Following on from the positive feedback on running a business and making money from what you love doing, in particular last week’s post, here’s a new series ‘Running Your Own Creative Business’. With this series we hope to help those either thinking about it for the first time, those in the early years and who are perhaps struggling and for those who just want some reminders.
Running your own business can be the best thing you ever do, some think it’s down to luck, it’s down to a lot more than that. It takes careful thought, planning and hard work, luck plays a part, in the words of Lucius Annaeus Seneca “Luck is a matter of preparation meeting opportunity.” Anyway enough of luck, we’ll get back to that later, in this first article I want to talk about where it all starts.
Seldom will you hear these words but when it comes to running your own business it IS all about you. It’s all about you for a number of reasons, let me explain.
Running Your Own Creative Business - People Are Buying Who You Are
When you first consider making money from running your own creative business you may think about what you will do, but what people are buying first and foremost is you. They are buying your gifts, your skills, your talent, your attitude, your values and your personality. You might think I’m overstating this point, but just consider this; are you the only person who does what you do? Are you the only person with a Pro Tools system? Estimates put Pro Tools ownership at around 800,000 worldwide - so if you are thinking of selling a service based around a Pro Tools rig then you had better either be very good, very nice, have a unique talent, or better still all three!
Creative businesses are even more dependant on the personalities that run them. When I worked in the post production world in Soho in London, a lot of discussions took place behind the scenes as different post facilities tried to hire an editor, dubbing mixer or colourist with a great reputation. When it comes to creativity reputation matters, you reputation is your calling card, if people know you have a reputation for creating great work, or even better AMAZING work then you’ll have no trouble getting clients. As my Dad taught me ‘reputation is tomorrow’s profit.’
‘You can’t build a reputation on what you are going to do.’ Henry Ford
People with a great reputation have less of a need to advertise and less of a need for business cards. When you have a great reputation clients come looking for you.
Who you are and the way you run your business is going to be make or break, I can’t overstate this.
Your business success starts and ends with you.
Running Your Own Creative Business - Link Your Business Goals With Your Personal Aspirations
It never ceases to amaze me how few people link their business goals with their personal needs. The first thing your business has to do is to provide for you, so this is where you need to start when you come to writing a business plan.
So let’s break this down to the basics. At the very least your business needs to provide enough money to meet your personal and family expenses.
Let’s do some sums. The first thing you need to do is to work out how much money you need to live on each year. Let’s make the sums easy and suggest $24,000 per annum, or $2000 per month.
Now the first mistake people make is to think that in order to take home $2000 a month they simply need their business to do this. However this takes no account for taxes, health care, business overheads, cost of jobs, banking costs and other professional expenses. Even if you work from home and keep your costs down then a rough guestimate would put your actual business turnover at more like an annual turnover at around $36,000 to get you the $24,000 income you need .
So let’s break this down to an even smaller figure, how much you need to TURNOVER a day to get to that $36,000 annual number. Let’s say you want to work 5 days a week and take 4 weeks off a year, so you are left with 5 days x 48 weeks in which to make this money. This means that every day of the week you need to make $150 per day - yes EVERY DAY. However, life ain’t like that, so let’s assume in your first year you get enough work for 3 days each week, every week (I’m being optimistic), now the daily figure is $250 per day. THIS NUMBER is important, as this is your day rate, anything less than this and you won’t hit your £36,000 figure and you then won’t hit your $24,000 to pay the rent and feed the family. This number takes no account of any additional expenses such as vacations, large purchases etc.
I recently sat down with someone who talked me through their business model. As we went through the numbers it soon become apparent that they either had to put their prices up or the business wouldn’t succeed, it wouldn’t make enough to even pay their wages. These are hard decisions but these numbers have to be considered, despite what some people may think even charities have to do these kind of sums. The first thing your business has to do is to meet its costs and in the early days you are the biggest cost it needs to meet.
Of course the numbers above are notional, but the basics are the same. If you are thinking about starting a business then you need to do these sums, if you don’t you are at risk of getting into debt and worse still losing the things that matter most to you.
If all of the above either scares you or depresses you and has put you off, then I’m glad. It’s better that you see the intrinsic link between your business turnover and personal income in this article than go blindly into the dream of a being a creative professional and find out 2 years later that you are in a big black hole of debt.
For some considering starting their own business then I implore you to sit down and do the sums - if they don’t work on paper then they won’t work in real life. Yes you might get lucky, you might win the lottery, but I wouldn’t risk my financial future on either possibilities.
Running Your Own Creative Business - It Is All About You
As you can see, it is all about you.
On a professional level people buy people, this is never more true than in creative professions. Do you have a unique skill? Do you have a good reputation? BOTH of them matter.
On a financial level money matters, unless you link your personal needs with you business goals then you’re going to run into trouble, you won’t get rich you’ll get poor.
Running you own creative business is possible but it starts with YOU.