The Art of the Business

A blog dedicated to artists who are serious about their business.

What’s your perception of value? Pt 2 March 19, 2010

A few years back, I had an eye-opening experience around money. I had an interview to be hired by a small social-profit corporation to to marketing and PR for them for a summer. I got the interview via my network, so these people didn’t know me at all. I did some research around what I should charge, and when they asked me what my rate was, I said, without hesitation, and with some confidence, “$30 to $50 an hour,” which seemed like a huge sum of money to me at the time. And you know what, they didn’t even blink. I got the job, and it paid for a trip to Europe that fall.

A week ago, I put up a post about how people perceive our value, and more importantly, about how we perceive our own value. I was starting to feel out of my depth, but handily, I have a money coach in my network, so I turned to her.

Ladies and Gentlemen, Shell Tain:

RC: If I’m just getting started, how do I know how much to charge for my work?

ST: Well, if I’m just starting out, how much to charge is partially a math question, but it’s never solely a math question. There is some research to be done about what other people charge who are doing what I want to do, and what is the range of charges for this in my geographic community. That’s the math part. Even more important, whether new to the game or an old hand, is creating enough commitment with the charge that someone really shows up. What is the amount that has the client have something at stake, but not freaked out? I once had a couple of very wealthy clients. My normal fee just wasn’t even the cost of lunch for them. They didn’t show up. Where is that tipping point? You always have to experiment to find it, but it’s worth finding.

On the emotional side, money isn’t just about money, it’s about self worth. Yep, self worth. So, somehow I get tangled in that the client is buying me, and putting a value on me, and gosh what does that bring up? So there we are, tangled up when we are asked how much we charge. Here’s an alternative perspective: they actually aren’t buying you, or even what you do, they are buying the results. They are buying how something will be different, better, or complete once you have done what you do. So that’s worth something to them. And it’s something they can’t easily do themselves, or they would have.

So, here’s the technique.

Once you have figured out what the charge is, get your brain firmly around it so it’s easy to say. Then, when the potential customer asks for the fee, state it, clearly, without back tracking and then, (this is the most important part) SHUT UP! Stop talking. Let the silence be there, awkward as it may be. See what they say. Don’t anticipate; don’t make up objections for them. See what they say. They might actually say something like “fine”. They might say “Gee that’s expensive” to which you could say “yes, and it’s worth it”. They might say “I can’t afford that” to which you say “I understand, and what would it be like for you to have the work done?” What you do not do is discount your fees, collude with them about finding the money to pay for it, or add things on. You want them to understand the value. Pushing back on the fee can mean they don’t see the value. It can also mean they just like to bargain.

RC: But what if I loose the customer entirely, because I wasn’t willing to negotiate the fees?

ST: Let me answer an even more important question than “what if you lose the potential customer”, that is “what if I get the customer by lowering my fees?” What’s the cost of that? Well that hard teacher, Experience, has shown me and many of my clients that the costs of discounting fees are many. One really challenging one is that it diminishes your credibility with the customer. That shows up by them criticizing your choices and micro managing you. Another cost is that by dealing with this customer for less money, you aren’t available to the customer who would pay your full fee. And yet another is that if other potential customers find out you discounted they will either want a discount too, of feel foolish for having paid your full fee. What a tangled web this can be. If the idea of standing firm on your price still just drives you crazy I suggest that you create a “one time” special package for some multiple units of whatever you sell. You can offer this to everyone, and limit how long it goes on.

RC: Last words of advice?

ST: You deserve to be paid well, and if you are underpaid, or worse yet, give away your time and expertise, you will resent it. And if you resent it, you are likely to not do as good a job. All that just creates a never ending cycle. Remember, you do well what they can’t, don’t want to, or find harder to do than you. What a gift you bring.

(more…)

Advertisements
 

Financial Friday May 8, 2009

Filed under: Cash flow,Finances — Rebecca Coleman @ 7:06 am
Tags: , ,

On Wednesday night, I attended a forum on financial management that was put on by one of my clients, Full Figure free-finance-softwareTheatre. Among the crowd were quite a few artists and actors, and they asked some good questions. I wanted to share with you some of the excellent tips and websites that I picked up.

I have always believed that I should try to have some kind of cash reserve–an emergency fund, or a savings account for a vacation or large purchase. But what I learned on Wednesday night is that having savings and debt at the same time is somewhat counterproductive. This is because you are paying high amounts of interest on your debt (maybe even up to 28% for some credit cards) and earning a very small amount of interest (maybe 2-3%) on your savings. By taking the money you have earmarked for savings and applying it to your debt, you can pay down your debt faster, and that saves you money in interest.

After your debt is cleared, set up special savings accounts, and give them names: “house,” “car,” “vacation.” Having a goal for your money will increase the odds that you won’t spend it on just anything.

Before you start this process, you need to know where your money is going. Even if you don’t have much money to spend, you might be shocked to see how much you are spending on certain things. This means tracking your spending every single day, every single penny. After you’ve done this for a few weeks, or, ideally, a month, you can start to create your spending plan.

Your spending plan needs to take into account your fixed epenses (rent/mortgage, phone, car insurance, etc), and your variable expenses, which are things like food, clothing, eating out, gifts, etc. And just know that if you overspend in one area, you don’t need to punish yourself. You may need to try to find that money somewhere else to make up for the shortfall, but it’s more about having knowlege around where your money is going, because that’s where the power is–you are controlling your money, not the other way around.

Here are some great websites I’ve discovered, or were suggested to me:

Billing Boss: This great, free tool, creates customizeable, trackable invoices. You upload your address and logo, put in the information, and it creates a professional looking invoice for  you. You can track if your client has opened it, and download the info into your accounting software. It is also PayPal enabled, so you can send the invoice and be paid all online.

CNN Debt Reduction Calculator: You put in all your debt information, credit cards, line of credit, loans, etc and their interest rates. It then calculates either how long it will take you to pay off your debt if you pay a certain amount each month, or it will calculate how much you need to pay each month in order to pay it off in a certain amount of time, say two years.

Piggy Pal: is an online money tracker. The advantage of having this information on a website is that you have access to it all the time, and can input information at work, at home, or via your smart phone.

add to del.icio.us : Add to Blinkslist : add to furl : Digg it : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

 

First-quarter check-in April 10, 2009

Filed under: Business of Arts — Rebecca Coleman @ 5:09 am
Tags: , ,

Over Christmas, I went away to Mayne Island for a couple of days for rest, relaxation, and recharging. While there, I read Timothy Ferriss’ The Four Hour Work Week. And I came home with a list of goals.

In large corporations, they do quarterly reports to the stock holders, letting them know how the company is doing. Here’s my report for the first quarter of 2009.basicchart_842

Finances: I had pretty specific financial goals, a certain amount of money I wanted to earn each month, and a certain amount of money I want to earn this year. I won’t tell you what that amount is, but I am reasonably satisfied with it, at this point.

Keep face-to-face meetings down to two days a week: I started out so well! I was doing really good! And then… not so much. Last week, in fact, I had meetings every day, which might explain why I am feeling so burnt out right now. Keeping face-to-face meetings to two days per week made my life a lot less hectic, and allowed me to really focus on my business for large chunks of uninterrupted time.

Keeping Friday mornings for working on my business: I’ve found that I’ve been so busy in the day-to-day running of my business, that I haven’t had time to plan and work on my business. My plan was to book off Friday mornings so that I could take that time to look at the future, and plan for what was next. I have done this a few times, but, I have fallen off the wagon…

Create an additional source of income: I have done this (at least in theory), now I need the time and space to get it launched!

How about you? If you had to write a first-quarter report, what would it look like? Would your shareholders be happy and impressed? I’d love to hear.

add to del.icio.us : Add to Blinkslist : add to furl : Digg it : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

 

Future Finances November 4, 2008

Filed under: Finances — Rebecca Coleman @ 11:59 pm
Tags: , , ,

One of my very first posts was on putting a value on your work, then, a couple months back, I did one on cash flow. For the next couple of posts, I want to turn my attention to our future finances as self-employed artists, and for this, I’ve employed the help of an expert.

I’ve known Shelley for many years–her company, Blue Peanut Productions, was one of the very first companies to hire me to do publicity many, many years ago. Shelley has a background as an actor and an arts administrator, but lately, she’s gone through a career change, and has become a financial ad visor with Investor’s Group. And she is also my personal financial advisor. Which makes me sound way more grown-up than I am….

In this first of a series, we talk about saving for retirement. Read on for more information and all the questions you’ve been too afraid to ask.

TAoTB: I’ve heard this rumor that by the time I get to retire, there may not be anything left in CPP. Is this true? Should I be saving for my retirement?

S: In Canada, nearly everyone will be eligible for the Canada Pension Plan (CPP) – but that’s not enough. The Canadian government also offers Old Age Security (OAS).  This is a scaled benefit and is dependent on your income.  Not everyone will be eligible to receive this benefit either. As self-employed persons, we need to plan ahead by having both RSP (or Registered) savings AND non-registered savings (which can be defined as anything that is NOT included in an RSP or Registered Savings Plan).  We will not be receiving a pension, except for that which we create for ourselves. 

TAoTB: How can I get started saving for my financial future? What options are there? There’s so much information, it’s confusing.

You’re very right about that. It is confusing. There are as many products available out there as there are people who need them. That is why it’s important to create a financial plan with someone that you can trust, who has your best interests in mind and who has access to the best information to help you. This is what I (and my company, Investors Group) do.

TAotB: Do you have some ‘rules of thumb’ about how much money I should be saving?

S: One thing that I do is work things from Retirement backwards. How much money do you need to retire? What would you like your retirement to look like? What will your income needs be? Will you travel? Do you want to own your own home before you retire?

My rule of thumb is to save as much money as you can. Look at what you spend and where you can cut back: a simple exercise is to write down every purchase that you make for 1 week – and I do mean every purchase. How much did you spend on lattes? On eating out? How much are you willing to cut back to fund your dreams? What will that vacation cost? So many of my clients that have performed this exercise come to me at the end of the week absolutely gob-struck at what they’re spending money on – and where that money could have otherwise gone; whether it be those gorgeous new shoes, or a spur of the moment trip to Vegas. Just by cutting out your morning trip to Starbucks, you could save $25 a week, $100 a month… or $1,200 a year.

TAotB: Okay. I can see how cutting back on my morning lattes might help me save $25 per week, but that doesn’t seem like much. Is there a way to jumpstart my plan?

S: There are many options available. One of my personal favorites is the Leverage. It’s an Investment Loan that allows you to jump-start your savings/retirement fund while paying only a minimum each month. My personal loan is in the amount of $50,000 and my payments are only $208/month. I’m earning interest/dividends on $50,000 rather than $208/$416/$624, etc.

The biggest thing to remember, though, is that how much you save isn’t anywhere NEAR as important as simply saving. Create a plan and stay on top of it. With the help of your financial consultant, it’s easy to make modifications to a plan if your situation or circumstances warrant it.

Finally, I’d just like to remind you of the old saying about oak trees: The very best time to plant an oak tree was 20 years ago. The second best time is right now. Don’t forget to water.


add to del.icio.us : Add to Blinkslist : add to furl : Digg it : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

 

Running a small business is unstable economic times October 29, 2008

Filed under: Business of Arts,Finances — Rebecca Coleman @ 9:57 pm
Tags: , ,

I’ve been thinking a lot the past few weeks about the economy. I know I’m not alone. Lots of people are–for better or for worse, our economy is somewhat dependent upon the States, and the downturn in their economy affects us. Everybody is talking about the “r-word.”

So, as the owner(s) of a small, arts-based business, what do we do?

First off, I think small businesses are in a much better place than large corporations in a time of economic

This is no time to make like Chicken Little!

This is no time to make like Chicken Little!

instability. We have the ability to react faster to belt-tightening. Reigning in our expenses, taking on more hours ourselves, waiting a little longer for expansion are all things that we can do without too much difficulty.

Second, because we have the ability to react faster, we can more easily afford to take a ‘wait and see’ attitude. For me, at this point, I have contracts that go through to the end of the theatre season. I am unsure about next year’s theatre season, but I know I have work at least for the next few months. If I find that offers are slow coming in for next season, I can change my strategy.

Third, this is an opportunity to get creative. Try to avoid cutting your prices if you can. Instead, try to get your clients to look at things in a different way. Part of the problem of a recession is that the first thing to go are things that are considered ‘frills’ or ‘luxuries’, and often art fits into that category. Is there some way that you can reframe your product or service so that it becomes something necessary? For example, I think that if someone is producing a show, they need to hire a publicist to help them get the word out so that they can recoup their investment.

There are other ways to attract business without cutting your price. Think about ‘value added’ options–things that you can add on to your product or service, that are like a little bonus. Or consider bundling.

Finally, don’t panic. This is not the time to be running around yelling “the sky is falling! the sky is falling!” Take a deep breath, make a plan, have faith in your abilities, and go for it.

Check out this excellent article in The Report on Business.

add to del.icio.us : Add to Blinkslist : add to furl : Digg it : add to ma.gnolia : Stumble It! : add to simpy : seed the vine : : : TailRank : post to facebook

 

Managing your flow…. September 28, 2008

Filed under: Business of Arts,Cash flow,Finances — Rebecca Coleman @ 12:54 am
Tags: , , ,

Originally published June 26, 2008, on The Next Stage)

A bunch of years ago, when Julia Cameron first published her book The Artist’s Way, I, like most other artists I knew, went out and bought a copy, and started working my way through it. I loved it; I was doing my exercises, my morning pages, my artist dates. And then I came to Chapter 6, and hit the wall. It took me seven months to get through “Recovering a Sense of Abundance.” Why? It was a chapter on money.

In a previous column, I talked about putting a value on your work. Sometimes, as artists, that’s hard to do—there is tons of competition out there, first off, always someone who’s willing to sell their stuff at a lower price to get the sale. Also, there is a kind of attitude in the world that, because we as artists get intrinsic value from our work, we don’t need to be compensated financially. Plus, it’s boring. And administrative. And not creative. Add to that the whole romantic notion of “the starving artist” (Moulin Rouge, anyone?), and no wonder we are often a mess when it comes to matters of money.

But if you want to feel like a professional and have others perceive you as such, you need to take some control of your cash flow. This month’s column is dedicated to some tips about just that.

1. You are a small business. If you are selling CDs, paintings, or working as a Production Assistant on a movie, you are self-employed. What that means is, your income taxes and CPP (Canada Pension Plan) payments don’t come off your cheque. If you bill the client for $1000, they give you a cheque (hopefully!) for $1000. It’s your responsibility to pay the taxes on that income. However, as a small business, you also get certain tax breaks (yay!—more on that later).

2. Set yourself up a separate bank account for your business transactions. Go for a credit union as opposed to one of the bigger banks, they will charge you less fees. Funnel all your business expenses and income though that account.

3. Taxes. It’s a good idea to take 20-25% of everything you earn and put it in a separate account from your regular business account. This money is earmarked for income taxes at the end of the year.

4. GST (Goods and Services Tax—5%): In Canada, you can make up to $30,000 in one year from your self-employment without having to charge your clients GST. However, once you hit that mark, you have to start. You can get a GST number from the Canada Revenue Agency. Many small businesses like to charge GST, despite the fact that they may not be at the $30,000 mark yet, and despite the added administration work of figuring it out (you get to write off all the GST you spend on your business), because it gives them the impression of being bigger than they are. You know, fake it till you make $30,000.

5. Set up a System Part 1. You can buy a small business software package like Simply Accounting or Quickbooks, or you can just use an Excel spreadsheet to track your income each month. You need to know two things: how much you have billed in any month (meaning, you send the invoices, but are still waiting for payment, like they owe you credit) and how much actual income you had that month (when people actually paid you and you cashed the cheque. Again, yay!). This spreadsheet, which shows both your income and expenses each month, is called a Cash Flow Statement. The goal is to keep it in the black, although this doesn’t always happen!

6. Expenses: When you go to file your income tax return at the end of the year, you can write off any expenses that are related to the cost of your doing business. For example, as an actor, you can write off headshots, acting classes, postage for mailing submissions, office supplies, books/plays, Casting Workbook, and even a portion of your rent, telephone, internet and car expenses. The list is extensive. Talk to someone at your local union office, or CARFAC (Canadian Artists Representation) if you are a visual artist, and they will often have a comprehensive list.

7. Set up a System Part 2: Part 1 was about tracking income, Part 2 is about tracking expenses. It is imperative to save your receipts for anything you think might be a business expense. Write on the receipt what it is related to, if it’s not obvious. Then clean out your wallet once a week or so, and dump all the receipts into a shoebox or a container someplace accessable. Once a month, go through the receipts, and enter them into your spreadsheet. You may want to break the spreadsheet down into categories, like Transportation, Meals & Entertainment, Books, Marketing, Bank Fees, etc. If you have a lot of expenses, you may need to do this more often than once a month.

8. Hire a professional. If you are totally lost with this stuff, or you are in a place where it is getting to be too much for you to handle yourself, you might want to hire a professional. An accountant can actually save you money, because they may know of hidden deductions that you were unaware of. A professional organizer can help you to create a system for your paperwork and for your computer.

Okay, so I’ll be the first to admit that all this talk of Cash Flow Statements and taxes and accounting is not the sexiest or most exciting topic in the world. However, getting a handle on your finances and setting up systems to deal with money can actually take a great deal of stress off, because you know exactly where you are financially, all the time. And that allows you more time to be creative, and to make a living at what you love to do. How awesome is that?

Finally, I’d like to give a plug to the Prosperous Artists blog and podcast. Dean and Rosh are based out of Michigan, and they have fantastic tips for the business side of being an artist. Coincidentally, the topic of their most current podcast is also cash flow.

So, until next time, here’s to bums in seats everywhere…

For a downloadable or streaming audio podcast of this article, click here.