An Artist's Guide to Starting a Business|
|An overview of starting a business from your home; the legal and technical aspects, as well as practical hints and tips. |
|Getting started with a business can be rather overwhelming. For many artists, it's difficult to pin down a point when the gnawing need to create artwork actually becomes a profession. Someone innocently asks "How much would you charge for a picture?", and before you know it, you've sold some prints and painted up some commissions and you're thinking, "I could do this instead of flipping burgers or answering the phone for an insurance company!"|
Then there are hurdles, and you look with horror at schedule C of your tax form and realize you might need a business license, and you have to decide where to put the printer (and which one to buy), and your kids want to know when dinner is and you can't find the e-mail from an interested client. Hopefully, these tips will help smooth out your transition from a harmless hobby into the small business world.
Start with a plan. "I want to make art for a living" is not a plan. You need to figure out what it is exactly that you want to sell. Do you want to do freelance work for publishers? Do you want to take personal commissions? Do you want to sell mousepads and t-shirts with your images on them? Do you want to sell originals?
Decide what kind of income you need and desire, and sit down and figure out how many commissions you would have to turn out at what prices, how many prints you would have to sell and how much it will cost you to maintain the infrastructure to do these things.
For example, if you need to be making $1500 a month to pay off your student loans, rent and utilities, and you figure you can make a $10/per print profit, you need to be selling 150 prints a month, or doing 3 commissions with a profit of $500 each. Naturally, you'll actually be doing some combination of these sales, and probably also taking odd illustrating jobs for a few bucks apiece. Having concrete numbers of the quotas that you would have to meet is very valuable in understanding the monetary importance of each kind of product or service, and for choosing where to invest your time and money.
Make a schedule and stick to it. Kids, pets, husbands and other distractions must be planned for. There are always piddly little details to be taken care of, like back e-mails, filing, finances, letters of inquiry to publishers and/or advertisers, and the all-important art creation itself. Make sure you are working regularly at all of these things, spreading out your workload and prioritizing wisely, and be sure to take into account your own personal time when you are laying out your schedule. You'll go crazy without it, and it's better to schedule a day off once in a while than to take an unexpected month off trying out the fit of a straitjacket.
Licenses and Taxes
It has been said that the only sure things in life are death and the fact that your government wants your money. The specifics in this category are going to depend on what country you live in, and what the local restrictions are, but you can count on having to pay for licenses and taxes.
Licenses: Nearly every country requires that you register for a license to conduct business, and they're going to charge you for that privilege. In the US, that licensure is done on a statewide basis, and the license must be renewed every one or two years. In Alaska, I now pay $200 per year for the right to stay in business.
When do you need a license? This, again, varies per locale. Alaska regulations require a license when business is 'regular,' including seasonal. If you only sell an original or two a year, you probably don't need a license. If you have tables at craft fairs every Christmas, have regular eBay auctions and sell prints through your webpage a few times a month, chances are good that you will need a license. Read your local regulations carefully to determine when you need to start filling out this paperwork.
Taxes: There are two kinds of taxes to be dealt with, sales and income. Sales tax is something that you will add to your product price, or code into your shopping cart in some manner. Sales tax may be levied at a city, regional (state or territory) or countrywide level. Check your exact requirements, but most local taxes are collected and then paid yearly.
Income tax is what you pay on your business profits. Here in the US, you can incorporate your business, which means that it is treated as a separate citizen and pays its own taxes. As a sole proprietorship (which is how most business will begin), your business is considered an extension of yourself. Sadly, you will be taxed twice: first on any profits that your business makes before paying yourself, and secondly on the 'wages'* that you pay yourself from those profits (self-employment tax). Look carefully at what you will be taxed before you start putting price tags on your work. Sometimes it is worth carrying a part-time job simply to take care of employment taxes. It is specifically spelled out in the US tax booklets at what monetary value you must start declaring business income and when you must begin paying self-employment. You do not declare your local (state or city) taxes as expenses when figuring federal income taxes, nor do you count taxes collected as income.
When Do You Need a Contract?
The quick and dirty answer to this question is that you probably already have a contract. A contract is very simply any agreement that fills four requirements: that the agreement is not unlawful, that the agreement is entered into by people who are authorized to make such an agreement, that the agreement is understood by both parties, and that it is explicitly agreed to by both parties.
There is generally no need for signatures, social security numbers or DNA tests. An e-mail discussion about the details of a transaction is often the only contract you need, so don't be careless with your e-mail filing! Do note that, in the US, it is required that agreements of a monetary value over $500 be documented on paper (this falls into the 'not unlawful' category).
The only real advantage to having a signed document is in the case of an actual court battle; having physical evidence can hold decided weight over what can otherwise be merely a he-said/she-said disagreement. Your decision to have a contract for a transaction is dependent on your trust. If you trust your client or publisher, etc, there is no need for a hard-copy, signed document. If you prefer to play it safe, draft up a simple statement of all of the terms, make sure that it states the four above-mentioned components that make it a contract, and have them sign it for you. A good middle ground is to send a single e-mail that states all of the terms of the agreement and ask that your client reply with all of the text included in their return message and a specific 'I accept these terms' statement. This is an excellent compromise when involved in a project where time is of the essense or when dealing with people overseas. Remember that your terms include when and how payment is to be transferred, not just what it is.
Your filing system is your best friend. I'm giving this subject a whole section of its own because it's that important.
Computer Files: Computer folders are free, easy to manipulate, and take up basically no space on your hard drive. Use them. You want to be able to find things again, so use a system that makes sense to you. In my case, my business has three branches: retail, printing services, and freelance art. Those are my first three folders in my business directory. Beneath these folders, I have them subdivided into product types (for retail) or clients, and below product types (in retail), into the artists who work for me. Files that you have a lot of versions of (in the case of revisions to digital art, for example) may deserve their own subfolders, simply to save the clutter in the parent directory. You should be able to look at the contents of a folder and easily find what you are looking for. Name your files logically, and file them in the correct place immediately. I find it useful to maintain a 'portfolio' folder as well. When I produce work that I think is exceptionally good, I place a flattened, finished .tif version of it into this folder. Any time that I am suddenly asked for a portfolio CD, I can easily burn a copy of select contents of that folder without having to search through many, many directories to find my best work. You can even maintain subfolders of 'available work' in case you are ever asked to provide spot illustrations on an impossibly tight deadline.
NOTE: If you are using Microsoft Windows, do not ever store important files on your Desktop, or in the My Documents folder under the Desktop. If Windows develops a bug and has to be reinstalled, these files can (and usually will) be lost. Files in folders that are not related to Windows can be restored or recovered far more easily. Set up your folder directory directly on your C: drive. Back it up frequently. CDs and DVDs are more reliable archive methods than tape drives, zip drives or floppies, all of which rely on magnetic memory.
E-mail: These days, most long-distance business correspondence is via e-mail. Important business contacts, details of commission agreements, queries about the products you carry and all the other general chitchat shouldn't be stored in your Inbox and Sentbox in a great unorganized mess. I tried this, it really doesn't work once you have more than one customer. Use the same kind of folder organization system as described for your computer files, and you'll be able to locate that important e-mail far more easily than flipping through pages of general correspondence. It is useful to store the answers to the e-mails right along with the original e-mails so you have a record that you replied. If you have a great deal of correspondence with a single individual, make them their own folder. I often break an e-mail to a single person into two parts if the correspondence should be filed in different locations (for example, if I'm talking to an artist about their work at EMG and discussing a printing service project for them).
Hardcopy Files: Some documents will be hardcopies, like purchase receipts and signed contracts. Some people also deal better with something they can touch and sort by hand, and prefer to file hardcopies of e-mail correspondence to looking for them on a computer. Whatever your personal balance between hardcopy and electronic, you'll need some amount of filing space. Invest in a filing cabinet or start with a filing box, and buy a lot of folders. Some suggested categories include: places to advertise, publishers, receipts (have a folder for every year), tax documentation, contracts, clients (particularly if you have return clients), orders and art.
Selecting a printer, scanner and other production equipment is a subject complex enough for its own article. In general, you need to make decisions about what you want to sell, do some research to find the best way to do so, and make informed decisions. The quality of these items depends on your intended use. If you want to be hands-on and create your own prints, you should consider purchasing a top-of-the-line 6- or 7-color, archival printer. If you prefer to job-out your printing, perhaps a cheaper (and less touchy) 4-color option would suit you fine for printing letters and medium quality proofs. If you scan in sketches and color over them digitally, you probably need a less hefty scanner than if you wish to scan in painted originals to reproduce as large prints. If you do a lot of digital work, you'll want a good quality digital tablet.
Once you've decided what you'll be selling, you'll need the space to make it. Whether this is room for your easel, space for a printer and scanner, or an area for a heat press and more, be sure that this is dedicated space that won't be taken over by children or nightly dinner preparations. Be sure you have a filing cabinet for the paperwork you will generate, and a safe, airtight way to store good paper and ink supplies.
In Case of Disaster...
Plan for the worst. If a fire wipes out your home, is your business equally wiped from the planet? Make regular backups of everything on your computer and store a copy away from your primary dwelling. Even having a one-year-old CD of the most important files at a friend's house or in a bank lock-box is better than starting from scratch with all of your art and business contacts. Insure your home office, and be sure you take into account the value of the information on your computer.
It is advisable never to store things that can be damaged by water on the floor, particularly in flood-prone areas and on first floors, but also anywhere you have plumbing or possible roof leaks. Heat, light and air can often be damaging to paper and ink, so be sure your storage method is conducive to protecting your supplies as well as storing them.
Don't ever rely 100% on your web host or any of your commerce services. If you have important files or a complex website, back it up regularly and store a copy either on your own computer and/or on a disc. Likewise, download relevant order and payment information from your money handlers like PayPal or your credit card proxy company monthly.
Don't think of this as a throw-away category. Without customers, your business is just another pretty webpage and that printer is only a $500 paperweight with an expensive drinking habit.
Pretend everyone you meet is a customer. Unless you are working under an obscure pseudonym, you are representing your business with your every action. Behave in a reserved, professional manner on every message board, in every chat room and in every e-mail. On the Internet in particular, the more popular you become, the more closely your every personal action becomes scrutinized and judged.
Prioritize all of your communication and deal with it promptly and courteously. Use your spell-check if you have sloppy spelling habits, and avoid cute-isms and slang. Your customer generally knows you only through your specific interaction with them, and you should always maintain a professional, up-front and friendly attitude. Don't avoid the person with that overdue commission, or blow off that query about an order because you already mailed it. Even a quick note that something has come up will set someone's mind to rest and make you shine. Customers will come back if they are treated well, and return business can be a massive part of an artists' income.
A Side-Dish of Business
Not everyone is cut out to keep meticulous records, stay on top of orders, do art to order, deal with demanding customers or maintain and run their own equipment. Running a business is hard work! What's more, art and art products are luxury goods in a fluctuating, competitive market economy.
There are a host of halfway options for you if the idea of a full-fledged, in-house business being your entire income is daunting. There are many businesses that specialize in printing, if you prefer not to have the hands-on approach, and many even offer fully automated shopping carts and storefront services. You can choose the level of involvement that you want with your customers, from absolutely no involvement for low risk and lesser profit, to dealing with every detail for much greater profits and appropriately greater risk. There are benefits and drawbacks to both, and it is a market that can be eased into.
The most common advice you'll find seasoned artists giving to new faces is: don't quit the day job. It takes time for a store to gather steam and an artist to get a name and gathering of fans. One highly suggested way to start is to keep (or get) your part-time job and develop a feeling for how many people are interested in your work with one of the lower risk, less time- and money-consuming options. You can ditch the day job and move into a higher profit niche once you've got some comfort in the idea and have some experience under your belt in dealing with some of the gritty little business details that can be so intimidating as a new business owner. There's also nothing that says you can't maintain more than one kind of storefront, if you find that each has its own unique advantages.
Breaking into the business world isn't impossible or even terribly difficult, but it can be intimidating, and it can help to have a little bit of guidance. I've found that artists are remarkably helpful peers; very few are jealous of their business secrets, and many are more than willing to answer questions and help others out. Being part of an active art community can be as valuable as reading a hundred articles on the subject. Don't be afraid to ask questions for fear of looking foolish; nearly everything I've learned, I've learned by doing the wrong way first, and I, like most artists, am happy to save someone else the trouble of making the mistakes I've already made.
Be meticulous in your bookkeeping, be courteous and professional in your correspondence and have fun with your art. May you find success and fulfillment in the field of your choice!
*It is important to realize that as a sole proprieter, you do not technically get wages. The profit a business pulls in is considered income, and you make personal draws on that income. The money you withdraw for yourself is not a business expense. You are never your own employer, and the money you make is business income, not wages.
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