Do you know how to make good money as a designer? To run a successful (and profitable) design business, you need to have better finance habits. If you have good money habits from the get-go, you’ll find it easier to grow your business year upon year.
Here are 9 finance habits you need to master in your design business.
1. Know your true costs.
This is one of the most important finance habits you need to start doing today. To work out your true costs, start with your overheads. You’ll need to include rent, electricity, software, hardware, insurance, furniture, accountant’s fees, advertising costs etc – the whole shebang – to get an honest reflection on your true costs. Use this handbook to help you work out your true costs.
2. Understand that ‘profit’ is not a dirty word.
You’re in business to make money. You’re not meant to be doing favours all the time, feeling guilty for increasing your rates, or doing spec work. Start putting profit as your no.1 priority. You’re running a business, after all. It’s time to start treating yourself like the business.
3. Time is money.
Remember, time is money. Nothing is free. If you spend time doing something for your business, that time doesn’t come ‘free’.
4. ‘You give me the money, I’ll give you the creative.’
To get into better finance habits, you need to think about the contract you send to clients. This contract has been very popular, speaking directly to creatives who work with clients. It’s true – you don’t put pixel to design until you have the dough in the bank.
5. Determine your desired profit margins.
Are you looking at 30% or 50%, or something in between? As a base rule, it’s good to aim for 30-40% profit margin on most jobs to allow for the overs and the unders. This way, when all is said and done, you’ll have a profit that’s far better than the web industry average of just 5.5% profit margin.
6. Track all profitability on every project.
You can do this with a CRM software to make it easier, like Harvest, Asana, Wrike, or Streamtime. You can track your time, and time for any staff members, and work out how much profit each project brings in.
7. Find a savvy accountant and hire an organised bookkeeper.
When it comes to finance, a bookkeeper can help get your accounts in order (including tracking expenses, invoicing, and chasing up payments), and your accountant can help you wade through deductions and tax requirements. You’ll be amazed how they can transform your business (and your stress levels)!
8. Be aware of what’s being invoiced, daily.
Make sure you send out the invoice as soon as the client signs the contract, and keep an eye out on what’s being invoiced and paid. Make it routine to check your bank account daily to see incomings and outgoings so you don’t miss a beat.
9. Monitor your cash flow.
Cash flow will make or break your business. It really is king. You need to know what’s coming in and outgoing so you’re never short on cash. So ensure you or your bookkeeper generate daily reports so you’re always on top of your cash status. You can also use QuickBooks accounting solutions to quote, invoice and even get paid twice as fast, in the one system, so you can rest easy knowing the cash is coming in.
We’ve trialled different revenue models over the past nine years and found the right ones that sees us to six figures in recurring revenue every month.
If you would like to know how we did it, and how you can do it too, check out our Foxley Cuts masterclass on recurring revenue here.