Budgeting and double accounting (okay not the best visual pun with this image, best I could do!) is probably the very last thing that is on the mind of a creative person, unless you are trying to “cook the books” as Enron did. As was pointed out by Martin in the comments to last weeks ArtBiz101 posting, you do need to think about things such as cash reserves for a business venture.
Developing annual budgets are not fun, but they can be helpful, perhaps essential to your business. I know what the average cash burn-rate per month is for my other business. I know that I need to make twice that amount each month to break even (tax rate is 50%, oh yuk) for business expenses, and that’s before getting paid for my personal expenses. As a result, I also know that its a good idea to have savings equal to about 3 to 6 months of the monthly expesnses. In sales, there are good months (put a little in the savings account) and bad months (Opps, take some out of the savings account). You just don’t know what’s going to happen, only what did.
For me I also try to figure when I can or should purchase some equipment, which is a different line item in the budget. I don’t buy equipment that often, so it is not a monthly expense item, but an irregular expense item. And if it is a big ticket item (say a wide format printer or a 16.7 Mp camera body), I may buy it this month, but I have to expense it (depreciate it) over the next 36 months. Unless I buy it on a credit card or take out a loan, I need that cash now.
You may also find your self needing to budget a other projects. Perhaps your are going on a two week self-assignment trip, you need to plan for the travel expenses, perhaps camera equipment rentals, film and film processing on the return.
Or in my case, I am thinking about an exhibit next year of my series Bad Trip – Sad Trip. I may be framing upword of 50 images, which at $250 per matte, glass and frame for each image, means I would need $12,500 for framing. Now hopefully it would be a local exhibit, otherwise I will need to plan for crating and shipping expenses (???). I am also thinking about larger prints and if I do those myself (buy new wide format printer) or have someone print them for me, that’s going to cost about me about $8,000. So I have a rough budget of $20,000 for the exhibit. Now lets say that I want to have a hard cover book published of this series concurrently with the exhibit, then I will need another $10,000 to $15,000. So now I should be thinking about $35,000. Oh wow.
But what would be my case if a gallery offered my a chance to exhibit and without realizing the cash needed, said yes! and later on as the exhibit date starts getting real close, I find out that I can’t afford to frame the images? Okay, the worst case is I buy some mattes and not use frames nor glass, but even thought I have the exhibit, it would not be my best foot forward & I would not be a real happy guy with this bittersweet experence.
So even if it means making some notes on a napkin, it is stil a good idea to think about this now.
Best regards, Doug