I’m never going to be one of those people/companies that publishes a monthly income report. Both because I feel like it would be really dull… (I spent the same $5-$50 dollars per product on all the same products that I spent last month!) And because I feel like a lot of income reports don’t feel very relevant to other people.
Our businesses are different and our expenses and income will differ wildly. But beyond that, even if you happen to be another graphic designer, your idea of a profitable month will vary wildly from mine. If you make tens of thousands of dollars a month, you won’t be able to empathize with my penny pinching for $15/monthly subscription services. If you’re struggling to get up to $1,000/month, you’ll think my networking group expenses of over $500/year seem excessive.
That being said, I don’t think money should be the taboo topic that it is. There’s very little to be gained by keeping the subject hush hush and not educating ourselves properly about money. I also enjoy social experimentation, which means I’m the one at parties who will deliberately bring up an awkward topic to see how people react.
I remember asking a friend how much money she spent on a new (sporty) car. Another friend jumped in with an appalled, “That’s so rude!” But sports car friend didn’t mind, answered my question, and I gained a better feel for vehicle costs. This was good for me because at the time I’d never purchased a new car and had no concept of the relative costs of a flashy new car vs the used, economy version.
To bring this back around to business finances, I often wonder what other people’s financial goals are, what they need to live on, how much they spend, and what kind of return they get on those products. I also wonder if I’m underselling myself and if I’m trying to restrict myself to an unnecessarily tight budget.
The Story Behind My Price Hike
In 2017 I’ve already raised my prices from $30/hour to $60/hour. This was not a decision I made lightly. I agonized over it. I was reluctant to do it. Scared.
But two people in similar creative fields had urged me to do it and I trusted and respected their opinions. So up the prices went!
The first two calls with potential clients ended in haggling and eventually losing those projects. I started to get nervous. And then… life and business continued on. No one since has blinked an eye at my new prices and I’ve been working nonstop for the last couple months. Several people have told me to continue to raise prices, to which I said, “I’m not ready yet.”
It’s uncomfortable to raise prices. To demand more for your time and to announce to the world, “I have value!” I’m glad I did it and business is better than before (for several reasons) but I also want to sit at my current level and get comfortable with it before I continue up that incline.
How Raising Prices Improved My Customer Relations
Seems counter-intuitive, I know. Landing and retaining MORE clients was the last thing I expected. But I have a couple of theories on how raising prices benefited my clients.
- I can spend more time talking to my clients and on other customer service related non-revenue-generating activities because my new prices cover that time. No more “wham, bam, thank you ma’am” mentality.
- Charging appropriately gives the perception that I have confidence in my own abilities. Pricing doesn’t always accurately affect quality, but it does (and should) often enough that if your prices are too low, people will wonder why.
- I appreciate my clients more. I’ve always appreciated my clients but in the past, it was easy to feel resentful if someone took up too much time because my pricing simply didn’t cover any extra time for revisions or communication. I also had more clients who were looking for a deal rather than looking for quality work. So there was a lack of appreciation all around.
Walmart is amazing and serves a definite need. But no one wants to be the Walmart of their field. (For more on that topic see my post on Fiverr and other bargain businesses.)
Profit and Loss
So you’d think I’d be super profitable now that I’ve essentially doubled my prices. But it’s been a weird year. 2016 was the first year where I cut my full-time job down to 2 days a week to dedicate more time to building my business. The first half of the year was record-breaking (for me) and I brought in between $1K and $2K each month. Not bad for a “part-time” gig.
In August business died. I hadn’t diversified my revenue streams so when the work from my 2 primary clients dried up, I had nothing else to fill that gap. I also had no idea how to go about marketing or finding new clients and so the second half of the year was more dedicated to learning about business and networking.
Long story short, I’ve learned a TON since that little debacle and this year I have a good mix of new and old clients. (For me networking and building a referral network has been the most effective but I know a lot of people who do really well through social media. Either way, you need SOMETHING.) So when I checked out my P&L, I was expecting to see better numbers than the previous year.
But I’d forgotten that I had a baby a mere 7 months ago. So my averages were a little low because the first 2-3 months of the year were more focused on the learning curve of working from home with an infant. According to my accounting software, I was making an average of $600/month and I was spending $400 of it.
I don’t know about you, but I can’t live on $200/month. Even with a part-time job. I actually need to recalculate this, but I’ll be honest, I’m waiting for several current large invoices to be sent and/or paid because I want to see the more accurate (and flattering!) numbers.
What I Spend My Money On
According to my P&L, I’m spending 2/3 of my income. At first glance that seems ridiculous, but after breaking it down with the help of my awesome VA, I know where that money is going.
The biggest expense? Taxes. And that’s a huge, huge expense that my previous pricing didn’t factor in at all. 1/3 of my income goes to taxes now that I’m married (vs the 1/5 when it was just my own, more modest salary).
Outside of that, I’ve spent quite a bit on design software (Adobe CC is $50/month) and networking groups (another $50/month). I’ve purchased things I later regret (join.me premium which was $18/month when I could have used zoom for free) and I learned that monthly payment plans aren’t a bad idea to at least try something out before committing to an annual plan that will “save” you money.
Quick confession here: I’m actually floating a balance on my business credit card at this moment. I hate having that debt, but I don’t regret my purchase (a laptop) and I use it every day. I will feel much more comfortable when my current invoices come in and I can pay that card off. Credit card interest is NOT what I want to spend my money on.
Things I do think are worth the expense:
- Trello Gold (I use this for tasks, project management, business organization, and on and on)
- Freshbooks (Time tracking AND invoicing in the same place! But Wave is a great option, too, if you want free invoicing.)
- Networking events and coffee dates (anywhere from $50 to the cost of a cup of coffee)
- Networking groups (BUT with the caveat that you have to find the right ones – I won’t be renewing all my memberships)
- Buffer (or any social media scheduler!)
Things that haven’t returned my investment:
- Paid ads (I tried Facebook and Google and probably won’t use them again without hiring someone or taking a few classes on how to use these tools effectively)
- Zapier (SUCH a cool idea! But ultimately IFTTT is free and I really just don’t have that many tasks I can truly automate.)
- Feedly (I don’t know what I expected, honestly)
Design-specific things I spend money on:
- Stock photos
- Microsoft Office (I pay $7 for one month at a time whenever a client needs a specific thing and I don’t renew until the next Office-based project)
In addition to learning that paying month-to-month, while more expensive in the short run, is actually a smart idea for trying something out, I’ve also developed a definite preference for services that offer a freemium model. It’s a lot like the concept of content-marketing. They provide a sampling of their services for free and then if and when you want to take advantage of additional features, you can start to pay for it. It saves me from regret a month or two later if and when I realize a certain service isn’t actually that helpful.
My Finance Goals
While it’s possible that I’ll find more ways to spend my business income as I make more of it (I have started hiring people to delegate work to and I sometimes daydream about going to business conferences), I don’t anticipate my expenses increasing THAT much. So my goal is based on my current expenses, taxes, and the lifestyle I’d like to be able to afford.
When I mathed this out, I got about $5,000 as the amount I should be making per month. This seems like a lot to me! Wildly ambitious even. But it does include the income from my part-time job, which drops the amount my business needs to make down to $3,500, which seems more doable.
I’ve been struggling to keep up at my current level of $1,000 or so per month, but a big part of that was trying to “do it all” and be a stay at home mom while also running a business. That is exhausting and stressful and after some long heart-to-hearts with my husband, we decided it wasn’t sustainable or contributing to anyone’s happiness.
So now that baby is safely ensconced in daycare and I have reliable work hours (that don’t involve staying awake all night!) I’ve got a few plans to make this happen.
- Networking, always networking
- Make more effective use of my “funnel” (I set this up and it technically runs about once a month but I don’t promote it at all)
- Monthly promos (see above)
- Expand my offerings (I’m planning on partnering with a few different people to hopefully start offering SEO, PPC, and reputation management!)
Are you still with me? I’m impressed. Want to talk more about business finances? Shoot me an email at email@example.com. I’m always happy to talk shop!