Money & Life > Legal Survival Guide > Small Business Failures

Small Business Failures


Legal Survival Guide


Lesson Info

Small Business Failures

Let's look at our industry now I'm gonna kind of focus on photographers but these numbers are not vastly different for graphic designers for web designers the numbers are fairly static across the board who are we nationally and where do we want to stack up now? Let's look at some of these now these are two thousand twelve numbers from the census from the bureau of labor statistics the media that this is remember from statistics you got mean median mode mean is average median is um half is above and half is below half of the photographers in the country earn less than thirteen dollars and seventy cents an hour half of the photographers in the country earned more than thirteen dollars and seventy cents an hour these air percentiles so the top ninety percent of photog well the top ten percent of the photographers in the country are making in two thousand twelve we're making about sixty seven thousand dollars an hour a year so that means that ninety percent of the photographers were making...

less than that ten percent of the photographers were making about seventeen five that means ninety percent of the country was making more than that so that's where you get your percentile averages let's come over here and look at the national average the national average is somewhat higher it was about fifty six thousand nationally comes out to be about seventeen fifty an hour for photographers oh, I apologize that's not a there are fifty six thousand one hundred and forty photographers that reported that as their occupation in two thousand twelve so that's what the population that we're dealing with this the average was I was thinking that that seems awful high the national average for photographers in two thousand twelve is thirty six thousand but look that is in the in two thousand twelve that's twenty six percent less than the national average salary across all occupations so if you choose photography and your average you can plan on making twenty six percent less than the average person doing all of the other occupations combined um and that national average was twenty three fifty an hour so you see that photographers they're making seventeen forty seven but everybody else averages out to about twenty three fifty and that number for photographers dropped from two thousand ten so I present the statistics from the the uh the bureau of labor statistics to ask the question where do you want to be on this continuum? I mean it's difficult to argue with the factual reality of our profession this is what it iss where do you want to stack up? Do you wantto be the top ten percent taking home sixty seven thousand dollars a year arm or are you happy with being average or do you want to be in the bottom ten percent were kind of part time you just need to make a choice as to where you want to be because, you know, if you don't set a destination for yourself, it's awful easy to get there, um, if you set a destination for yourself, it's a little bit more difficult to get there, but you know where you're going? Uh, so I point that out to to make sure everybody understands there are some financial realities about the creative professions, these air they and we have to work awfully hard to beat the averages. So by tuning into this course today and tomorrow, I'm telling you that is going to give you unfair advantage over your competition, because the majority of creative professionals are cholula ce cholula ce it's a strong word, I choose that intentionally clueless about the realities of the business that they're in, some are very successful and still relatively clueless, not that there's anything wrong with that? Um, so that's kind of where we're at let's let's, uh, let's think about where we're going to get our business advice from I heard online, I heard in this this forum that somebody said I don't have to register my my work because it's already protected, I don't need any copyright protection, I don't need any thinking copyright protection, or somebody said online that if I take my what would people say if I take my picture and mail it to myself in an envelope and never open it that proves I took it on a certain date and I don't have to registered online or uh I don't have to charge sales tax all of these things could be found all over the internet and they have one thing in common it's all wrong it's simply wrong and we've kind of gotten ourselves I mean I say this and everybody's heard it but we've got ourselves on in the mind set that you know, if it's on the internet it must be true and you know lorenzo you laugh but we all get there we all I mean I could be guilty of that from time to time I go look for a quick answer to a question I find that lots of people are saying it it's kind of this myth of commonality if everybody saying it then it must have some truth to it right? I mean we're all grown ups we've been around long enough to know that is not necessarily true the odds of our business being successful as we start out our business today and tomorrow are the odds of us living past a year are small the baby's going to die? We've got to make sure the baby doesn't die we're gonna give birth to the baby and we have to get it past the first year uh zoe did I offend you way have to keep the baby alive uh, the chance of failing in year one according to entrepreneur weekly is in the vicinity of seventy five percent mean that's less than roulette I'd have a better chance taking my start up capital for my business and going in betting on black or red I got a one in thirty five chance of of hitting it big I've got a little less than fifty percent chance of betting black and red so you'd be better off playing roulette in year one the odds are not much better if you make it into year two you still have a sixty four percent chance of failing and the odds on lee even out in year three that's where the odds are in your favor if you make it into your three you're doing better but look don't rest on your laurels in year three because what happens in your four we start to face a new challenge is maybe we've we've got a big following we can't deliver all the product that people want we start to have some customer service problems people get mad at us we have to fire people from our ah facebook account because they're saying bad things about us we know we're not friends with them any more and your four s o you have to be aware of the gods in starting a new business venture now again tune in today and tomorrow and learning what we're going to learn that is a step in the right direction why do we fail? I mean, if you think about it there's a number of reasons that small businesses fail and they start with lack of experience lorenzo where you going to school at uh ten day the artiste sort of seattle would just right down the street here what kinds of things are you studying right now? I'm going to corporate photography editorial photography, portraiture ah creative concepts portfolio which is setting up a web site setting up the air your website and last but not least women it's one, two, three, four and editorial and fashion so you're getting when you graduate, you'll have ah white and exposure to ah wide stretch of photography yes, and you'll be able to take that and find which niche applies to you that you like and you can move forward and go get a job in that field or start a business and solicit clients and then grilled yes and you're doing that because you need to get you didn't have any experience in it before you went to school projects is correct lack of experience is is one of the big reasons why creative businesses are likely to fail and the route to being a professional photographer it used to be kind of a protege mentor relationship where like ah clay blackmore was ah protege and men toward with money zucker who's a very famous photographer and he learned all that he knows today about photographer from money and now he's a great photo educator and a great photographer because he studied under someone and learned it well let's be honest with each other uh what's it take to become a professional photographer now class camera it's kind of like being a ah contractor in southwest missouri you have to have a pickup truck with a cell phone and a hammer I can build a house so I say that tongue in cheek but the barriers to calling yourself a professional are are relatively low and that creates interesting discussions between established photographers and the new guard on did create some heated discussions and I mean each side has some very valid points if you're gonna hold yourself out too from your lawyer talking to you if you're gonna hold yourself out as a professional a photographer or a surgeon to the public and charge money for it do you think you should have some basic skills right so if I say you know what I'll go shoot your family session and I'll take your five hundred dollars and I'll give you a disc of images should that person be able to expect a certain basic level of professional competency I think so if a surgeon's going to cut you open and you know do a valve replacement they probably need to have a basic level of surgical competency so that the person that pays them and trust their life to them crossing your fingers hope it's not a strategy. Zoe, come on now, seriously, my surgery rates are much lower than my lawyer is, but you know it any rate we've got to recognize that laugh lack of experience is a problem lack of organization is a huge problem. I am not one to say that I am perfect in all things unless I'm having a conversation with my wife. Black of organization is one of my problems I I have recently brought into my house a fantastic piece of furniture. Got it sam's if they sell it at sam's, it means I need it. It is a chrome uh, little wheelie card thing and it has, like eighteen multi colored drawers that can pull out with chrome knobs and I can put all of my papers in an organized myself. I feel organized, so I put that in my office, of course it's a it's a home to court nightmare, you know, it looks like my wife calls it the rainbow bright cart way but that's how I tried to organize myself because things I'd piles of paper everywhere are you a pile er zoe, are you a pilot? That's a challenge, isn't it? It's okay cathartic moment admitting it is the first step to healing so lack of organization is a problem cashflow planning what's it take to run a business cash we have to weigh have to be able to pay for things don't weigh we have to be able to pay for things and we have to have the cash when the expenses come for instance let's say that I have a wedding that I booked a year ago they paid in advance so you got five thousand dollars and I have taken that five thousand dollars and I paid my insurance I paid my taxes I paid my rant I've paid myself and now I've shot the wedding in the print order comes in let's say that my package included some prince and they ordered prints and maybe they got a five hundred dollar print credit and I know that my margin is forty percent on prints so that five hundred bucks on prince is going to cost me two hundred bucks. Okay, they order the prince I sent him to the lab. The prints come back in what's the lab expect me to do hey, um I've gotta pay him so if I don't have two hundred dollars when that that lab bill comes due, I've got a problem. Yes, I got paid from that client but I have to be ableto forecast cash four cash my cast did I say that right jim forecast my cash needs they're going articulate failure to predict actual costs huge problem you know, I I had everybody if you if you fiona pricing seminar you know you've got your package you never want to sell the package that you you want to sell all the time the one they could expire too and then your whopper okay and then when you start selling your whopper you raise your prices her debt before I had a whopper package right as I was developing my wedding business the black label package sounds sound like l a get a get a black label signature so it's six thousand dollars well, one of the things in there that I was going to delivers a twenty by twenty four print and I think I had checked the price on the black label twenty by twenty four print when I rolled that out five or six years ago and uh anyway, I started booking it. Well then when you have to go print the twenty by twenty four printed you realize it's two hundred or two hundred fifty dollars at miller's you've got to make sure that you understand that you're gonna have to pay that amount of money to deliver the product and you have to know what the cost is so going back and looking at your costs of your business periodically are super important to being successful insufficient capital uh like I said the reality is the barriers to entry into creative businesses how much does ah good computer and a mac book cost I mean do you think we could probably start uh if we were head skills a decent business for five six seven thousand bucks I started with the camera and you know cameron a mac book uh for realistically I mean you'd have to buy some software but now adobes lowered the barrier to get into the business even more with what we call it the creative cloud of the cloud I mean I have ah fourteen thousand dollars creative sweet if somebody wants to buy it okay deal on it it's got everything adobe makes well now you can get everything that adobe makes for what? Thirty a month thirty months actually twenty one thirty seven lorenzo's given the shoutout to adobe for twenty one thirty seven I mean it's fantastic and there's no updates required you know so it's great but you have to have enough capital to get the job done so check it out if I get enough money to buy my camera here's a mistake a lot of taco and I don't want to dive into the nuts and bolts right now but I'll just give an example hey, I'm starting my business I'm so excited I've always wanted to cannon five d mark three and I'll tell you what that everybody says that l siri's twenty for ah seventy two two hundred I s too is the lens tohave I'm going to go get that I've always wanted that tamarack rolling strong box to put it in there have all my little ill siri's glass all the way across the top tell you need a wide angle lens to some I'm gonna go out and spend ten grand on new camera equipment and flashes and it's all in there and it's fantastic oh yeah ok, great click click click click click now we're going to dio well you have to have a computer you gotta have a backup system you've gotta have the software to run and you've got to get some light room you got to pay your creative cloud you have to have some maybe some accounting software, so getting the camera and the bags and the lenses is the first step towards getting the job done now from a graphic designer right, you have to have the software you have to have the computer, you have to have the backups. What other expenses would you have to have to start a graphic design business? I think you've actually said it all it's it's pretty low entry marketing true relationships with your vendors taking a mouse line in dinan schmoozing, you know, getting that business in yeah yeah, but as faras physical things, I don't think there are a lot but obviously, if you didn't budget enough capital to get the basic things to do the job, you're gonna have a problem, and you're not gonna be around long guess what computers break? I mean, the life expectancy of a computer, what is three to five years? I mean, it's certainly obsolete after five years, but we have to budget capital to continue to replace those things that were out, including cameras, guys, including cameras. So the other thing that we do is we over invest in those fixed assets if I'm starting out as a photographer, andi, I had my bag of equipment laying in front of you, I would not I encourage you to duplicate what I have in my bag, okay? Number one uh, the way I approach my business might be a little bit different than the way you approach it, and I may have some things that you don't necessarily need some things that I might use once or twice a year. Um, likewise, if you're going to start out, people tend to get the things that they can afford. You know, the old adage is true by the most expensive lens that you can afford in the cheapest camera that you can plug it into n chances are you're gonna have some success, but people tend to over invest and fix asset. And new photographers will borrow money to buy cameras and equipment so you really need to walk alongside a mentor and get some good advice from somebody that's been there done that on what you actually need the other thing that we er might do that would cause us not to be successful is to make personal use of our business funds so zoe why did you open your personal bank account why did you do that? Why did you think that was necessary? Well, it started out with a personal business account when I was getting paid and I was putting the money in there and I you zach and jodi I was looking at their financial things in the first thing they said as one of the most important things is to separate out your business and make a budget you seriously I'm not the first person that's ever said this and I thought huh I do have a business I do make money maybe maybe I should figure out a way to me more professional about my money set up a business name, set up a business account start really looking at where all of my money is coming from hard to budget for your business if you're dipping into your bank account paid groceries or pay your car payment or pay for all of the other expenses of life the other thing that can cause us to fail is unexpected growth chances are if you're good at what you do, you're gonna be successful you're gonna have people that want you you're gonna have more jobs, you're gonna have to do mawr, you're gonna need more assets, you're gonna need more resource is so the faster you grow, the faster you have to be able to a day out so your success can be your enemy. So if we recognize that and we budget for, it will be likely to overcome those those issues competition always a challenge, isn't it? I mean competition among photographers there's this concept of huh? There's a book that I would recommend for new new business owners it's it's not a complicated read it's called blue ocean strategy and there's this concept of blue water and red water and if the sharks are in the ocean and there's a limited supply of food, all of the sharks are kind of fighting over this this small we're all fighting over ah small batch of food to eat and it creates this red water and nobody gets enough. What we need to do is try and find the blue water, the blue ocean, an area that we conserve in the market where there's not a lot of competition, so if we recognize that the competition in the wedding market in are are in the wedding industry and our market is brutal and people are out there you know shooting all day delivering five albums providing for photographers having a video at on all for the price of a thousand dollars and every image is edited and they deliver it to you you know on all expense paid cruise to the bahamas and that goes for a thousand bucks in your market that's pretty tough competition and so if you're going to dive into that maybe you need to to to rethink that low sales of course always a killer of a startup if you dive in and you do all that you need to do and you're just not generating the cash from your activities you need to make some changes you need to look at your pricing you need to look at your marketing you need to look at the quality of your work you need to look at your business location you need some help so you know as we move forward the key thing is we need to admit to ourselves what we don't know it's okay not to know something I mean I I I am a huge proponent of just being honest with yourself I don't know that I'm gonna make a list of what I don't know and then I'm going to seek the answer and along the way I'm gonna be honest with myself because is a moving through that first year of business it's kind like the first year of marriage the first year of marriage could be kind of hard. You have to make sure that you're careful and you make smart decisions because it's hard that first year and it gets easier and that's true with the statistics that we saw, so we need to be honest with ourselves. Um, again, goal setting for our business. What do you want to dio let's? Look at where we're at, how much money do you want to make? Have you written that number down? Everybody write it down at home or at work? How much money do you want to make? Because we're gonna we're gonna play a little startup business game and I need to know how much money you want to make. Come on, zoe doria, bob lorenzo, write that number down. How much do you need? You want to be part time making a part time number? If you want to be full time, think about all of the money that you need to to do this job. If you're working full time and you're thinking about giving up your full time job to pursue a creative endeavor full time, how much would it take for you to leave your current job to start a new one, try and divorce yourself from the idea that it's your passion, how much would you need? We're going to talk about writing a business plan and that could be kind of overwhelming for some folks you can get a business coach, my friends gerry and sandra buzzworthy success would be happy to help you they can do telephone conversations, telephone consulting, cell cicada will dio telephone consultations but we need to invest in our business a cz we create the business plan because on ly by doing that are we going tio achieve long term success remember ah bad plan is better than no plan a bad plan is better than no plan so making a decision sometimes the best thing for you can do the best thing that you can do for yourself in your business is simply make a decision uh I might be wrong it might be right, but you're going to move in a direction shin paralysis kills businesses and I I get in that position sometimes I've got a decision that's affecting me should I do this? Or should I do that? I'll think about it some more and maybe I'll study on it and maybe I'll forget about it for a week and then it'll come back to me and it's still there and it's slowing me down and it's keeping me from moving on to other things um perhaps you might and, uh analogize it to deciding where to go with your spouse on vacation you talk it to death. But ultimately that time comes when you have to decide. We're going here. And this is where we're going. And this is where we're staying and make a decision.

Class Description

Ready to turn your creative side project into a thriving business? Join Craig Heidemann for an introduction to the business and accounting principles every creative professional needs to know. 

In this class, Craig will take you step-by-step through the process of setting up, running, and growing a small business. You’ll learn how to use QuickBooks to manage your finances, including managing client contracts and invoices. Craig will also help you navigate the potentially-confusing tax, legal, and copyright issues surrounding small businesses. You’ll also learn how to contract and/or hire people to do the tasks you can’t do yourself. 

Whether you’re just starting out as a business owner or you’re a longtime entrepreneur ready for a refresher course, this course will give you a roadmap to business success.