Lessons

Lesson Info

Financing Your Business

So how do you finance your business that you have here? Do you take out a loan? Do you not take out a loan? Do you borrow from a family member? What do you do? So now that you figured out whether you're going to be an llc or a sole proprietor or an s corporation and you have all of your permits and you are ready to report your sales tax, what do you do to get started? Because the equipment is incredibly expensive and computers aren't cheap, and if you don't have clients coming in, how are you making any money to finance your business? What I did when I very first got started and I've spoken about this before I took out a loan, I took out a loan for fifteen thousand dollars, and I gave myself six months with the fifteen thousand dollars I bought a computer and I bought enough gear to get me going. I didn't have extensive backups, I didn't have the latest and greatest, I didn't have the top of the line, but I had enough that I could go out and start photographing events. Now the six mont...

hs that I gave myself was if my business does not start taking off, if I am not making enough money in six months to really be paying this loan back fast, then I'm going to sell everything I bought pay off most of the loan and pay off the rest is I can. It was a little bit of a gamble, it ended up working all out perfectly. I paid it back three hundred eighty seven dollars a month for quite a while until I was able to finally pay it off in a lump sum and looking back on it, I would do it exactly the same way again because it worked out very well for me. Now at the time, I was married before my marriage now, and my husband had a day job and he had health insurance and he could pair a mortgage, so I was very, very fortunate and that I was able to take this gamble. Now, what would I do if I had started my business after my divorce, when I was living with my kids and I didn't have any sort of safety net? What I have taken out a loan it's really hard to say because I'm not in that position. Maybe I would, because the same principles will still apply. I could still give myself six months, and if it wasn't working so my things and pay it back, the reason for the six months is because I knew that the things that I had purchased would still hold their resale value pretty well. About six months later, if I'd waited three years and tried to sell the camera that I bought, I wouldn't be able to recoup nearly what I spent for it, but within six months I could get pretty close. Now the whole loan thing aside, which I'm still glad that I did, I didn't take out a loan for one hundred thousand dollars or fifty thousand dollars it was fifteen thousand, which to me at the time and still now is an obscene amount of money, but it was something that didn't frighten me, and I knew that if I worked hard enough, I could pay it back. Now from there on out, I haven't taken out alone and I don't have credit card debt and I'm not saying that to brag or anything like that. There was a point in time when I did have credit card debt and I had things that I was paying down, but I did pay all of those things often now my business and my personal life carries no debt at all, which for me makes me feel very comfortable. So how do you buy gear from here on out? I only buy gear with cash, I only buy it when I have the money for it, I only buy it when I've budgeted for it, but in the very beginning when you don't have anything I don't think that taking out a loan is a bad idea if you have a plan to pay it back if it's easier for you too borrow from a family member that might be something to consider, but I never wanted to consider that because I very strongly believe in not mixing business with my personal life so I didn't want to become indebted to anyone that I was related to for any amount of money, so the loan from the bank had a very low interest rate I was able to pay it off I'm glad I did it I would do it again, but if that is the road that you want to go down, just be careful make sure you know what you're getting yourself into and have an exit plan if it doesn't work out for you now how do I manage my money now that we've talked about how you get started, what type of business your business is going to be, how you're going to collect and pay your sales tax and how you're going to get your permits and your licenses you've talked about who you need is a trusted professional to help you out with your business. You figured out how to obtain your start up money you've got your money, you've got some gear you're ready to start going now how do you manage money when you actually start turning a profit and maybe this isn't your first year of being in business. Maybe this isn't even your second year. I didn't turn toe working with a financial advisor until I'd been in business for seven years, six, seven years, but in the interim, I made sure that I was managing my money very carefully, and when I say manage my money, I'm talking about day today, managing of the money I'm not talking about how I take my money, and I invested for my future. I'm talking about when a client gives me a check, what am I doing with that money? So I have several different accounts with which I handle everything that I'm doing. I have a personal checking account, I have a personal savings account of the business checking account as it is in the savings account, and I have an american express card now talking about what each of these accounts do for me. And I've spoken about this before everything that a client pays me everything that I make from selling a think book or selling a quick sheet or shooting a wedding or shooting a portrait. All of that money goes into my business checking account, and it is recorded as income once a month, even though I'm an llc and I can profit share as I like, I still pay myself a paycheck every single month. The reason for that is because in my mind especially not only just on paper my business is a separate entity from myself I don't view my business funds is something that I could just go take from anytime I want and if I'm just going and taking from my business funds anytime I want I really have no handle on what my expenses are every single month so I pay myself a paycheck every single month there is an automatic draw that goes from my business checking account and it puts money into my personal checking account just like you would if you worked a nine to five and you had a paycheck that direct deposited it's the exact same principle from the money that goes into my personal checking account. I pay my rent and I pay my bills I pay my daughter's after school program and I pay their dance classes and I buy groceries exactly how you would if you had a nine to five job that gave you a paycheck all of the things that you would pay for with that paycheck exactly how I handle the money I transfer into my checking account every single month my personal savings account also gets a little monthly deposit, which I again I consider part of payroll part of it goes into my checking account to pay my expenses. Part of it goes into my savings account for savings I'm a big follower of, you know your basic dave ramsey rules where you have six months of emergency funds just in case of emergency, I liketo have kind of a number padded in that in that personal savings account, just in case something happens to my car or I have an unforeseen medical bill that I need to pay or anything like that. I want that reserve of funds that I can get back into now after being in business for thirteen years it's it's a little easier? I have pretty reliable income coming in I know I know what my numbers are for the year, I know that I'm going to be able to do that, but when I was very first starting out when I wasn't making a whole lot of money, maybe I'm putting ten dollars a month in my personal savings account maybe twenty dollars a month it's something that I'm putting away that I know that I'm not going to touch in case of unless there's an absolute emergency and I really need it once a month. There is also an automatic draw from my business checking account that goes into my business savings account. Now the reason why it's going into my business savings account instead of anything personal is this is the money that I'm laying aside for taxes this is the monthly average that I figured out goes towards my quarterly taxes now I paid quarterly taxes four times a year. I just sent out a cheque that makes me extraordinarily sad to the united states government, and I don't want to have to rely on touching my business checking account for that because it's a fairly substantial amount of money, so I figured out that if I oh, and just to make up a number off the top of my head, this isn't my number will talk about my number soon, I promise, but let's say, I know that I'm going teo six thousand dollars a quarter to the irs, and I have three months to put that together. We'll every single month I'm gonna automatically pull two thousand dollars from my business checking account, put it in my business savings account so that when I have to write that six thousand dollars check, I take it right out of my savings account, put it in my checking account, and I pay it. I also do that with sales tax. If a client has a contract that requires me to collect and report sales tax to the state of new york, when they pay me that check that has the sales tax attached to it, I automatically separate it and put it in my savings account so it's sitting there. I do that with clients who have albums in their contract I know the cost of every single album that I'm making and I make sure that I take that cost on I put it in my savings account yes, I have money in my checking account to keep moving and to keep doing these things but if for some reason in january when I have almost no weddings if all of my clients from two thousand thirteen came back and said we want to order our albums right now I have all of that money set aside in savings now even though I have that money set aside and savings if I have it in my checking account and I can spare it I'm going to pay for it out of my checking account and just continue letting that number grow in my savings account if I have the six thousand dollars sitting in checking to pay my quarterly taxes I'm going to pay it and leave that six thousand dollars in my business account what if I have a few slow month and it's difficult for me to pull the money for my taxes and set it aside? Having that personal buffer in my business savings account really really really helps me out in case I need to do that in the past six months I've also introduced in american express card into what ideo after years and years of having friends talk about what great things american express does for you as a as a purchaser, not as taking american express card from your client, I'm talking about using it to pay for things for my business, I pay it off every single month, it's one of the ones that you do pay off monthly, so I'm not running a balance over and over and over again, and to be perfectly honest, the points that I earn from using the american express makes it really worth it for me and also the protection as a buyer, if I buy something and it goes south or something, I need to get a refund, and I can't get it from the refund from the company american express really protects the purchaser, which is kind of a very helpful thing as well, so adding on the american express has been really, really fantastic as well, but I did not introduce that until I've been in business for twelve years and I knew for sure that every single month I would be able to pay it off. I didn't want to introduce something that suddenly ended up running a balance, and then the balance started snowballing, and then all of a sudden I had tons of business debt, I didn't do it until I knew for sure that I would be able to pay off my expenses for it every single month. So when toe add on a financial advisor to help you out with the money that you're making? Like I said, it took me several years to be at the point where I felt like I needed to bring someone on, but now if I go back and kind of look at it, I wish I'd had brought somebody on quite a bit earlier because it would have allowed me to start investing and saving more smartly for my future. Even if I've just been putting away twenty dollars, a month would have been better than putting away no dollars a month, so I did bring on an adviser and it is is someone that I work with on a very regular basis. He isn't on staff hey only makes money if I make money, which works out really well for him. If it works out well for me and I found my adviser by asking around, I didn't just have a financial advisor that was a buddy of mine, I started asking friends of mine and business owners of mine who they trusted to help them manage their money. Now they don't he doesn't help me with my checking account, my savings account or anything like that, he helps me with my investment accounts. And maybe you're not there yet or maybe like I said you can only put away twenty dollars a month but if I had started sooner that twenty dollars a month could have been working for me instead of just sitting in a savings account which it was doing nothing when it was sitting there now what does he do for me he helps me manage for completely different accounts each of my daughters have a college savings account well college investment account have a personal investment account myself and I have a sep ira that I contribute to every single year your sep ira you can contribute a certain percentage of your income every single year into this ira another reason why I send my profit and loss four times a year to my accountant is so that he can continue to advise me how much money I'm going to be able to contribute to my step ira at the end of the year your ira not to get too complicated into that is pre tax money so you put it you pay taxes when you take it out later on in life so I know that it's gone I know that it's locked away I know that it's sitting there for my retirement which is a really great thing for me but the financial advisor what he did was he helped me sit down and figure out how much I could comfortably invest every single month he looked at my daughter's ages, he looked at the years they would be going to college. He looked at the year that I, you know, hypothetically want to retire and at what income level, I'd like to retire. And then he came back to me with numbers, and he said, this is the amount that you need to put away every single month for your eldest daughter, and then this is the amount that you need to put away for your youngest daughter. Can you do that? And at the time that he gave me those numbers for the first time, no, I couldn't do that. It was way more than I could possibly conceive of putting away every single month, so I put away less, and then I went back to him again, and I said, okay, I think I'm okay with putting in a little bit more, can you re advise me? So if you have no idea where to start with any type of investments or any type of savings for the future, speaking with a financial advisor that maybe your accountant refers to you or I found mine through my husband is a gentleman that he grew up with and he's been working with for years, and I was able to look at what he was able to do for him, and I know that you know hopefully he would be able to do something very similar for me and in the years that we've been working together he's given me very good advice and I don't want you to think that planning for the future is something that you only do when you're making a lot of money it's actually something that you should do before you're making any money at all because then you're set on your path and then hopefully as you start to make more money and hopefully is your business continues to grow you'll be able to do smarter things with the money that you're bringing in again how do you know how much to invest? I asked for advice stuart I don't know what to do and my putting away enough am I not putting away enough? Can you help me? He will answer the phone when I call him he will take my emails he will look at my tax returns for the year he'll tell me where I need to be going with my money based on where I want my future to be and it's just it's been really extraordinarily helpful to me I'm investing for my future I'm investing for my daughter's future I'm investing for my husband's future I love shooting weddings and I love running my own business I don't want teo die at a wedding when I'm ninety years old because I didn't plan well enough for the future I want to plan for it now and I wish I'd been planning for it fifteen years ago but I wasn't so now that you've done all of these things and you're set up and you have your license is in your paying your taxes and you know where your money is going to go when it starts coming in and you're sitting there in your home and you're like, ok, I'm ready let's go let's do this how do you actually find someone who'll let you take their picture that's kind of you know that's where a lot of people hit a roadblock and a lot of us like I did stumble into it a friend of a friend of a friend of a friend ask you to shoot their wedding and you do it but what if that doesn't happen for you? What if none of your friends or getting married or what if you don't have any friends are you know your friends live states over they've already been married or they're not engaged what do you do to get the first people in the door? Because it's a really tricky catch twenty two you can't have people hire you to shoot their weddings until you can show them a portfolio but how in the world do you have a portfolio when nobody's hiring you to shoot their wedding? You know what do you do these are two pictures from the very first wedding that I ever shot. I still like them. It was a two thousand and one, and I've talked already about how that very first client found me, and it was a little bit of luck, but if you aren't lucky and you don't have someone who's just asking you to do it, what do you do? Well, you ask, you're engaged friends, you know, and don't get your feelings hurt if you say, hey, I'd love to shoot your wedding for you and they pat you on the back and say, I'm no that's, okay? Because we spend a lot of time advising our clients not to just hire a buddy to shoot their wedding, but to hire a real professional. What do you do if all of your engaged friends don't want to hire you? Well, maybe you ask around maybe you see if they know somebody who's getting married, maybe maybe somebody who legitimately does not have the money to hire a professional. Not everyone can afford a professional photographer and forever, not everybody that's on a priority for them. Some people really don't care, you know, you might ask a friend and they're like, oh yeah, we were gonna have a photographer sure, go ahead if you keep asking around nine times out of ten, you're gonna find somebody on a lot of photographers who've said, oh, that's never gonna work for me come back later and say, yeah, I just kind of asked around and I actually did find somebody and it worked out well, what do you do it? If if that doesn't happen for you, maybe a friend of yours who's getting married, who has already hired a professional won't mind if you shoot engagement pictures for them? Maybe they weren't going to hire their professional toe hired to photograph engagement sessions for them, and they'll let you do it, or maybe after the wedding, they're willing to put their wedding attire back on for you and shoot a post session with you. I do not want you to take your camera and go to your friend's wedding and attempt to shoot alongside the professional or even to just say, oh yeah, you know, I'm starting my business, I'm not going to get in your way. I'm just shooting some that's this maybe not the best ethical move you should do something that doesn't involve shooting over the shoulder of an actual hired a pro so a pre wedding shoot for them, a post wedding shoot for them, but don't get in the way of the person that they've actually hired to document their wedding day engaged friends of friends ask around maybe somebody you know knows somebody even if they have a professional photographer, maybe they're willing to get dressed back up for you later and do some portrait's outside that you could use for your portfolio. Ask your friends maybe you've got a good girl friend and a good guy friend and they're not even dating and neither one of them are married, but they're willing to dress up for you and pretend to do an engagement session or pretend to do a post session. No it's, not a wedding, no it's, not a client that paid you, but you're also not misrepresenting if you have friends dress up and you take beautiful photographs of them it's still a beautiful photograph of peoples and if you don't have any friends at all and you are a hermit who sits at home and knows no one, hire a model hire a model to dress up the only thing I'm asking you to do if you do these things if you do hire a model, don't don't attempt to use this to mislead any other perspective clients. If you meet with someone and they ask you how many weddings you've shot, be honest with them tell them that your new don't show them this model portfolio are your friends all dressed up and pretend that you shot one hundred weddings that way look about to bite you you just need beautiful work to show and eventually someone will trust you they will hire you they will get you started and all you need is one all you need is one client now how do you educate yourself from there once everything is set up once you've got some clients that are interested once you're really ready to get going how do you educate yourself and how do you continue to educate yourself it's extraordinarily important no matter where you are in your career to keep educating yourself I am constantly looking for inspiration I'm looking for new things I am looking towards new photographers and what they're doing I always want to continue to get better no matter what so I attend workshops in the past I've attended the one light workshop I went to my husband's lighting and skill set boot camp many years ago which was extraordinarily helpful for me there are a lot of photographers that I would really love to take workshops from and learn from I would love to attend a workshop by laura jade I'm not a commercial photographer why don't you portrait I don't you studio lights not really but anything that I could learn from her could always be applicability wedding photography and maybe what you need is an education from someone who's not a wedding photographer you don't have to go to a wedding photography workshop tto learn photography you khun you know, go to any workshop that is photographically helpful and maybe it will inspire you in a completely different way if the instructor you're learning from isn't a wedding photographer, I go to conventions, I've gone to w p p I for this will be my thirteenth year when I go this year I have been to people a conventions I've gone to photo shop conventions, anything that you can go to toe learn from not only for the learning but also for the networking for the meeting, new people for the meeting, new photographers I have learned so much about photography just sitting late night in shibuya with my friends in vegas talking about things that is justice, educational, sometimes it's sitting in a class because you're talking one on one and you're collaborating with someone who does what you do and that is incredibly useful get to know everybody get to know photographers when you go to conventions, don't sit by yourself, go up and introduce yourself to someone go sit down at someone's table for dinner and say hi the amount of knowledge that you will gain from your friends who then become collaborators with you. I balance ideas off of my friends in business all the time, not necessarily just photographers other business owners are really helpful to know and they keep me going and to keep me stimulated both photographically and on the business side of things now the incredible difficult question of window I quit my day job when I got started I didn't have a day job I was a receptionist at a veterinary office for a while and then I left that to be a stay at home mom to my daughter. So when I started my business, I was a stay at home mom with a camera just like a lot of you out there, but what do you do if you have a job that maybe you don't love and you want to leave it to become a photographer? Where do you go and how do you know when to do that? There are a lot of instructors out there who will tell you that success will never come to you unless you put yourself at risk, right? Like they'll give you some really boneheaded advice like just quit your job and the necessity of making money will force you to work harder and succeed faster and that's completely insane because if you quit your job with absolutely no backup plan, you're literally jumping into the deep end not knowing how to swim. I don't think that's smart, I'm also very financially conservative and very cautious and I don't want to drop my health insurance and my source of reliable income for something that I'm not necessarily sure if it's going to work or not if you want to put your day job, I highly recommend that you not do that until you're making enough money in your photography business to at least we're place enough of your salary that you can live on whether you have to keep doing photography in your day job for a year or two years until you build up a savings that you can live off of, maybe in your day job you've set aside your six months of, you know, living money in a savings account, you feel very comfortable leaving that job and going out and trying photography and you know that you've got six months where that income to live off of great. But if you don't have a savings account and you don't have a way to have health insurance and you don't have any stability whatsoever, don't quit your job don't just jump into the deep end and trust that some higher power or some, you know, business divinity will save you. You need to plan for the future. If I had a day job right now, which if photography ever didn't work out for me, I would totally go and get one. I wouldn't leave that job until I knew that I either had enough income coming in from contracting events that could take care of me or I had more than enough in my savings account to take care of me for a period of time you know, maybe that's a little bucket of cold water over your head but I would rather you stick with your day job for six more months and then when you do leave it you are in a financial place that you don't have to be desperate and terrified and worried because I really feel like that desperate nous and terror and worry will translate over into your business and it's just it's not good vibe this it's not gonna help you out so stick with it a little longer banks and more money and then go how do I know what to pay myself that's a hard one I can't tell you that we're going to talk about pricing we're going to talk about profitability that's coming up very, very soon in the many more episodes that you have to watch over this thirty days I figured out what to pay myself I really understanding what my monthly expenses are and what my day today minutes are in my personal life we will talk about that I'm not trying to gloss over this question but don't just pick a number out of your head and say this this is what I'm gonna pay myself a year you need to do the research into knowing how much money you need to be bringing in now here's the difficult thing that a lot of people ask us why isn't this happening faster? I've been in business for a year I've done all the right things I'm getting clients you know I'm why am I not succeeding faster now listen there is no way to succeed faster I'm here for thirty days to help you as much as I possibly can to set up your business tto learn how to be a better photographer tto learn how to manage the day there is no fast track to success there's no silver bullet there's no one thing that I can tell tell you that tomorrow will explode your business that doesn't exist and anyone and you teacher any instructor, any anybody who will tell you that they can give you the key to success right away is not being honest with you because the key to success is repetition it's longevity it's paying your dues it's coming back year after year and continuing to get better and to work harder and to be smarter with your money and to know your your prices in your expenses and continually improve your marketing there is no way to make this happen faster I can help it happen smarter for you but I can't make it help happen faster and anybody who tells you you can any seminar or or book or lecture or course that tells you how to do it like that there is no like that and if there is a like that it's not sustainable so the only way to do this is with hard work and with repetition and coming back and keeping at it, and I still don't think I'm anywhere near where I want to be, but I'm continuing to plug at it year after year after year. Seriously, can I make it happen faster and you can't you can't, and if what you're doing is spending your time looking for that magic bullet to make it happen faster, you're wasting time that you could actually be working on your business. So stop looking for a loophole stop looking for this quick track to success. Put your head down and get to work. That's the best advice that I can give to you when you're getting started. These are questions that I kind of get asked a lot. How can I get comfortable in front of my clients? How do I get comfortable on the phone with clients? We'll talk about that with in the episodes coming up, many, many, many times will delve into comfort level. The only way to get comfortable in front of your clients is to keep getting out in front of your clients, and the only way to get comfortable on the phone with clients is to keep picking up the phone and trying I hate talking on the phone. Two clients it makes me nervous it makes me uncomfortable it makes me kind of nauseous and I really don't like it I especially hate talking money on the phone with my clients if you have to write a script to talk to an inquiry on the phone, write a script right your sales pitch down and read it if that makes you more comfortable but again with is there a way to make this happen faster? The only way to become more comfortable is to keep at it and keep doing it said your best friend down and have a fake consultation with her have someone that you know ask you difficult questions in practice answering them but keep at it and it will definitely get easier and then the last question that I get asked a lot for photographers who are knew who might not necessarily be comfortable at the very beginning with this how do I get comfortable asking people for money? And I asked on facebook not long ago for people to tell me what their most common problems were with being a new business so that I could help them out in this thirty days and I was asked repeatedly how do I get comfortable asking my clients for money it's a lot of money? What if I know that they're having financial difficulties? I can't ask them to write me a check for five thousand dollars yes you can because the difference for me between being a hobby and being a business is this isn't business, this is personal. If you signed a contract for me and you owe me five thousand dollars, I'm going to send you an email invoice and expect you to pay me the five thousand dollars. How do you get comfortable asking people for money if they have signed a contract? If you you asked them for money it's just that simple and sometimes the the easiest answer is also the hardest thing to dio. Send them the invoice and tell them that it's due that's all you khun d'oh, thank you for sitting here with me as we talked about starting up your business. If you have any questions about anything that I've talked about today, please hold your questions. I'll be back at the end of these thirty days to recap, I'll answer anything that you have at that time and please stay tuned because we have many more days to come.