I got this in an email from one of my students recently and it gave me a chuckle:
“You know you’re an amateur when you get your first email from a stranger who wants you to do business portraits, and your flip your lid- I’m getting paid for this?! SWEET! Then you promptly head to the local camera store to purchase the gear you will need to do the shoot, which of course is more than you’re getting paid.”
Oh to return to those heady, carefree days of total financial irresponsibility in the name of art. 🙂
In my past life I went bankrupt. Actual legal bankruptcy. It was not one of my shining moments. The months leading up to the bankruptcy were pretty dehumanizing and I realized very quickly I had never taken the How Not To Be a Moron class that others seem to have taken. I comforted myself with the oft-quoted fact that many successful business people have declared bankruptcy at least once before they found success, when in fact they had been risk-takers and I’d just been an idiot. Oh the list of things I didn’t know then. Well I know them now.
If I were doing the curriculum for the course Finances: How Not To Be A Moron, here’s some of the classes that would make it into the syllabus:
1. Basic Math. If you spend more than you make, you’re operating at a loss. This is not usually good. Since money doesn’t grow on trees some people use credit cards. This also is not good. Spend less than you make. Seriously.
2. Buy Low. Your business is not a game and it’s not about ego. If you don’t need a top o’ the line Hasselblad, but just really, really want one so you can say you have one, that’s heading into Moron territory and your accountant or spouse needs to open a can of Dumb-Ass on you.
Rent gear you won’t use much and charge it to the client. If you don’t need cutting edge gear, buy trailing edge gear. If you don’t need new Pocket Wizards, buy used ones when someone less savvy than you buys the shiny new ones. That’s the thing about photography – some people buy new gear the moment it comes out just because it’s new. And then they sell the old stuff, which is probably in pretty good shape since they obviously aren’t buying this stuff to make actual photographs. In fact, if you tell them how awesome they are for having the latest and greatest, they might give you a deal.
3. Sell High. Price your services accordingly. You can’t compete solely on price. Don’t believe me, try competing with Wal Mart and get back to me in a year if you’re still solvent. Set your prices appropriately high.
4. Assets and Liabilities – If it makes you money, it’s an asset. If it doesn’t – even if you bought it pretending hoping really, really hard that it would – it’s a liability. Liabilities are bad for the bottom line. Avoid them if you can, sell them if you already have them and put that money into assets. Like a savings account. Or better marketing materials. Or a professionally designed logo. Already have assets? Keep them around as long as it makes sense. I like to keep my computers for 3 years, wouldn’t make sense to replace them every year. Sure, it’s an asset, but only once it has made more than it costs.
5. Taxes. If you follow these tidbits you’ll eventually hear your accountant (tell me you have an accountant…) at year end say “Well, I have good news and I have bad news.” The good news will be that you made money. The bad news will be that the Fed wants a piece of the action. Make this as painless as possible:
- Put something into a savings account with every invoice that gets paid, and leave it there specifically for taxes. No, you can’t dip into it because Nikon just released the D4x and it has HD video AND makes fruit smoothies.
- Know what you can and can’t write off and jealously keep track of expenses and receipts. If you can write off a portion of your home rent, do so. If you can be writing off automotive expenses, make sure you’re tracking mileage and keeping receipts.
- Put something away against retirement; it’s a write-off. In Canada it’s an RRSP, in the U.S. I believe it’s a 401K. If you’re going to give money to the government why not put a chunk of it into a savings account instead? Ask your accountant how much you can sensibly contribute and consider making it an automatic monthly debit.
6. Make A Plan, Stan. It’s not rare that anyone goes into business with a vague plan like, “Hey! I know; I’ll get a camera and take pictures for a living!” but it’s very rare that these people actually see that plan bear any fruit. Not without learning some hard lessons first, anyways. Sit down and take a hard look at how much money – actual dollars – you need to make a living. Rent, heat, internet, phones, groceries, taxes, every penny that you need to spend on a monthly basis. If it’s a big number, you need to make an even bigger number every month. How are you going to do this? How much do you need to charge? Sticking your head under the covers and hoping the monster magically goes away is not going to help. Make an actual plan, with real numbers and stuff.
Those are the first five classes I’d put on offer. They’re the ones I’ve learned the hard way. Why do I keep going on about this stuff? It’s not because I’m obsessed with money. In fact few things drive me up the wall like MLM people with “opportunities” to discuss with me while talking non-stop about money. Money is a means to an end, and not the end in itself. If I could do what I do without ever thinking of money again, I would. But going through a bankruptcy is a fast way of snapping back to this hard reality: if you aren’t wise about this money stuff you won’t have a fighting chance of doing what you love. That’s all I’m sayin’.
Feel like sharing your own nuggets of hard-learned financial wisdom? Comments are open.