I was engrossed in this blog post about why creative businesses fail written by Jason Aten. I work in a creative field (magazine publishing) with many creative people (writers, photographers, and graphic designers). If you work in the creative industry and are looking to start your own business—listen up!
Jason Aten, the owner of the blog Starting Out Right, is a wedding photographer. He quit his career in marketing and sales management with FedEx to start his own business—something many creative freelancers decide to do.
His photography business took off, and his work has been featured in many national wedding publications. He also spends a lot of time speaking, educating, and writing about the business of photography. Jason knows that, no matter how talented you are, if you don’t have a head for business, you aren’t going to make it far.
A creative business isn’t unlike any other business. You have expenses and revenue. The successful businesses have more revenue than expenses. Anyone that starts a business should love what they do—because they are going to spend an awful lot of time doing it. But just because you are passionate about art, music, photography, etc., doesn’t mean it’s enough to build a business around.
Being passionate about something isn’t enough. If it’s going to be a business – it HAS to be profitable. It HAS to make money. Not only is this common sense, but the IRS won’t even let you call it a business if you don’t have what they call a “profit motive.” —Jason Aten
Here are some tips and pertinent info I gleaned from Aten’s blog post on running a successful creative business:
It will take you 3 years to make money
This is a stark reality, but it’s the reality. You need to be prepared to operate at a loss for three years in your new business. This is one of the reasons many freelancers start out working a full time job while freelancing on the side. Aten suggests that if you really want to make it work, you need to stop treating your creativity as a hobby and start acting like a business.
Manage your expenses
A shoebox full of receipts is not going to cut it. You need to either learn how to keep your books or hire someone to do it for you. Just because bookkeeping isn’t “your thing” doesn’t mean you can shy away from it. On the contrary!
You need to understand exactly how much it costs you to be in business. What are your fixed expenses—like rent, your computer or camera, utilities, website, and all the other stuff you need to be IN business.
For most photographers, this number is staggering when you start to really look at it. Most photographers forget that the wear and tear on their vehicle is an expense of their business. Most photographers don’t consider that there are additional utility costs (even if you’re a home based business), associated with the additional work you do. —Jason Aten
Decide what to charge
How do you know how much to sell an 8×10 photo you took if you have no idea how much it cost you to take and print that photo? Figure out how much you spend on things like materials, labor, equipment use, and prints so you can come to a fair price.
The same thing goes for other freelancers—take your equipment and software into consideration. When we create our ad rates for the magazine, we take into consideration how much our printer charges us to print the magazine, the shipping, etc. so we know how much to charge our advertisers. If we don’t charge enough for a full-page ad to cover the costs of printing and producing that page, we’re losing money.
Treat yourself as an expense
My tax guy told me to get a business credit card and use it wisely. That way, when the time comes for him to go through my expenses—from gas to client lunches—it’s all right there in front of him. If you don’t know what your expenses are, how do you know how much to pay yourself? And you DO want to pay yourself.
Be realistic about what your pricing will allow you to make. Be realistic and start the habit now of paying yourself a set amount – based on your revenue and other expenses. This will allow you to manage both your business AND personal budget/cash flow. —Jason Aten
Don’t buy things you don’t need or can’t afford
As Aten says, new gear doesn’t make you a better photographer. A new website won’t automatically increase your bookings.
There is a lot of cool gear that I’d like to buy. I don’t need it and I can’t afford it. That’s why I won’t be buying new gear anytime soon. Sure, it’s true that if you can afford it, sometimes you can buy things you don’t “need.” That’s the entire point of making money right? But if you’re borrowing money to buy gear that takes you 4 years to get a positive ROI out of, and 5 years to pay off, do you think you’re business stands any chance? —Jason Aten
Don’t go into credit card debt due to shiny new things. It’s not worth it!
Before you turn your passion into a business, there’s a lot to consider and a lot to learn. But don’t let it frighten you.
Owning your own business is tough work—but the rewards can be great. Take a business class at your local community college, or look for workshops and seminars to attend to help guide you. The better you set yourself up from the start will help you out in the long run.