month or two ago, and I suppose I should take some time to reflect on it.
Undeniably, going solo was the best thing for me. I am sure that for some people it just doesn’t work, but for certain personalities, it is the greatest gig going. The difficult part is dealing with the bipolar nature of the work: it seems like you are either swamped or you have nothing. It is almost impossible to regulate the work to a nice steady pace.
Small firms are not immune to this problem, either.
The problem is that during the slow times, there is a constant fear about whether the phone will ring again and if any work will show up. It is the classic problem: you have the time, but not the money. When the work is booming, you have the money but not the time.
Having been through the cycle several times, I have learned a few things. First, the work always shows up. Eventually. It may take a while, but it will show up. Because of this uncertainty, holding to a reasonable budget is essential through the cycles. Even though the income may vary drastically from one month to another, I try to keep the outflow reasonably steady.
Because a solo practice is a business, I tend to monitor the balance sheets anywhere from once or twice a week to every few weeks. I track how much I bill every month and compare it to my monthly burn rate. Obviously, my goal is to exceed the burn rate with some cushion. I also track collections and receivables on a monthly basis. These measures give a much more complete view of the health of the business than does my bank balance.
I have used Quickbooks for creating invoices and keeping track of income and outflow since I started. It has taken a few iterations to figure out exactly where certain expenses should be tracked so that the numbers are all making sense. At this point, having spent a considerable amount of time trying different expense classification schemes, I have a couple reports that give me a good look at the business so that I can monitor the health of the business and take corrective action ahead of time.
Monitoring the economic health of the business is crucial for my peace of mind, and lets me enjoy the freedom of being solo. Without knowing how well my income is tracking my expenses, the slow times would be very unnerving. The whole point of being solo is to enjoy the flexibility and freedom, and not to worry.
