HOW TO BUDGET YOUR GRAPHIC DESIGN BUSINESS BETTER
Running a graphic design business has its ups and downs. One month, you might have several big projects and payments coming in. The next month, you could have small jobs and very little cash flowing into the coffers. While a six-figure income is the dream, that doesn’t always happen, especially in the early days of starting your own enterprise. Budgets are a must if you want to make it through the lean times and spend your money wisely when you have it.
The average graphic designer makes about $50,370 per year, with about 20 percent of them self-employed. The annual salary of someone who owns their own design business varies greatly, and planning for the year ahead can be difficult. Budgeting your dollars carefully can mean the difference between success and failure.
Fortunately, there are several ways you can plan better and save money so your dollars stretch further. Here are seven ways to budget for your company in the coming year.
1. CUT EXPENSES
Before creating a budget, your first step should be to cut expenses as much as possible. Do you really need that monthly software subscription right now, or can you pause it until you must use it? Little things make a big difference in costs, such as adjusting the thermostat when you aren’t in your office and turning off lights. Instead of using a billing service, do the invoicing yourself — just make sure you stay on top of it to keep cash flowing in.
If you’re leasing an office, is there somewhere less expensive or perhaps some shared space that works just as well? Today, we live in a digital world, so reduce printing as much as possible. Invest in a printer that marks directly on boxes or packages and saves on the cost of labels, or at least buy ink in bulk.
2. TAKE A SALARY
Many small-business owners make the mistake of not taking a salary for themselves. In the early days of growing your business, it’s natural to want to invest everything back into it. While it is important to do so, if you don’t take a salary, you’ll soon experience personal financial struggle and burnout. Set aside a reasonable amount for your paycheck. It needs to be a livable wage, or you might as well get a job at the local fast-food burger place. Make sure you can comfortably pay yourself before you hire any other employees.
3. GET A SEPARATE ACCOUNT FOR TAXES
Many a business owner has gone about their year thinking they’re doing OK only to realize they didn’t pay enough estimated taxes. They’re then hit with a big tax bill and possibly penalties for not paying promptly. When you work for yourself, you have to pay what’s called self-employment taxes. When you work for a company, it covers a portion of your taxes. Now, you’re responsible for 100 percent. They will be slightly more than what is taken out of a paycheck from an employer. Consider your current tax rate and set that amount aside. Don’t forget state taxes, and be sure to pay both federal and state taxes quarterly to avoid penalties.
4. EXAMINE YOUR REVENUE
Once you’re in business for a year, you should have a pretty good idea of your typical revenue from month to month. Add up all your income streams for your business and subtract your fixed and variable expenses. Fixed expenses would be things such as rent, and variable would be things that change from month to month, such as your electric bill. Variables can be averaged for budgeting purposes.
This is a good time to consider if some of your clients take up more of your time than they’re worth from a financial standpoint. You own your own business and don’t have to work with anyone who demeans you, calls you all hours of the day and night, or in any way harms your business. Cut unprofitable relationships every six months to make room for better clients.
5. GET NEW QUOTES
At least once a year, get in touch with anyone you order supplies from, pay for service through or do business with and ask for a lower rate. This includes everything from internet service to insurance. You’d be surprised how savings add up when you do this consistently. You might only put back a few hundred dollars a year, but over the course of five or 10 years, you’ve saved thousands of dollars. When your business is new and struggling, those few extra dollars a month make a big impact.
6. CREATE A RAINY DAY FUND
No matter how well you plan, there will come a time when catastrophe strikes. It happens to every business — you lose your biggest client or someone fails to pay a big invoice. When money rolls in and things go well, set aside some of the surpluses into your rainy day fund. This allows you to get through the hard times with less stress and worry, which keeps you focused on your work.
Financial experts often advise that you have three to six months of personal expenses set aside. The three-to-six-month range is a good amount for a business as well. It allows you to get past rough spots without falling behind on your bills. If you have employees, you can pay them without losing skilled talent.
7. HIRE EMPLOYEES SLOWLY
As your business grows, you may feel overwhelmed with work and think about hiring full-time employees to take some of the pressure off. Proceed slowly, however, and consider all the costs of hiring staff. Not only do you have to pay their salary, but you’ll also have added costs such as insurance premiums, paid time off, training expenses, overtime and workers compensation. While there are many advantages to hiring a dedicated worker, make sure you fully understand everything involved before hiring someone. You can always use contract workers until you can afford employees.
REVAMP YOUR BUDGET FREQUENTLY
The budget that works for your business today likely won’t work tomorrow. Rework it every few months or so until your company is steady and stops ebbing and growing. You may miscalculate some costs in the beginning, so taking another look gives you a chance to make necessary changes. A budget gives you a plan and helps you stay on track even when you flounder a bit.