Ready to hire a manager? (How do I find one?)

/in , ,

It is very difficult to operate a sustainable and thriving business. As we are starting our venture, it is tempting to take paths of least resistance. In many circumstances, it is smart to conserve energy. So when an artist is ready to hire a manager, it’s common to look to friends, family, or colleagues who feel safe and familiar.

BUT when it comes to hiring, there is an adage that rings true: “hire slow, fire fast.” It costs a lot of money and time to bring someone new into an operation. Similarly, it costs a lot of money, time, and stress to keep the wrong person in place.

Hiring the right people is an art form worth practicing.

What makes a manager?

When it comes to hiring a manager, the right person needs to have an appreciation for efficiency (getting work done without waste) and a respect for structures. Ideally, they have the ability and desire to build routines, design systems, apply those processes, and repeat. A great manager can improvise, but their superpower is actually found in the mundane.

The skills that make a good manager are not frequently aligned with the skills that make one a great artist. Frequently in the art business world, artists look for a studio manager among other artists. This might quickly yield a willing participant, but the results often frustrate both parties. The employee has experience in the arts but likely gets asked to do things that are not their real strengths or comfort. Meanwhile, the employer is frustrated that work is not being done and likely stressed that an employee has their own creative vision to pursue. In theory, it can and sometimes does work for an artist to hire another artist to manage their business, but there might be better options.

A manager loves systems the way an artist loves art

There are people who see beauty in repetition and clarity in the tasks at hand. (Yes, some artists do fall into this category.) These folks often end up in fields like engineering and business administration. As an artist, these people seem inaccessible from a dollar standpoint—aren’t those high-paying jobs? Yes, they are, but they often pay high because other aspects of the job are unfulfilling: the product being produced is meaningless; the culture of the workplace is soulless; the work is toil with a reward that is a medium for something or someone else.

It is quite possible that as an art studio, you can offer systems-loving folks value that exceeds the traditional paths of engineers and business types. The pay can be part of the reward package, but consider that you have meaning, soul, and inspiring business operations.

A manager likes to be in the midst of things

Finding an organized, systems-oriented person may not be any harder than hanging out at a local engineering school. There are likely people in your network who have the skills to be the manager of a growing business like yours.

There are a significant number of folks in the workforce who operate other people’s businesses—or at least a part of those businesses. They are familiar with corporate systems and tools. If no one comes to mind, you certainly know people who know people. The best place to start your search for your next employee is within your own circle of influence. (This is why LinkedIn is popular.)

Ask people: “What do you do? Do you enjoy doing it? Have you thought about a career in the arts?” You might be surprised by who you find in those already close to you.

Messaging to hire a manager

If you are hoping to find someone beyond the realm of a hustling artist who says “yes” to any gig in the arts, you might have to consider your messaging.

A “studio manager” is not going to catch someone whose résumé includes “engineer” positions only. However, an “Excel wizard that enables others to build monuments” might sound familiar and crazy enough to excite a spreadsheet savant in an otherwise soulless middle management position. The specific skills needed to produce your bold products and services can make for captivating job post messaging. There are no rules for marketing jobs. It is fair, and valuable, to lean into creativity to attract the right talent.

Managing the hiring process

Everyone has a portfolio. No, the manager you hire may not have photos of creative projects they have made successful—particularly if they are outside of the arts world. However, they will have samples of their organization skills and the ability to show how they refined corporate tools. As you are considering the fit of a person to run your studio, consider if their process for organizing aligns with yours. They should be able to use the tools (or introduce new ones) that help your operation keep running even smoother.

It will be important that you can work well together. Remember, a manager is likely being hired to manage your time. Will you let them tell you what to do? And if you are pursuing someone with strengths that are not your own, their personality might also be different. This can initially cause tension. However, if you are serious about getting to new places in your business, then the friction might be exactly what you need to overcome the obstacles you’ve been facing. Trust and respect, although hard to quickly assess in hiring, might be the most valuable aspects to consider when passing the keys to your studio to someone else to run.

“I’m looking for a manager who can also…”

It’s a bonus to hire a manager who is also able to do the work. Does the studio needs operational support? Look for a manager who has skills to apply to production. Is communication is lacking from the studio (grants, newsletters, posts, captions)? Look for someone who has a way with words or marketing experience. Are sales slow? Look for a manager who would be fantastic to bring along for meetings with clients. They can help build relationships and close deals.

Multi-talented folks exist. Clarity on what you need might lead you to the rare gem that can make the studio run more efficiently and accomplish even more.

A manager is a great addition to any studio—especially when the time is right. Good management will get you more time for research and development (i.e., more time in the studio).

If you are ready to hire a manager but still uncertain, we might be able to help. Consider signing up to learn about our free monthly virtual professional development workshops or schedule time to chat. 

Banner art credits: The Northern Whale Fishery: The “Swan” and “Isabella”, c. 1840 is a oil on canvas work by John Ward of Hull. Known as a premier ship and marine oil painter, his family background in the industry must help to create such a mystical, nautical scene. The careful, finely detailed figures have a sharpness that give them clarity and strength against any backdrop.

SCHEDULE A MEETING TO TALK WITH SCOTT

Am I Ready for a Manager?

/in , ,

If you are feeling overwhelmed by the work to be done, a manager might be a great addition to your team. A manager makes sure that work gets done, and can help you conserve energy in the process! Are you ready for a manager? 

If you are not managing yourself, then you likely are not ready to be managed. 

However, there are alternatives and ways to prepare. Before you take the step to hire someone to oversee your business, it is important to assess your readiness; otherwise the hire may cost you more than you expect. Dollars will go out the door, and stress (the only true killer cost) will rise. 

Here’s some ways to start preparing your practice to take big steps and be ready for a manager.

What does a manager do? 

Generally, a manager oversees the use of resources to ensure that a business accomplishes what it sets out to do. These resources include what you imagine in a studio—supplies, materials, and money. More significantly, a good manager keeps an eye on the most expensive resource of any business—they manage time.

Are you ready for someone to tell you, advise you, or hold you accountable on how you use your time? If you answered no, a manager is NOT the right person to hire (yet).

Do you know what work needs done? 

There are many projects and tasks that a business needs to do to stay viable. Bringing a manager in to get EVERYTHING done is not a reasonable ask. The studio needs to have direction on the work that is at hand. 

  • Is there production to be done? 
  • Are there relationships that need to be taken to the next level? 
  • Are there opportunities to research? 
  • Do you need help getting the word out to the right people? 

Specific work is much more reasonable to accomplish than a generic ask for a manager to “run a business.”

Do you know how the work gets done? 

There are different paths that arrive at the same destination. This is true of the work that needs to be done in a business. There are multiple ways to stretch a canvas, chat to someone on a phone and organize files. But unless you have clarity on your way of doing these things, having someone else try to do it for you, or manage it for you, the relationship will frustrate all parties. 

If you are not clear on exactly what needs to be done, it will be very difficult for someone else to oversee it.

They will do things wrong (or, at least, wrong according to you.) You have routines and systems that you utilize to accomplish the day to day work in your business. Are they just in your head or have you written them down? It is arduous to create standard operating procedures (SOPs) but if they are only in your head you will have to repeat them every time someone else sets out to accomplish the task. 

If they are written down they can be utilized by others with clarity. More importantly, they can be improved upon by someone else. If not, when you hire someone else to assist in accomplishing the tasks at hand they will likely do it wrong.

Alternatives (if you’re not ready for a manager)

If you…

  1. are ready to have your time managed,
  2. know the work to be done,
  3. have clarity on how it is done,

…then a manager may be a great hire to optimize the business.

However, if you still aren’t sure about your next hire let’s consider what might be the right fit.

Say you have clarity on the work to be done, and structures that someone else can build upon but you aren’t willing to give up oversight of your time (B and C but not A). Potentially what you need is a technician, someone who can do the clearly outlined work. You are not hiring them to optimize or manage your system, but only to be a part of it.

Say you’re ready to have your time managed but don’t have clarity on the work to be done or the structures you utilize to accomplish the work (A but not B or C). A good manager could possibly help you. However, a coach or a strategic consultant might be even more valuable at this stage. They can help you equip the business to grow and be ready for a manager.

(Note: A strategist will cost more than a manager, and a manager will cost more than an employee or technician.)

Ready to grow but not quite sure what the next step is? Reach out or consider joining a free virtual professional workshop.

Banner art credits: Hudson River, Logging is a watercolor over graphite on wove paper work by Winslow Homer. The expansive watercolor landscape with two very finely detailed subjects logging in the foreground captures the energy of work done in a magnificent, yet calming setting. The graphical nature of watercolor blocking makes it particularly apt for digital interpolation and precise, experimental recoloring. 

SCHEDULE A MEETING TO TALK WITH SCOTT

Selling Art Online: E-commerce Platforms for Creatives

/in ,

The tools we use in our business become our business, especially when selling art online.

Each time we add a tool to our belt, it will become part of our regular activities. If it doesn’t, we likely have invested poorly. The decision on which e-commerce application you choose will impact the way that your creative business functions. Like many important decisions in life, it can be a hard one to make.

It is easy to get lost in the vast array of information and options that are at our fingertips. This is particularly true in the realm of digital tools. There are over 8.9M apps. Like anything in life, it is hard to find something if you don’t know what you are looking for. A great place to start in making your decision on an e-commerce tool is to evaluate your goals and the business model you are using to achieve them. Our tools are operational decisions. If we do not want to operate in a certain way, we should evaluate this before entering the online creative market.

What am I selling?

In art, an important distinction in our business model comes down to how we see our work. Broadly art sells as:

  • an object of admiration like fine art
  • an object of appreciation, more akin to (very) limited merchandise
  • an object of utility (like decor), produced/sold in mass
  • an idea for hire and licensed for someone else to sell.

Each of these types of products has unique business model attributes that can be harnessed to find success. Museum-worthy art is likely not going to be purchased on Amazon, just as a run of one thousand blankets with a printed image will not be sold at Christies. Knowing what product you are selling helps determine which tool(s) will help find the right platform to sell art online.

What resources do I have to sell art online?

A sustainable business requires the judicious application of resources. Business decisions—including which digital tools we use—benefit from taking stock of the money, time, and skills we have to put towards their use.

Money is the most tangible resource to access, but often we neglect to look at the real cash that will be impacted. In the case of digital tools, there may be a variety of fees to consider including subscription fees, processing fees, commission, and more. There are also financial considerations beyond the tool itself including. Should someone else be hired to set up and/or maintain the use of the tool? This includes overseeing ongoing transaction fees, the fulfillment process once the sale is made (packing and shipping), and processing returns (if available). Knowing the dollar impact of a specific tool is critical to growing the business by selling art online.

Do I have the time?

Tools are meant to make us more efficient, and they do, however, they still require us to utilize our time to use them. We have all likely had our frustrations with technology, particularly new technology. It takes time to adapt to a new tool. In e-commerce, along with general time to practice the tool, we need to consider the time cost of set-up, maintenance, fulfillment, customer communication, and marketing. Within the expansive market for e-commerce, tools can either add or reduce the time we have to spend on successful sales. Assessing the time requirements to utilize an e-commerce tool is valuable in making a sustainable business decision.

Do I have the skills to sell art online?

Skills—you either have them or you need to acquire them (education or hire). Humans weren’t born with an innate capacity to run an e-commerce business. There are skills that selling online requires:

  • Digital marketing and branding (Using SEO, promoting through online channels, and establishing a brand that conveys value, story or better, myth.)
  • Technical e-commerce management (Webmaster for a website or platform, manage connected integrations including payment processors/gateways.)
  • Content creation (Produce quality photos and descriptions of work, possibly blogs.)
  • Customer relationship management and building
  • Pricing strategy (Price artwork appropriately for online.)
  • Sales skills (Close sales, handle transactions, negotiate prices, manage payment processors.)
  • Financial management (Accurate financial records, cash flow, and tax obligations.)

Some are basic, others are not. There are ways to sell art online that are as simple as sending someone else images and details of your work and other ways as complex as coding the back end of a website. When you select a platform, app, or widget to cultivate online transactions, determine what skills you have (or are willing to invest in) to make it successful.

Ready?

To ensure that you are making a sustainable business decision when you step into e-commerce, it is helpful to think about your intent, start at the beginning—what are you selling? Then evaluate the impact on your resources.

We have compiled research on several well-known e-commerce options for creative businesses to help you make your decision. Let’s start a conversation about this decision. You can also find a friendly community of artists working on their business at our virtual monthly co-working sessions.

 

Banner art credits: Studies of Market Figures is a graphite work by David Teniers the Younger. As the name implies, it is a pencil study of various people in a market scene. The figures are spread throughout the paper evenly as studies but still occupy the same plane and perspective giving it a dispersed, individuated isometric quality familiar to digital mockups of a collection of objects or figures.

 

SCHEDULE A MEETING TO TALK WITH SCOTT

Navigating Personal and Business: Dashboards for Creative Entrepreneurs

/in ,

In The War of Art, Steven Pressfield advocates that young writers take the step from amateur to professional by writing a contract as though they were hiring themselves for the work. Dashboards for creative entrepreneurs help to navigate this tension between personal and business.

While it may seem unnatural to separate those roles, it is a balance small business owners already play whether or not they admit it. Externalizing this antagonism between the creative as producer and the creative as manager makes goals clearer and more measurable. It also benefits work-life balance.

A “dashboard” keeps the most important measurements within view. This post outlines how to create a personal and business dashboard, and how to get the most out of them.

The Personal Dashboard

A personal dashboard empowers the creative as an employee to build their work around fulfillment and well-being. To start, ask what part of creative work brings the most fulfillment. This indicates what values should drive a personal dashboard. It also builds clear expectations about why the business exists in the first place.

Generally, the categories of love, play, work, and health capture many of these values for most people. It can include family, friends, recreation, connections, career, money, mental or physical health, and more. Everyone finds a different balance. This dashboard should depict a fulfilling lifestyle that makes the hard work of entrepreneurship worthwhile for you.

Likewise, these are the categories that dip when we ask ourselves “is this worth doing?” or “are we doing this correctly?” This personal dashboard monitors the well-being of the small business owner as an “employee.” It enables more fine-tuned decision-making when the manager must adjust to promote better working conditions.

The Business Dashboard

Next, put on the manager hat to create a business dashboard. Step back and evaluate the many aspects of your business: production, finances, sales (marketing, relationships, networking), and administrative. Break each further down into categories that make sense based on the goals of your unique work.

Production should include hourly goals and targets for work. This is what is expected of the “employee.” Finances include targets for discrete periods of time (weekly or monthly goals). Sales may be goals related to new connections, events to attend, or managing marketing content. It could also include expectations for follow-up with existing clients. Administrative tasks are those tasks that seem the least important but help to alleviate stressors.

Where are you trying to land? These categories are unique to each business and should be accompanied by the big picture growth goals and how they are connected to production. With an annual financial goal and working time estimates, artists can better visualize hourly revenue targets (HRTs) that can be used for day-to-day management. 

A practical example of dashboards for creative entrepreneurs

An oil painter’s annual revenue goal is $50,000 (to cover their salary, cost of goods sold, other overhead expenses, etc.). They calculate that their average piece takes about 4 weeks to produce while painting for 20 hours a week (that’s 80 hours per piece). They need to sell about 13 “average pieces” at $3850 to meet the artist’s revenue goal of $50,000. At 80 hours per piece, the artist calculates their HRT is about $50. Now, they can use this $50 HRT, to evaluate the progress of each unique piece. 

They just sold a commission for $2000. To meet their $50 HRT, they need to complete this piece in about 40 hours. 10 hours in, they estimate the piece is more than halfway completed. In this case, they’re exceeding their hourly revenue target. The artist plans to put a portion of the projected profits into framing expenses as a gift to their client.

They are also working on another large piece that does not yet have a buyer. Previous pieces at a similar size sold for $7000. At this price they need to complete it in 140 hours to meet their $50 HRT. They are 100 hours in and not yet halfway. Assuming that rushing to finish isn’t an option, they must anticipate demanding a higher price to satisfy their hourly revenue target (and ultimately their annual goal). Can the piece be sold for $10,000? Is there other work meeting hourly revenue targets that should take production priority over this one?

Your dashboard should display the right metrics to easily view the most important aspects of your business on the fly. It will also help maintain positive cash flow. Identify these categories, then break down quarterly or yearly goals into actionable steps that can be tracked on a weekly or bi-weekly level.

The Power of Weekly Check-ins

Dashboards for creative entrepreneurs tell how this week’s work moves you toward this year’s goals.  Ask, “What can be done today to move toward the business goals?” Create space for weekly check-ins focused on assessing how the progress of tasks aligns with distant targets. In the example above, the artist used their hourly revenue target to check-in on production progress. The weekly metrics empowered small decision-making to achieve larger goals. Explore different structures for this. Some may prefer the beginning of the week, others may prefer the end.

Each weekly check-in should include an evaluation of the personal dashboard and the business dashboard.

Record how personal goals are being met. Take note of trends and reflect on them. The same goes for the business dashboards. If trends are negative, how can the work adapt? If they are positive, how can the same thing be achieved next week?

Ultimately, regular check-ins are the only way to know whether the business is moving in the right direction at the proper speed. Otherwise, there is no way to reorient work over time (especially considering the complexity of creative entrepreneurship). Instead, problems will only become clear long after you could have avoided them; and moreover, you’ll miss opportunities for growth.

Your dashboards should change over time. Dashboards help the work evolve and will evolve alongside the work.

Tools for Enhanced Productivity

The tool that works best is the one you will use. Whether this is a simple spreadsheet or a custom note-taking solution. Develop a cluster of instruments to make up your dashboard. It should be easily accessible and simple to update during the course of work without interfering with production.

Take advantage of outside tools that already offer useful reports.

  • Financials: Most bookkeeping software produces weekly or monthly cash flow reports. Even basic online banking dashboards have tools to create financial reports and categories.
  • Production: Inexpensive hours tracking software offers the opportunity to better code and analyze how time is being spent week to week. Many of these run customized reports and queries that would benefit the production section of a business dashboard.
  • Sales: Email marketing platforms and social media are built to offer valuable analytic insights for existing content. Familiarize yourself with the analytics that matter most to your business: opens, messages, click-throughs, etc.

Even if a business dashboard pulls information from multiple sources, design something to consolidate and track everything in the same place week to week. A corporate board meeting pulls tons of data from all different sectors of a business, but it’s consolidated in a way that each part of the business can be analyzed in tandem.

You are your employee, manager, and board. Invest in a method that curates your dashboard for the benefit of the whole business.

Be Patient

Great data analysis opportunities require data. The more of it, the better. This takes time. If you have never set goals or just started collecting regular data on your own work, be patient. At first, it may not appear to provide many insights. However, after a few months or even weeks of tracking your productivity and accounts, patterns will emerge.

These patterns are the power of weekly check-ins. Next year’s round of goal-setting can be based on data rather than speculation. The production requirements required to reach revenue goals can be approached with reason and sensitivity to work-life balance. Ultimately, this practice of regular self-check-ins and structured goal-setting helps small business owners who must wear many hats sustain their work with better clarity.

If you’ve never engaged a group of creative entrepreneurs who juggle responsibilities in this way, attend a co-working session. Our free, monthly sessions give creatives a collaborative opportunity to share in others’ successes, learn from failures, and build external accountability of their work. Work on your business with others while facing the challenges of creative entrepreneurship together.

SCHEDULE A MEETING TO TALK WITH SCOTT

What Is a Business Model and Why Your Artistic Business Needs One

/in ,

As a creative person who wants to earn a living, you might think that’s as easy as selling the fruits of your creativity. That’s true on some level, but it’s likely not enough to get you to a point where you can sustain yourself. Having a business model that you understand and can craft into a business plan will help you get more time in the studio doing what you love!

 

If you desire to build a sustaining business out of your creative practice, sign up for our newsletter with insights on creating a business that gives you more time in the studio.

—

When you look at the careers of successful artists, it might seem like they got there through sheer luck. Maybe they were at the right place at the right time. They found a patron or stumbled into a relationship with a dealer when out on the town. But that’s probably not the case. 

The truth is that more often than not, getting to the point where you’re earning a living off your art takes more than just divine intervention. It takes thoughtful planning. That’s where having a business model for your art comes in. Hours spent building your business model will give you many years in your studio.

 

What Is a Business Model?

A business model is a plan that describes how you intend to make money. Every business—no matter what size or type of business it is—needs to have a business model. A business plan, built around a business model, gives definition for what needs to be done, and prepares for when things don’t go as expected. A plan can also be used to attract resources, money and talent, to a firm. 

Business models can be simple or complex, but they do need to have some key ingredients if they’re going to be useful. While larger businesses often use very complicated business models, I find the Business Model Canvas to be the easiest and least cluttered way for an artist to conceptualize their business. 

In my experience, a business plan, which we will connect to the model, minimally needs:

Executive Summary:  A short description of what the business is, what it does, and who it does it for. 

Market Analysis:  An understanding of how an artist’s work, the products, fits into the market; i.e. is it fine art, public art, 

Marketing Plan:  A method for identifying and attracting audience and customers.

Sales Plan:  A process that identifies your sales goals (transactions), tactics, and challenges for closing sales.

Finances: A description of your sources and pricing, and the costs required to produce the goods or services. 

Team Players:  The critical people that make the business run. That certainly includes yourself, but it might include staff, partners, vendors, venues, etc.

For internal purposes it is valuable to have a plan of operations. These are the manuals for production and process for delivering services, as well as the means of maintain great company culture.

Of course, none of these items exist in a vacuum. You need to understand how they connect and influence each other.The business model canvas is a tool that outlines and connects the different aspects of a plan.

Value Proposition: What is the unique value that your work brings to your audience?

At the heart of any business is the value it is producing for the world. This will influence internal operations of production and external communication of marketing and sales. The executive summary of a full business plan will focus on the value proposition and concisely address other facets of the plan.

Customer Segments and Channels: Who are your customers and audience? Who will value what you are doing? How will you present the value of what you are doing with them? The marketing portion of a business plan will identify customers and define methods of connecting with them. 

Customer Relationships: How will you build a relationship with someone from meeting  for the first time to being a repeat audience member or customer? Sales is about building relationships, a sequence of exchanging value. The plan for sales will define the process the business uses to develop and grow meaningful relationships with its audience. 

Revenue Sources + Cost Structure: How will the business make money, what will it cost to generate the revenue. The financial piece of a business plan has many details and most relate to revenue and expenses. The plan may also define sources of outside cash like investors, patrons and traditional banks.

Key Partners + Key Activities + Key Resources: How does the business make its product or deliver its services? What special relationships, resources or skills are required? This is the operational plan for making a product or delivering a service. A note on partners, they are critical vendors and others necessary for your operations who also share in risk and reward. 

Do You Need a Business Model?

I hope that by the time you’ve gotten to this point, you realize the answer is a resounding YES! Putting them together can be challenging, particularly if you’ve never done one before. That’s where I come in! I’m happy to help you strategize your business model. Contact me to schedule a chat or join one of our Creative Coworking sessions. 

 

SCHEDULE A MEETING TO TALK WITH SCOTT

Cash Flow for an Artists: What Is It and Why You Need to Pay Attention to It

/in , , ,

Have you ever opened your banking app to look at your balance, only to find it’s much lower than you thought it would be? Not my favorite feeling either, but if you have encountered this sensation, then you’ve experienced the effects of cash flow!

If there never seems to be enough cash on hand for your creative endeavor, consider signing up for our business of art newsletter.

 

Just like you need to keep an eye on your personal account balance to make sure you have sufficient funds to live, so too do you need to pay attention to what’s coming in and going out of your business to sustain your practice. That, in a nutshell, is cash flow. 

When mastered, strong cash flow for an artist can make the difference between a business that’s healthy and one that’s no longer in business, or the difference between making more art or waiting for the next check. Let’s take a closer look at what cash flow for an artist  is, how to ensure you have a positive cash flow, and the impact that it can have on your arts business. 

 

What Is Cash Flow?

Cash flow is the movement of money through your business. Typically speaking, money coming into your business is revenue, while money going out of your business is expenses. Cash flow for an artist takes into account both revenues and expenses to date, as well as future revenues and expenses. In this sense, it’s also a forecast of what you can expect financially.  

Cash flow is calculated over a duration of time. Frequently it is analyzed over the course of a month, but you might also calculate the flow for a day, week, quarter, or year. A month tends to be most helpful as “bills” or invoices from vendors are usually calculated on a monthly basis. 

What Is Positive Cash Flow?

Cash ebbs and flows; sometimes we have more cash on hand, sometimes we have less. Having a positive cash flow for an artist means that more money is coming into your business than going out. It’s a sign that your business is healthy. It’s important to note that this doesn’t necessarily mean you’re profitable, as things can change over time. 

The dynamic nature of your cash position makes it important to look at your cash flow monthly. Consistent check ups allow you to a) ensure you’re not spending more than you’re taking in and b) adjust your forecast of revenue and expenditures of future cash flow to keep sufficient funds on hand to stay operational. And yes, when you are in business for yourself you can control the expenses and revenue. You can put more energy into marketing and sales to increase revenue, and you can reduce costs by changing vendors for products and services.

Additionally, a cash flow report for a certain period is often required by banks and lenders in cases where you need to take a business loan. 

 

How to Calculate Cash Flow

There are a number of ways to calculate cash flow for an artist, some more complex than others. If you’ve invested in an accounting tool, they frequently offer a cash flow report, but it’s good to still understand how it’s measured. 

A basic cash flow formula looks like this:

Income – Expenses

So, for example, let’s say last month you sold $5,000 worth of art. But you also spent $3,000 in expenses such as supplies and materials, studio rent, utilities, etc. during the same time period. You therefore have a $2,000 positive cash flow for the month; i.e. $5,000 revenue – $3,000 expenses = $2,000 cash flow) .

You can certainly project the same numbers out over a time period, but it’s important to take into consideration that both revenue and expenses are likely to fluctuate over time. That is, you’re not going to necessarily bring in $5,000 every single month, and your expenses may shift based on your business activities. 

But, let’s say you want to project your cash flow for the next four months. That’s a little trickier, particularly for an artist with revenues and expenses that fluctuate. A cash flow report might look like this:

January February March April
Cash at beginning of period $5,000 $7,000 $5,000 $9,000
Estimated Revenue  $5,000 $2,000 $6,000 $3,000
Estimated expenses $3,000 $4,000 $2,000 $3,000
Final Cash on Hand (change in cash + cash at beginning) $7,000 $5,000 $9,000 $9,000

 

Of course, your cash flow report should be more detailed, with itemized expenses and potentially income (particularly if you have multiple income sources). 

Ultimately, putting together a cash flow report and reviewing it on a monthly basis will help ensure you’re staying on top of expenses, operating within the bounds of your income, and whether or not your business is on a positive track. 

Your cash flow report can also help you prioritize your activities. If you need more revenue, you may want to work on your sales or marketing. If you have ample cash on hand, it may be time to invest in new equipment or more materials. Understanding cash flow for an artist, can give you more time in the studio with better gear to make the things you want to make!

 

Want help putting together a cash flow statement? I’m happy to help! Set up a time to chat with me or check out one of our Coworking with Creatives sessions. 

SCHEDULE A MEETING TO TALK WITH SCOTT

Best Legal Structures for an Art Business

/in , ,

Art Business Legal structure was likely not taught in art school. This short post is a quick overview of the topic. 

We are NOT lawyers! This is not legal advice, but may help you converse with your future lawyer, possibly a volunteer lawyer for the arts.

You can sign up for our Business of art newsletter to get great art business content in the comfort of your own inbox.

If you’re an artist, photographer, writer, or any other type of self-employed creative worker, you are required to register as a business.This will actually help you in the long run. Registering a business entitles you to a number of protections and benefits, including (but not limited to):

  • Reducing your personal liability in case of a lawsuit
  • Potentially reducing your tax burden
  • Access to public grants and funding (PPP during pandemic required registration)

 

Although there are a variety of legal structures possible, some of them are a better fit for a creative business than others. Let’s take a brief look at the three most popular ones and discuss the advantages and disadvantages of each.

 

Sole-proprietorship

This is the simplest business structure and is a good place to start for artists just beginning to sell their work. A sole-proprietorship treats the artist and the business as a single entity.  The government (both state and federal) utilizes your social security number as your “identity.” With this basic type of business, you can deduct business-related expenses such as your materials, travel costs to work-related events, studio rent, subcontractors etc. 

That said, because you and your business are considered a single entity, you are personally liable for all business debts or damages should someone bring a lawsuit against you and win. Additionally, all business income is considered personal income and will be taxed at your personal income tax rate, including Federal Insurance Contributions Act (FICA) taxes, i.e. social security and medicare contributions. This may end up increasing what you owe in taxes, though it will depend on how much you make. 

 

Limited Liability Corporation (LLC)

An LLC is the next step up from sole-proprietorship, though depending on the type of LLC you choose, it can be very similar. LLCs are generally very flexible when it comes to how they are taxed and grant you additional liability protection in case of business debt or lawsuits. To date, there have been very few cases where liability has penetrated the LLC, but usually this is the result of abuse of the structure. 

Another advantage is that an LLC enables you to hire employees, which a sole-proprietorship doesn’t allow. Both a sole-proprietor and an LLC can hire subcontractors. There are very particular laws on the difference between the two and it is worth getting familiar with the nuance between a contractor and an employee to ensure you are operating within the law. You can also deduct business expenses from your taxable income under an LLC.

LLCs can be considered single member, meaning you’re the only owner, or multi-member, meaning you have partners. Like a sole-proprietorship, income is only taxed at the individual member level as personal income for each member, regardless of the number of partners involved. Income under an LLC is treated as personal income, and as such, you are required to also pay a self-employment tax that goes towards things like social security, Medicare, etc. 

LLC’s cost money to register and maintain depending on the state in which they reside. Filing taxes is also slightly more complicated than sole-proprietorship.

 

S Corporation 

S corporations (S corps for short) are significantly different than the previous two structures in that they are a tax classification rather than a business structure. To receive this classification, you need to register as an LLC first. 

Once you obtain S-Corp status, business income is treated separately from your personal income. That is, anything the business earns is taxed as a business, while you will pay taxes on your personal income separately. Owners of S corps who operate or run their business pay themselves a salary as an employee even if they are the only person in the business.

Like LLCs, S corps shield personal assets from liability in case of business debt or lawsuit. Additionally, S corps can hire employees, deduct business expenses, and they enjoy all the benefits of an LLC and greater liability protection for the owners of the company.

Generally speaking, and very much a back of the envelope calculation, it’s a good idea to switch over to an S corp if your take home income from your business is greater than $100,000. This will help lower your personal tax rate, any additional income beyond your salary is taxed at the corporate rate which is lower than higher level personal income tax rates. Yes, that last sentence was complicated, but if your business is at this point it is probably a good idea to hire an accountant and possibly a lawyer to ensure you are making the most prudent business decisions.

S-Corps have registration fees as well as annual maintenance fees (depending on the state of residence, and expectations for corporate governance like meetings of shareholders and board members. Filing taxes is more complicated as more forms must be filled out to appease government agencies. 

 

Choosing the right business structure is crucial to your success. It’s a good idea to consult with an accountant or tax lawyer before you file any paperwork with federal or state governments. 

CTA

Join a future coworking session where we often engage in topics like business structure, finances, and taxes.

SCHEDULE A MEETING TO TALK WITH SCOTT