Talking about finances is one of my least favorite things to do. Monthly budget meetings and the long winded discussions we have about pricing adjustments are like nails on a chalkboard. To be completely honest, when I hear Patience mention that we need to talk about our budget I either look for the nearest escape or I freak out like a two year old having a temper tantrum. I’m guessing that unless you’re an accountant you probably feel the same way as I do. Unfortunately, this is one of the most important things you’ll need to consider and work through in great detail when running a small, creative and sometimes very seasonal business.
The following steps in gaining the financial confidence to go full time are things that made a big difference for me…
Educate yourself on how to make budgets and get out of debt. We attended Dave Ramsey’s Financial Peace classes a few years ago and it made an incredible difference in not only the way we budget but the way we try to live. Dave Ramsey lays out simple step by step instructions on how to build your emergency fund and pay off debt before you start to try and build wealth. By going through the steps he teaches we have felt a lot more freedom to take the chance on going full time with our business. I can’t even put into words how much I recommend this class if you’re trying to position yourself to take the giant leap to full time or if you want to cut back at a 9-5 to devote more time to your own business. Actually, I recommend Financial Peace to everyone. It doesn’t matter if you own business or hope to start a business, it has the potential to help everyone who attends if they apply the simple principles Dave Ramsey teaches.
Find ways to minimize excess in your life. A while back I was doing what I do way too much of, getting swallowed by the huge black hole we know as the internet, and I stumbled on one of the most awesome blogs I’ve ever found, becoming minimalist. I’m one of those people that wants a clean and simple life and it’s something Patience and I had been discussing for quite a while so finding this blog was a huge deal for me. I love how Joshua Becker breaks the idea that we need possessions to feel complete and reminds people that it’s more about the things you do and the people you help that will be fulfilling.
Think about that for just a second… Life feels more complete when you make a difference in people’s lives. Isn’t that exactly why most of us got started in photography or with our small business in the first place? I know I got started in photography because I wanted to do something that would make a difference for people. Of course we need to make a living and therefore charge for the service we provide but deep down it’s still about serving others. I realize this part doesn’t have anything to do with finances but it is a byproduct of a lifestyle decision that can start out with financial motivation and quickly turn into something even more fulfilling.
Back to the financial side of becoming minimalist. By cutting back the excess in your life you are eliminating expenses and positioning yourself to take advantage of opportunities you may have missed out on otherwise. Sounds like a win, win to me!
Here are a few ways we have been able to cut back while still living a life that is comfortable with the things we absolutely need.
We got rid of our iPhones. We were paying about $1700 a year to have smart phones. Now we have those super awesome slider phones that were really popular back in the mid 2000’s and we’re saving about half of what we were paying previously. We are also on our phones less and are much more invested in what is going on with our kids when we are out and about than we used to be. This change has also allowed us to have more steady business hours since we don’t have constant access to our email.
We sold one of our vehicles. Since we work together now it just doesn’t really make sense to have 2 vehicles. We were able to sell one of our cars to pay off a decent amount of debt and save money on our insurance. Of course we’ve had moments where it would have been really convenient to have had both of our cars but we’re finding ways to plan ahead and be much more efficient with our time.
Sell or donate the stuff you aren’t using. If it’s sitting around taking up space in your house it’s taking up space in your life. Get rid of it! We had a lot of stuff in our garage and around our house that we realized was taking up our space and our time. We donated stuff, we sold stuff and we’re still finding more. As you can see, this is going to be a lifelong process for me with cameras and something I’ll probably always struggle with.
One thing to remember is that all of these decisions are things that aren’t permanent. If our situation changes we can get another vehicle or switch back to our iPhones or buy back the things we got rid of. By making this decision to go full time we made decisions that will have small, temporary effects on our lifestyle but they definitely aren’t for the worse. In most ways our life is much better because we were willing to get rid of things that don’t matter as much as the time that we have gained with our family.
Alright, on to the numbers stuff.
Know what you need to make to survive. This means every single thing! Figure out all of your expenses so you have don’t just have an approximate budget. It needs to be exact! We have to regularly go into our spreadsheets as our expenses change so we can keep track of everything. This is where those monthly budget/nails on a chalkboard meetings come into play. I may fight it every single time but I know it’s necessary. Once you get into the habit of doing this it will get a lot easier.
Mapping out our income. The biggest fear I have encountered in this whole process is the fear of failing to provide for my family. Income is a big deal to everyone and for me it was only amplified by having a young family. The only way I was able to minimize this fear was to figure out exactly what our income was going to be over the remaining 9 months of our year as I was preparing to leave my last job.
I know this may seem like a no brainer but there are parts that could definitely get looked over so I want to talk about a few parts in detail. It doesn’t matter if you’re planning on going full time with your business or just cutting back to part time with your 9-5, you need to have a solid understanding of what you’ll be bringing in financially.
Here’s what we did. We took all of the contracted work, which was mostly weddings, and figured out the total. This number is going to be the minimum you will make so you’ll also need to figure out what your average number of other sessions is per year along with what you expect to make at each session. Most family sessions aren’t booked very far in advance so you’re going to need to look back at the past few years to get an idea of how many sessions you do on average and when you do them. I personally think using 3 years is a pretty solid amount. Year to year can see some pretty wild fluctuations but an average of sessions booked each year for 3 years should flatten out some of the peaks and valleys and give you a more accurate number.
Also, be conservative with your estimates! I can’t stress that enough! The last thing you want to do is plan to do more shoots than you’ll actually end up doing. I would much rather make more money than I was expecting to make than less.
If you realize you might come up short of your target income you’ll need to really push your marketing muscle. It’s been our experience that any marketing you do will have an effect about 3 months after you do it. If you need to book mini sessions in September, start marketing for them on Facebook, Instagram and your blog in June. That’s something we also need to be a lot better at doing too.
Speaking of marketing, it is really important to come up with a marketing strategy for your entire year. Do you want to book a few family mini session dates between September and October? Is there a certain part of the year you have noticed you seem to slow down quite a bit based on the numbers you figured out when looking at your session averages? Right now is the time to make those marketing plans! Pick the session dates, put them on the calendar and then plan your marketing strategy around those dates. Remember that it’s good to market for the sessions you’re hoping to book around three months in advance like I mentioned previously. Figure out the best times to post on Instagram and Facebook and post regularly about the dates you have chosen. Post links to the blog posts from similar sessions you have done in previous years. You have to get that work in front of people if you want to get more work. By marketing for the work you need to do you will stabilize your income which will make a huge difference if you want to cut back at your full time job or if you want to go full time with your small business.
These are all steps that we have taken to help with the fears we have about the financial side of running a business full time. Understanding our budget, cutting back on things we don’t need and marketing to help gain business during slow times of the year have all worked together to help us feel more confident that we will be able to provide for our family.
We can’t thank you enough for taking the time to read about our financial fears and what we continually try to do to ease them. Next week we’re going to talk more about our marketing approaching since it has such a huge effect on our finances.
You can take a look back at our previous post about our personal fear here.
Also, if you missed the links to Financial Peace and Becoming Minimalist, here they are again. I highly recommend checking both of them out!