Financial Considerations for Creative Business Owners: 3 Smart Tips for a Solid Foundation

Financial concerns are common for many businesses, with 82% of business failures chalked up to poor cash flow management, according to a U.S. Bank study cited by the nonprofit organization SCORE. For those who own a creative business, finances can often take a backseat when the focus is on creative endeavors, which can quickly result in issues before one even realizes. From the power of a simple budget to legal structure (and even how a diversified income can make a difference), here are just a few tips that can help solidify your business from a financial standpoint.

The importance of a comprehensive budget

A budget is a must for any business owner, though arguably even more so for creatives. This is primarily due to the never ending need for supplies, coupled with the nature of irregular income that artists often face. For those who are new to the business realm, there are several aspects of a well-kept budget that can impact the financial side of things. For starters, a comprehensive budget can serve as the foundation for good financial practices in the long run, as well as provide a comprehensive look at the business as a whole. One Forbes article points out that a budget will enable a small business owner to meet financial goals, observe business objectives, track and manage debt, and prepare for emergencies accordingly.

When the goal is to create a well thought out budget, one LinkedIn article from Officeheads points out several worthy elements to include. Categorized expenses (project costs, marketing, operational costs, etc.) are just one recommendation that can help provide a clear perspective of where money is going, and where unnecessary expenses can be cut. Other tips include the creation of realistic financial goals, as well as a cash flow forecast. Furthermore, it’s advised to regularly review your budget from time to time, which will help make adjustments based on the fluctuation of sales and expenses. This is particularly important for creative business owners, as sales can vary widely from month to month and based on season — Christmastime, for instance, can often present a few months of high sales; these numbers, however, aren’t likely to carry over into January. 

The advantages of a registered agent 

While a business structure can seem like just another part of the paperwork, it’s crucial to keep in mind that this choice can have an impact on your finances as an individual and as a creative business owner. Nerdwallet simplifies the matter, noting that there are several common models to choose from: among them include a sole proprietorship, partnership, limited liability company (LLC), to name a few. While a sole proprietorship is noted to be the simplest of structures out there, there are benefits in the consideration of others depending on your specific situation. The formation of an LLC can prove to be a beneficial selection for some creative business owners, as this structure works to proactively limit owners from personal liability. As the nature of creative businesses can leave one open to certain vulnerabilities (like a lawsuit from a client that alleges breach of contract), the protection of personal assets can be a smart move. In addition to potential lawsuits, an LLC structure can be beneficial in the event that debt arises, too. 

To simplify the process and the paperwork involved, many who form an LLC often choose to hire a registered agent, which is an official point of contact that is able to receive important documents on a business owner’s behalf, like a legal document or state paperwork. In addition to advantages such as privacy, this will guarantee that you receive valuable documents and information on time and securely. An official point of contact for such documents also brings peace of mind for new business owners, as everything is properly handled in a timely manner. Typically, official registered agent services often include the handling of state paperwork, as well as supply a digital mailbox for legal documents that are received. For those who choose to form an LLC and wish to enlist the help of a registered agent, here’s a promo code that can help you get started. 

Diversifying your income for additional opportunities

Beyond a budget, it’s crucial to consider diversity in your finances, which can help greatly in the event of dry spells throughout the fiscal year. Thankfully, there are a number of avenues that artists can pursue online — selling mini prints or digital art (like stickers or ebook covers) are just two ideas that can help an artist diversify their income throughout the year, though the options don’t end there. Many artists have found success by posting YouTube videos online, where videos can reach a global audience. Creative tutorials on YouTube, for example, can become a weekly routine that can eventually lead to passive income. Aside from the YouTube Partner Program (YPP), which provides creators with the chance to monetize their videos via ads, a Forbes article by Kristen Bousquet outlines several tips for how to make money on YouTube as a creator. Sponsored content is a primary strategy for many, which can provide artists with the chance to connect with brands that align with their content. For example, you may wish to partner with an art supply brand, and use the products in a tutorial. 

The financial nuances of a creative business can be a challenge to grapple with, especially for those who have just begun their business endeavors. From the importance of a well-kept budget to how a diversified income can provide a wealth of advantages, there are a variety of financial opportunities that creative business owners can (and should) take advantage of.