Running your own design business and being your own boss should be fun. And it is! It’s great to have full creative control over your designs (well except for those pesky clients with their opinions, lol).
Yep, it’s great living like a boss, not to mention if you want to go home early… you can! Geez it’s so much fun, what on earth could go wrong?
Well… unfortunately all this fun and freedom has a cost. And the cost is: responsibility. And your biggest (and most painful) responsibility is the money, right?
Your finances don’t have to be the worst part of being a boss and I’ll show you why.
It’s not as hard as you fear. Take it from me, the least-mathmatical person I know, once you’ve mastered a few key concepts and you have a smart financial plan, being a boss becomes a breeze… well almost!
Let’s look at the top 5 financial sins that almost all graphic designers make… and some simple solutions to make your life that bit easier.
(BTW I’ll be impressed if you’re not making any of them!)
1. Not knowing the true cost of your design services.
On the surface, charging for your services should be a simple process… in theory right? You figure out how much you think your time is worth per hour, and charge for the amount of time you work.
Simple right? Not so quick!
“Design work can, and often will, take longer than you estimate.”
[Click to tweet]
In addition to that, do you REALLY know how much your time is worth?
Are you taking into account absolutely every aspect of your business? I know that when I started I didn’t, and I quickly realised that I wasn’t…. and I ended up with small (to utterly NO) profit margins on many jobs.
Some simple solutions:
- Make sure you add extra hours to all jobs. Estimate how many hours you think this design task will take you, and add a good 20% on top of it! Just in case jobs run over.
- Calculate your TRUE hourly rate. If you have multiple designers / developers / etc working for you, you need to take this into account.As part of your ‘true’ costs, you should also take into account your utility costs (after all electricity isn’t free!) and then add your profit margin on top. Don’t ever under sell yourself… you’ll only hate yourself when you spending 20 extra hours on a job with no profit at the end of it.
2. Cutting costs rather than driving revenue.
When looking at how they can improve their profitability, many design businesses may be tempted to cut costs. However, the danger is that it’s a false saving, and you could be in danger of cutting out the legs from underneath your own business.
What a lot of designers often overlook, is that instead of cutting costs, it can often be a better use of time to find out how you can stimulate more business from the money you are spending.
So for example, a design professional who runs their own business should look at:
- The number of clients they have.
- The number of times these customers use your services.
- The average amount you make from each client.
Once you understand the above drivers to your business, you can begin to create small tactics to help increase your income.
So some general habits you might want to get into include:
- Following up with your previous clients to see if they have any other new design jobs they need help with.
- Ask your clients if they have any friends who are looking for a designer, or even refer you to their friends, in case they need a designer.
- When creating a quote for a client, offer them add-on services (new logos, email templates, banners etc) so that you can maximise the amount of work you get from them. The old “would you like fries with that?” theory.
Long story short, before cutting costs, you should look at your strategies in place as to how to increase your business, because once you start cutting costs, you will likely find you will have to continue cutting costs to survive… and that can lead to a downward spiral from which there is no escape.
3. If you fail to plan, you are planning to fail!
There are many design businesses out there who go from month to month, not truly knowing their expenditures and incomes, and as a result are unaware if they’re doing better (or more dangerously, worse) from month to month.
It is VITAL that you develop a working understanding of your financial incomings and outgoings. Otherwise, you might be running your business into the ground and not actually be aware of it!!!
Seriously, don’t rely on guess work. Instead, every month, make the time to note down:
- Your sales income.
- Your costs.
In addition, you should do the above, for each major design service you supply. This way you can identify which services are making you money, and which need to be improved upon.
4. Make sure you know your exact figures.
Ultimately it’s easy to quickly write up some figures from the top of your head and say “yep, that’s my outgoings and incomings.”
No. Because even the best of us will make mistakes. You should always know:
- The EXACT amount of money you’ve spent this month.
- The EXACT amount of money you’ve made this month.
- The EXACT amount of money your business has at the end of the month.
- What money you’re EXPECTING next month.
- What outgoings you are EXPECTING next month.
Unfortunately I know lots of designers who forget their key costs, who think they have enough to cover it all, then they check their bank balance to find that the money they thought was in there… well… wasn’t.
“Once you’ve made your first BIG financial mistake, once you’ve really suffered from lazy guesstimating you’ll never do it again.
But…wouldn’t you prefer to avoid the pain in the first place? “
Likewise, if you map out what you’re EXPECTING to come in next month, then you’ll know if you’re making enough to cover your outgoings… or if you’ll need to push extra hard to earn what you need.
These little financial health checks can help you stay in the black… where you deserve to be!
5. Remember to get your money into your actual hands!
What’s the point of doing all this work, if you don’t get the money you are due?
When you move forward with design work for a client, it’s important to lay out with your client exactly how much you will be charging them, and more importantly, WHEN you’re expecting payment to be made.
Personally, if a project value is less than $2,000, I always aim to get all monies upfront, but if you want to, you can setup a payment schedule like this:
- 50% upfront as a deposit.
- 25% once initial designs are complete.
- 25% at the end of the job.
One thing I must stress is that you should NEVER start any work whatsoever without having a paid deposit from the client IN YOUR BANK.
If I had a dollar every time I’ve heard of a designer who had done free design drafts before they had received money, I would be one very rich lady! Often this can lead to heartbreak, so make sure you get some sort of deposit that covers your initial work every time.
So once you’ve laid out the terms, make a note to chase the client when money is due. And when the client says that they’ve paid, actually CHECK your bank account and make sure the money has landed.
DO NOT continue your work until the money is actually in your hands. Trust me, I’ve done enough “free” work to know that it only leads to heartbreak when you do work before you receive your money.
Got any tales of financial hardship you want to share with us?
Continue to enjoy your business, just remember to be responsible with your money. I wouldn’t want you feel fed up with your business due to a financial mishap.
Have you ever had any financial mishaps or hardships that have made you want to throw your hands up in the air and almost quit? Let us know below!
All the best!
What do you think? Share your comments below.