Accounting and Goal Setting
Blue steel is going to make some money today blue steel is going to make some money today here is my question for the class and for the internet what is your accounting system today we're not going I'm not we don't have to answer right now but I want everybody to start chime in and I want to know what your accounting system is okay go ahead ru I use an excel spreadsheet you rock you've got an excel spreadsheet yeah really if cells and everything gets him heading does how did you come up with that what do you keep track of um how much money I make and how much money I spend on sheets for for expenses and income okay and what else that's about it it's pretty simple your old school I know okay and then what how you back that up what happens in your house fire how's that work out a matter of luck you are out of luck thie end of the year I mean how long does it take you two to do your tax returns and take you a long time a short time my husband does them so you pass the bok you have no idea...
it's not your problem still in days speaking of I'm super jealous brute camp in the chat room says that they married an accountant period uh what do you d'oh? I use quickbooks quickbooks lee what about you your vast sums of money that you're making how do you account for them? What do you use? What do you do? I'm just starting just a starting. Okay, lorenzo I am on the right side of her. I have absolutely nothing that your blank slates yes. What are we getting from the internet? What's everybody using so they're using their using excel on dh they used the drop box or the icloud to back it up. Look, andi neo office spread sheet we got quickbooks pro. We have another excel personally, I use wave accounting waves grey which is free and doesn't just a great job. How about his quickbooks and simply studio for a client management? Kind of okay, everybody that's tuned in for these last two days is is here for a reason. Well, did you want to jump in? Zoe, what do you use? And I won't leave you out, huh? His papal count pay pal. Keep thinking what's coming in pay, pal keeps track of your income and to the extent that you're paying out of papal, if you paid everything out of papal, you'd have a great record of all of your expenses. So that would help you attacks time that's one way to do it. I'm not judging you e not judging face yeah, not judging, but look, this is my this is my editorial moment everybody's tuned in for these last two days because they're serious about getting their business started to the right way if you're not serious about getting started the right way, you know to nan, listen have fun, eat some popcorn you don't have to do anything I say, but if you're serious about building a business that's going to last if you're going bill, if you're serious about building a business that can survive an audit if you're serious about building a business that can survive a sales tax on it, if you're serious about building a business that's going to last and and and you want the ability to gauge your success or your failure along the way you need to probably take a little bit more sophisticated approach to your money then excel you probably need to take a little bit more sophisticated approach to your money then wave you probably need to take a little bit more sophisticated approach to your money then just quick in I'm not here pitching quickbooks it's just the one that I picked for today um there's there's, peach tree there's there's a number of different ones that were gone talk about down the line but you really have to have a system okay, you have to have a system to keep track of your money and that's kind of what we're going to talk about so we have this system to keep track of our money what's the first thing we have to have money, money, money, money when the theme song for the apprentice everybody think about that right now, okay? Um under capitalization is the global business killer. It just kills business is far and wide it doesn't matter whether you're aah! It doesn't matter whether you're a creative business, it doesn't matter whether you're a service business or a retail product business. If you don't have enough money to weather the storm you're going now. Every photographer that has survived, uh, the last seven years knows what I'm talking about. Uh, we've gone through a recession, the portrait industry, the wedding industry to the extent that that is served through people's disposable income it's not food it's not water it's not gas it's not a car it's not insurance it's not something you have to have it's a discretion comes out of our discretionary income. We've taken a hit and to the extent that we've taken a hit in our income, we've taken a hit. Our ability to mete are fixed expenses, right? What are fixed expenses? Uh, what are your personal fixed expenses market dorrie's got the mortgage now let's think about that because this is a list that we're going to come back to all day today my discussion of accounting is a cz much about quality of life as it is about the success of your business okay so let's make a little list of the must have rent and mortgage yeah what other fixed expenses do we have? Oh bless you, bob. Some people wouldn't say that's a fixed expense what else well along bob what kind what else what else car all right what other fixed expenses do we have personal personal fixed expenses forget what your occupation what do you have to have a gas card yeah children if you have okay, well that's not I don't even know about that let's get some fancy clothes, alana no entertainment e I mean um hey, anybody got a college education? What about vices and superfluid he's entertainment what else? All right, we gotta keep the lights on uh everybody has in this room one or two or three cell phones on you right and they all received data it like eight gig obey bits and a second right so we have phone cellphone that could be expensive. Yeah. What else parking come appear and put car alone slash transpo I'm gonna check the internet creative live courses yeah, websites now remember, this is personal. Yeah true, I'm not getting into the business yet let's focus on just what I don't care if I need to be a photographer the greeter at wal mart a ceo a lawyer a doctor what do I have to pay to keep my life moving down the road now now, mallory great point this children one what's it say three million bucks or a million bucks to raise a kid till age eighteen or twenty one or something like that it's like a million dollars something like that? I don't know I'm working on a fifty thousand dollar budget with my kids it's really cheap medical expenses oh my gosh. How did we forget that nobody gets sick. Thank you. Daphne linn uh erin uh writes a retirement remember her name? I'm gonna come talk to her errand layer in the presentation on ly there's only about forty percent of the working population that really cares about retirement at all. So, um that's actually doing something about it so yes, that true, but the majority of people wouldn't include this on their list. All right, for one essentials dominic heart dot com says hair appointment I have to keep myself looking fabulous. I spend a lot of skinny jeans. What mean lorenzo it's not really part of our budget. We will call it personal care and excluding plastic surgery all personal care services, manicures, facial mani pedi all that fun stuff so all of this adds up to a number in that number is different for everybody and it's different based upon where you live jim, I just one more I want to throw out, which is which is really good. One dart of photo giving donations giving to the churches and such ten percent all right, charity tithes and offerings. So this number adds up to a number for everybody that this number is different. Uh, based on where you live now, there's a great resource on the, uh, government websites. If you work for the federal government depending on where you go there's a different per diem multiplier for every city that you go to and you can say, you know, if I'm in atlanta it's two times the federal per diem of him in san francisco, it's three times if I'm in springfield, missouri, its point five times, because it's, cheaper and so there's a government multiplier where you can kind of get an idea for relatively how mohr or less expensive it is to live where you live, how much is internet? How much is an apartment in san francisco now downtown? A month? I mean, it used to be, like, two grand a month or something like that for a little seven hundred foot studio. Somebody tell me, I don't know, but, you know, if you need to get an apartment in springfield, missouri, three hundred fifty dollars, probably take you care ofyou a month if I'm going to go do business somewhere else it's gonna be a lot more so how much I need to make is a photographer which my accounting system is going to help me see if I'm achieving my goals the first thing I need to do is have a goal right? So we know that the national average for photographers is somewhere in the vicinity of thirty so what do we decide? It was thirty six thirty six thousand dollars a year about seventeen dollars an hour. Are you ready? Yes. So if you want to live downtown in the richmond area it's three thousand if you want to live stunning remodel two bedroom thirty eight hundred again in the richmond area south beach is going to cost you twenty six seventy and it looks like inner richmond is going to cost you thirty, three hundred so right around there and there's a couple for six thousand now look, this is perm onthe huge views great views and you're paying for the city that you live in they're not making more hills in san francisco they're all done so you're gonna pay a premium to live there. So if this is these are your personal expenses we then have to translate these into our business so in our legal survival guide the first thing we have to do is know how much money we need to live we don't live on how much money we get we plan to get how much money we need everybody's doing this backwards tim it's I'm gonna live on whatever I could make rather than I'm going to go make what I need to live you see that I mean it's it's a mindset that's changed its its people are switching jobs, we're switching professions an alarming rate you know, the average professional is going to switch jobs ten, fifteen times in their career, maybe more than that it used to be three times, so people are moving around um they're their wages were going up and down everybody and I I believe strongly that you should have a job that you like. I believe strongly you should have a job that rewards you, but I don't think you should leave a high paying job just because you don't like it and you don't feel that it's rewarding just to go do something else without a plan to achieve a level of income to meet your needs because you know what if you've got a spouse or children, they're relying on you it's difficult to make those kinds of lifestyle changes. So as we dive into our accounting discussion, we need to have a concept of what our goals are, so what do we want blue steel when we want blue steele's personal expenses to be and let's be honest I mean we don't have to do a whole spreadsheet but uh what's blue steel going to need to make if I'm uh uh I've got a wife and two kids two hundred fifty thousand dollars a year what? Well that's pitt legend and I just threw that let's base where we went worse blue steel doing business at oh missouri you want to call it springfield I mean I'll give you some lorenzo I would go really well but my real with seattle okay let's use seattle we're in seattle you guys know how much it costs to live in seattle what's in average uh what do I need to live in seattle for a family of four to take care of all of these expenses live modestly well my family of seven were running about fifty eight hundred dollars a month so what's that multiplied by twelve six s about uh seventy all these apples in the room nobody can add it up for I don't have a seriously give me one sec sixty nine sixty nine six hundred all right. So lorenzo knows in order to take care of his wrist sponsor abilities lorenzo is gonna have to have a business that made before taxes before his personal share taxes he's going to need seventy five grand to stay where he's at and to keep everybody well fed and dressed appropriately and save a little bit for college and and take care of his needs so blue steel needs seventy five grand a year after expenses in order to be able to keep the lights on. Does everybody realize that so to get blue steel off the ground making money so that we can meet our goal? What if we just set for ourselves? Um and and listen, that is super important because people are going about starting businesses completely backwards. Well, I want to do this. I'm gonna go do it all right, nobody's going to stop you, you live in the freest country in the world. If you want to be a photographer, go be one if you want to be an airline pilot gobi one but what's your goal, my goal is to take care of my family and make enough money to support them. So we have to start this business and we don't want to fail. We know that we've got a huge chance of failure, but weaken, we can get around that we could deal with those risks by planning, so we've got our business plan. We did that right up front. We know that blue steel if we're going to do sports photography, we're going to do larger than life cutting edge sports photography, right? And so we know what we're going to do, and we're going to put some money in the business if you undercapitalized in your first year here's what's gonna happen you sell your package from these air true stories uh you sell your your package to your client for three thousand dollars which includes an album and let's say that your album vendor is zuck binders and he's a finer folks out there um you do the wedding you've been paid for the wedding it takes you a while to send the proofs out your bride picks the proof she picks her album pictures you design the album she approves the album and now you've got to send the following email with your client I'm sorry client there will be a slight delay in beginning your album to you because I don't have enough money to pre pay my album vendor for your album but I anticipate next wedding season when I get mohr clients signing up with their deposits then I will use that to pay for your album and you'll have your albums shortly all right well let's say that you don't send that letter you don't have the conversation all you can do is go dark and silent and you start your your clients like where's my album oh it'll be here shortly where's your album it'll be here shortly where's your album it'll be here shortly we'll you know good and well why the album's not here because you don't have money you don't have enough money to pay the album folks because why what are you gonna pay first, lorenzo mortgage or rent? What do you pay second food? What you gonna pay? Third incident? Uh gas utilities well, don't skinny jeans might be first with his cell phone internet do you see what I'm saying? These air ria world choices and people don't talk about this, but when it comes down to paying for your client's album, we're putting food on the table, which you gonna pick you will put food on the table every time, so I say under capitalization is a problem because this is a true story you can't have your album because, well, there's not a lot of folks with strong enough backbone to stand up to their client and tell him that they mismanaged the business finances when they can't have their album because you don't have money to pay for it, but that's the truth so you end up having to lie to your clients or go dark and it just from a business business ethics point of view it puts us in a lousy lousy pay is ishan so capitalization is key? What this level of capitalization that's going to be required to start a photography business varies and in the answer to this question is largely dependent on whether or not you've got a day job most of the people watching based on our demographic research here creative life have day jobs they are starting photography businesses, they haven't left the comfort and security of a day job, and so they don't have the pressures that I'm describing where we don't have to put food on the table or buy the album. But the gentleman that I was talking to you about, where he had to actually go through that he was a full time photographer and his wife didn't work. He was a full time professional photographer and his wife didn't work. And what other choices do you have? If you are the sole provider for your family and your wife doesn't work takes care of the kids, you have to make these choices, so if you have the day job again, you have a little bit more flexibility because you can take some money from your day job and pay for the album, but for a pro photographer that's in it to win it full time and to do photography right? There are folks that khun b successful doing two jobs, but being ah, a slave to two masters is difficult. I mean, it is it's difficult to devote all that needs to be done to build a successful photography business if you're serving two masters, so if you're serving just your business, your chances are you're going to be a little bit more successful, so true story. I've had more than one photographer come to me with a contract dispute. Sometimes it progresses. Another photographer came to me and said, I'm getting sued by my client. I'm getting horrible calls from her father and getting horrible calls from her mother. They want their album, I can't give her her album, because I have no money to pay for it. In fact, I've lost my house. I've lost my home, I'm living in my car, I'm editing on my mac rv park. I mean, these true stories, um, and if your business gets to that situation, I mean, you're, you're left with the choice of, of walking away are trying to figure out some other source of capital for your company.