Module Five
money talk
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Full disclosure: This module covers some of my favorite topics ever. To me, the whole point of running a creative business is the freedom and fulfillment that come on a silver platter when you make money doing something you love.
Whether we’re talking about budgeting and personal finance, expenses and taxes, or figuring out how you want to structure your pricing within your business, I could probably talk your ear off. So lucky you! You get to enjoy my concise, curated collection of thoughts on the subject without having to endure any rambling.
I love money. It’s such a powerful, freeing tool that allows us to get more out of life! And it’s not greedy or unacceptable to want money, even as a stay-at-home mom. Even though my income isn’t necessary to support my family, I’m still allowed to pursue financial progression.
While it’s absolutely true that it’s not all about the money and that you’ll get more value and fulfillment out of your business if your passion represents a combination of motivations, you’re not going anywhere if your business doesn’t earn a profit. It’s a critical component of this whole entrepreneurship thing.
You already have enough on your plate as a stay-at-home mom as it is — why would you add more work, responsibilities, and pressure if there isn’t a nice payoff? By starting now and working smarter, not harder, you’ll see the benefits of an efficient hustle in turning a solid profit that you can use to benefit your family.
BUSINESS BANKING
Whatever sort of business structure you’re starting with, I highly recommend you set up a business bank account, separate from your personal one. There are countless reasons why keeping your business money mixed with your personal money is dangerous:
It causes a logistic nightmare when it comes to tracking income and business expenses
You might be tempted to dip into funds for either when you hit hard times either personally or with your business
It’s harder to see progress or momentum and understand how to grow
It’s easy (and free) to set up a business bank account. Often, most banks will even give you some sort of bonus or perk for signing up! I use the same bank for both our personal and business accounts, which I find really handy, but they’re still separate.
Beyond making your life easier, using a business bank account will legitimize your business and serve you on your journey to becoming a fully-fledged entrepreneur. All you need is your business name and either your social security number or your business’ EIN.
Once your business bank account is all set up, you can start to establish a business budget separate from your personal one.
One of the most valuable processes I’ve discovered in learning how to run a profitable business is budgeting. To this day, I’m still using a budgeting system I started in college, and I’ve now implemented it for my business, too.
A BUDGET IS FREEING NOT LIMITING
The beauty of a budget is that you get to control how much you spend on what.
You could pursue an aggressive inventory growth strategy, redirecting most of your profit into buying new inventory or hiring help to serve more clients, or you can choose to grow the business at a slower rate in favor of a higher paycheck for yourself. It’s totally up to you how you allocate those funds, but you must allocate them if you want to make sure no funds are falling through the cracks.
I know creatives who ramp up their business during the Christmas season to recoup the cost of gifts they purchased. I know women who build businesses just to supplement their income while their husband is in medical school. I’ve known someone who started a creative business to pay for an unexpected surgery.
We each have our own reasons for starting a business, but the underlying common factor of successful businesses is that they are profitable, and you can’t get that without using a budget.
A common misconception about budgets is that they limit you and your happiness. I’d argue that it’s just the opposite — setting up a budget frees you up for increased spending by telling your money where to go now, so you don’t have to sacrifice or put a cap on your spending later.
Let’s break that down.
The numbers in your bank account, without a budget to accurately reflect expenses and upcoming bills, don’t mean anything. They’re just arbitrary numbers, and, yes, the higher the better, but do you really know how much you have available to spend? Just by looking at that number, are you able to instantly take into account:
How much of that total amount do you need to set aside to pay off the credit card?
Which bills are due before the next paycheck?
How many expenses will have due before your next sale is made?
What amount is actually from Jessica that needs to be reimbursed to Mike?
How much is remaining from when Sydney paid you back for her burrito AND your services in the same transaction?
How much do you need to keep in there to cover your taxes from the sales you’ve made this year?
There’s a lot going on with your money, and it’s hard to keep track of all of it in your head. Some people can do the whole “living on a prayer, not a budget” thing, but I am not a risk-taker.
I’ve worked too hard for that money to let it slip away without knowing its full potential.
That’s where setting up a budget comes into play — by determining exactly how much money you need for things and deciding what you’ll spend your money on before it even comes in, you’ll be armed with the knowledge (and funds) to take your business to the next level of profitability sooner rather than later.
SETTING UP YOUR BUDGET
Budgets are a personal thing, and there is no right way to do them. Of course, I do consider my own budgeting system to be prime, but in reality, you need to work out a system that works best for you, your business, and your family.
But that being said, if you need a starting point, please use my Business Budget Template e-book! This is a hefty workbook that will walk you through all the intricacies of my budgeting system. It’s high maintenance, and you totally don’t have to use it, but it works.
Operating on a budget means I have zero fear or stress surrounding the financial side of my business.
I know I have enough to pay myself and my contract workers for this month and the next, if, worst-case scenario, all income sources cease to exist. I know exactly how much I need to set aside to pay taxes as the year goes on. I keep just what I need to cover my expenses, and the rest gets used for whatever I want. My budget is freeing me from the burden of financial woes.
BOOTSTRAPPING YOUR BUSINESS
Sometimes managing the money isn’t the issue. Sometimes it’s that there isn’t any money to begin with. Listen, I’ve been there. Your entrepreneurial journey might be led mainly by the fact that you don’t have as much money as you’d like to make ends meet, so why would you have enough to fund a brand-new start-up?
Not having any money doesn’t mean you’re out of luck. After all, I’ve started several with $0. That’s right!
You can start your business today with $0.
It’s called "bootstrapping," and it’s another favorite topic of mine. Bootstrapping your business is, in essence, a way of “trading up” until you’ve got consistent funds coming in. Your goal is to get your business fully operational using only an investment of your time.
This might look like:
Offering to babysit, make meals for, or trade services with a photographer, copywriter, or web designer to get your e-commerce site up and running.
Starting an Etsy shop and selling digital downloads to save money for a special piece of equipment.
Reinvesting the money from your first sale on more inventory so you can expand your product line-up.
With bootstrapping, the name of the game is creativity, and it may not be the fastest way to get your business launched, but it’s not like you have all that much time to work anyway, as you balance your business with motherhood.
Ultimately, how you choose to invest in your business is up to you, but I want to show just how easy it is to get a quick boost and propel your creative idea into a full-blown business. Here’s a list of 20 easy ways to get $20 that you can use to reinvest in your business:
Host a yard sale. All you have to do is make $20. You can make that easily just by going through your kid’s closets or the toy room.
Downgrade furniture you don’t need. How many of us have furniture in storage or in the garage that isn’t getting used? A few years ago, I sold a really nice headboard on Facebook Marketplace in favor of a platform frame that I bought from Walmart for much less. Easy money, and a decor upgrade!
Inventory your existing equipment. Be realistic with what you actually need for your business. Several years ago, I bought a Wacom drawing tablet on a whim for $100, thinking I’d use it for my business. I quickly learned I had neither the skill nor the patience for understanding how to draw on a tablet connected to my computer screen, so the tablet sat in my junk drawer for two years after ONLY ONE USE. I kept hanging on to it thinking that one day I’d figure it out and make money off of it. I finalize wised up a few years later and sold it on Facebook Marketplace for $40, which I was incredibly proud of considering how much longer it might have sat unused. Take stock of the equipment or supplies you have lying around from unfinished projects or dreams that are no longer your priority.
Skip eating out for one week. A no-brainer, right? You could easily save tons each month if you have a concrete goal you are working towards, like, say, saving up enough to start your dream business. It’s doable!
Cancel your Netflix subscription for two months. Really, you can live without it for TWO months, and that’s $20 saved right there!
Offer a flash sale of your services to get started. Sure people don’t know what you offer, because you just started! But there is someone in your circle of friends who would be willing to support you in your quest for $20 as you do $1 haircuts, $5 headshots, or $10 commissioned artwork. Everyone starts somewhere, so start NOW and soon you’ll be at that destination you’re envisioning as you read this.
Babysit. Offer to babysit for new parents. You can quickly rack up your $20 goal, likely in just one visit!
Take your clothes to a consignment store. Try selling your old clothes at Plato’s Closet or another similar store that will buy used items from you. This errand is less than half an hour of your time and could easily hit that $20 mark.
Use couponing or receipt-scanning apps. I used to do this years ago, and I regularly brought in about $20/month from all the various apps I would scan receipts on!
Save your cash back from big purchases. Credit cards make it super easy to earn points these days, and there are even browser apps like Rakuten that keep track of your purchases and send you cash-back bonuses. Don’t miss out on this free money!
Create a digital product to sell on Etsy. The time required to create and publish a few decor prints is minimal. I’ve added several to my Etsy shop over the year, but I probably spend about 5 hours a year on shop maintenance with a resulting $40-$60/month in take-home. Passive income for the win!
Sell your unopened Bath and Body Works goods. We’ve all probably got a lifetime’s worth of birthday presents and Christmas gifts filling the under-the-sink cabinets in our laundry rooms and guest bathrooms, all courtesy of Bath and Body Works. You could easily sell the entire bundle of scents (the ones you don’t want to keep, of course) for $20 to someone on Facebook Marketplace or at a yard sale.
Rent your tools. When your husband isn’t working on his latest home improvement project, see if you can’t list the fancy tools he convinced you were oh-so-necessary to rent out for the weekend to someone needing them for a one-time project.
Sell photos on a stock photo website. I’ve never done this, but I have a friend who has! It’s an easy way to turn a passive profit on photos that aren’t doing anything other than sitting on your hard drive. If it gets you that much closer to your dream hustle, why not try it?
Tutor someone. If you took French in high school, brush up on your skills for a bit, and then find a freshman who wants to learn and offer to tutor them for the semester for $10 a lesson. Just get a couple of those under your belt and you’re well on your way!
Donate plasma. Donating your plasma, depending on your area, could earn you a lot more than $20 per visit, so try it out to see if it’s something you’re interested in making a more permanent solution to funding your business start-up costs.
Sell produce from your garden. This would be a fun family activity you could get your kids in on, too. Seeds are cheap, and if you nurture your produce throughout the summer, you could have a hefty harvest to sell to neighbors, friends, and family, easily hitting that $20 mark.
House sit. Put the word out there that you and your VERY CLEAN AND TIDY FAMILY would love to house-sit the next time a family member or friend goes on an extended vacation. You can easily earn $20 just by taking care of someone’s dog for them while they’re gone, too, regardless of whether or not you’re staying in their home!
Open a new checking account/credit card. You can often earn tons of bonus cash simply by using your new credit card as you normally would. If you need a business checking account anyway, might as well get started on spending so you can earn those bonus points!
Become an assistant for another small business owner. Get your feet wet in the world of entrepreneurism by working for another creative entrepreneur to learn more about their processes and habits. Post on social media for them or take their orders to the post office so they don’t have to. It’s a great way to learn valuable skills that you can then apply to your own business one day and make money doing it.
Again, the choice to bootstrap is totally yours. But sometimes, I find that if you’re using the initial investment as the reason for not starting your creative business, you might be subconsciously covering for some other insecurity or motive. It’s really so easy to build up a bit of an investment jumpstart, or bootstrap something from nothing! Don’t let money be the reason you don’t start.
PRICING YOUR OFFERINGS
Before you can actually make a profit, you need to figure out exactly how much money will be left over for you to take home after you make a sale or book a client.
Many creatives set their prices “creatively”, meaning based on their feelings and emotions — how much they think something should cost. In reality, you don’t have that much say in the base cost of your offerings. Instead, you determine the value, and that’s how you’re really able to make money. We’ll touch on that later on in the course, but for now, let’s talk about a few basic factors that play into your cost of doing business.
In my opinion, people make a much bigger deal than they should about pricing their goods and services, especially for a creative small business. The reality is that as long as you know what expenses you need to cover, you should be able to price your offerings at a profit.
That being said, expenses are often hard to quantify. Your total cost is more than just the cost of materials to create your goods, or the cost of your time if you offer a service.
Additionally, there are lots of things that you pay for as a result of simply doing business, like entrance fees and booth rent for trade shows and events, maintaining certification or licenses, or buying the wood pellets that go in the smoker so you can barbecue all the meat for your weekend cook.
I have a set of formulas I like to use to help me price my offerings:
Materials + Time + Other Expenses = Final Cost
Cost + Perceived Value = Final Price
The first formula helps you figure out exactly how much money is required to produce one product or service. If you’d like to use a more concrete tool to make sure you’re not forgetting anything, you can use a CODB calculator like this one.
The second formula is where you start making your profit, using the fluctuating variable of perceived value to help you control your price. Again, we’ll discuss adding value to your offerings in depth in a later module.
If you don’t feel like you’re making enough money from each sale, troubleshoot the issue by doing one of two things:
Decrease your costs, allowing your perceived value to increase to a greater margin and allowing for greater profits, or
Add more value to what you’re offering, allowing you to increase that perceived value variable to result in a greater Final Price.
There is a limit to how few costs you can carry in your prices, but there are virtually endless ways you can add more value to your offerings. Here are a few ideas:
Repackage your products or create a bundle that can serve as a gift set. Offering the variety packaged together as a gift might offer more appeal than the individual pieces.
Offer a discount for a future purchase with today’s purchase. The customer is attracted to the idea of future savings, whether they end up coming back in the future or not, which allows you to sell at a higher rate today.
Implement a tiered pricing strategy, keeping in mind that most people flock to a middle package because they don’t want to feel “cheap” with the lowest tier, but they also don’t want to overspend. Make sure your middle package packs in the most value and profit.
Streamline your service or offerings so you can work on more projects, but on a more personal, focused basis. This improvement in the client experience offers higher value, allowing you to charge more.
Update your branding and product photography to emulate the high quality and value of a bigger brand, therefore resulting in an increased perceived value.
Include cheap add-ons as an option when someone makes a purchase. This is a great way to offload inventory that isn’t selling as well with someone who is already committed to your business.
It’s okay to start with a guess for your prices and then raise them however often you want. But, that privilege comes with a caveat: if you raise the Perceived Value higher than the customer’s value, you won’t sell at that price.
If you have a reason for increasing your rates, like work you’ve done to improve the quality or offer more value, then don’t hesitate to alter your rates to reflect that change. It’s all about finding the Perceived Value that matches your client’s.
Again, running a creative business isn’t a race — you don’t have to hit the ground running and stay on track from the moment the gun goes off. As time goes on, you’ll be able to better understand what the Perceived Value of your offerings is and know how to price yourself.
I promise you’ll regret not starting more than you’ll regret not earning the right amount to reflect your value when you look back.
INVESTING IN YOURSELF
Part of the process of starting a business is investing in the equipment, education, and tools you need to get started the right way. You can begin with subpar materials, and work your way up to something higher quality, but it’s just not as efficient as learning to operate your business with quality and value from the start.
I’m not saying you should spend tons of money on the best equipment, or the finest private coaching money can buy — the last thing you want to do is invest so much money that you can’t recover the investment in a reasonable amount of time. But you can still start where you can with what you have by investing your start-up money intentionally.
Another thing you need to do is get over the fear of outsourcing to a professional. I understand just as well as the next person the value of doing it all yourself to save a little money.
But when it comes to business, I’ve never regretted the professional help I’ve invested in.
This includes hiring an attorney to file for an EIN for you, booking a professional photographer to take your headshots or product photography, or even investing in professional-grade materials with which to build or create your offerings. It’s okay to spend a little money on yourself to make things easier, more organized, or higher quality. These are all areas that will positively affect your business as you continue to operate.
Looking for a way to fund these investments if you’re not interested in bootstrapping? Rather than borrowing from your personal finances or taking out a bank loan, I recommend you use what I call the “Grow as You Can: strategy. Start with what you have already, sell what you can, and reinvest your profits back into the business.
Sure, buy a digital camera. But wait for a sale (or buy a cheaper body but nicer lens, or buy used, etc.), and then take as many pictures as you can to save up whatever amount is necessary to purchase the better model and some extra lenses.
Absolutely invest in some initial inventory. But if you have to borrow from your personal finances, set a budget for yourself and record how much you’re borrowing so you can make a game plan for paying yourself back, while also reinvesting profits into buying more inventory.
Do it — buy the online course. But spend a few weekends babysitting and hosting garage sales to earn the cash for it, so you can invest without setting yourself back in your business.
One of my favorite creative methods of investing in a side hustle came from a client. I’d been recommending she get a website up and running, but she just didn’t have the $120 (well, $115.20 to be exact) to scrape together for the subscription.
Her husband entered a Fantasy Football league that fall. He put in $30 for the buy-in (why do the husbands always find a way to spend money so freely?) and ended up completely dominating in that league. The first-place payout happened to be about $146. After he repaid his $30 investment back into the family funds, he was left with $116 profit, which he was able to gift to his wife to spend on her website subscription.
Talk about fate! It was exactly the amount she needed, and she was able to keep the website live with that money for the whole year, and then sell enough to maintain it going forward.
The financial aspect of running a business is not only pretty important but also exciting. Nothing makes me feel more alive than creating an income for my family with my own time, assets, and skills.
After all, money is what drives your business. If you aren’t in this at least partially to make money, then why go to all the trouble and time to live out your entrepreneurial dreams?
By laying the groundwork for a profitable business from the start, you’ll ensure that you’re spending your time productively when you’re working on your creative business.
quick links to resources:
Cost of Doing Business Calculator
Dalton Forsythe with Freedom Financial Coaching
(Rachel’s personal financial coach)
Chase Thurgood with Incite Tax
(Rachel’s personal CPA)