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How to Understand Your Finances and Build a Debt-Free Business

If you’re like me, you likely fell (or hurdled) into the creative world with no concrete plan to start a business. At the very beginning, your creative work lit you up inside, and for a while, it was enough for it to be a side hustle, or even an unpaid hobby. 

But then, things got more serious – and suddenly you were charging for your work, booking more clients, and transitioning to a full or part-time business! And somewhere in the middle of all of that, you probably realized that you would need to learn about things like “investments” and “bookkeeping” and taxes – AKA, the not-so-fun parts of running a creative business. 

Well my friend, getting to know the financial side of running a business allows us to do two things: make a living, and actually thrive while doing what we love.

So, here are 9 financial tips to help you understand your finances, and build a debt-free business!

Learn the difference between good debt vs. bad debt

Everyone feels a little differently when the word “debt” gets thrown into the mix. As business owners, the best thing we can do is educate ourselves about finances and debt in general! Understanding money and the concept of good debt versus bad debt is especially important. I’ve included some articles about different kinds of debt below!

Good Debt vs Bad Debt – Equifax | Good Debt vs Bad Debt – Schwab

Choose a low risk business (if possible)

Okay, but what business is actually low risk, right? 

Regardless of the type of business you choose, there will always be a certain amount of financial risk involved – that’s the beauty (and slight terror) of doing things for yourself! However, choosing a business that’s low risk in terms of upfront investment can be immensely helpful in limiting financial stress. 

While a service-based business like photography does require an initial gear investment, in the grand scheme of things, it won’t pose a huge risk in terms of upfront costs. In general, businesses without storefronts (i.e., ecommerce stores or online service businesses) tend to be a lower financial risk. 

Now, running a brick and mortar clothing boutique or opening a restaurant? Those are higher risk businesses. Of course, don’t let that risk limit you or completely alter your plan to chase your dreams. Just be aware of the level of risk in the type of business you want to run, so you can avoid those “oh no” moments down the road!

Run lean

Speaking of gear, a huge part of staying financially healthy and debt-free lies in only allowing yourself to buy what’s necessary to run a successful business. Consider what you really NEED to do the job!

As a photographer,  I need a camera, a couple of lenses and editing software in order to actually run my business. Sure, client management software, a marketing assistant or second shooter might be nice to have, but they aren’t vital to the actual operation of my business! 

Trust me, you can easily put yourself in a financial hole by having allll the nice things – but the truth is, you don’t need all of the gear, or even the best gear. The beautiful thing about being a business owner is that you can save up for those “nice to haves,” while operating your business inexpensively. Once you do invest in better gear or decide to outsource, your life will feel *that* much easier!

There will always be shinier, fancier things to buy, but a good rule of thumb is to practice maxing out your technical skills with your existing tools, resources and gear, before assessing what it is you really need for your business. 

I spent the first year of my photography business shooting with only one camera body, and one lens (Canon 5D Mark III and a Canon 24-70 f2.8 lens). After spending plenty of time getting to know my shooting style and existing gear, I invested in one additional lens that would help me shoot at a lower aperture to achieve softer backgrounds. I had determined that I really did need that extra lens, and it was worth every penny!

You’re a creative business owner – you don’t need much to be incredible at what you do. There will always be plenty of other things to invest your money in – run lean, and play it safe while you can! 

And just a quick note for fellow photographers: I use Borrow Lenses to try out any new gear before purchasing, which has been super helpful in allowing me to run a financially healthy business!

Build a healthy financial mindset

It’s so important to be in a good financial headspace before you start your business. As a new business, it’ll take a while for you to make significant income. You’ll also be paying for upfront necessities like website hosting, gear and supplies – so go easy on yourself, and don’t expect to be swimming in cash right away!

All good things take time. Like Mary Marantz says, “slow growth equals strong roots.” 

Next month, I’ll share a blog that covers all of the systems you might want to invest in. But just know that transitioning to those systems and resources can be done at your own pace. It’s more important that you stay in a healthy mindset, and add those things on when the time is right!

Keep separate bank accounts

One of the most important things you could ever do for your business’ financial health? Separate those bank accounts! 

Even if you’re a sole proprietor, it is nearly impossible to track your income and business expenses through a shared bank account. Open a different checking account for your business that accepts client payments, and pays for your business expenses! It’ll make your life infinitely easier when it comes time to categorize those expenses of yours, and gather documentation for taxes. 

And if you’re comfortable with it, opt for a separate business credit card, too! Just remember to stay away from that bad debt I mentioned earlier in the blog 😉

Keeping a separate bank account for your business is the only way you’ll be able to really get to know your numbers. By treating your business like an actual business, you’ll likely take it more seriously, too! 

Separating your bank accounts is also a great practice for later on in your business’ journey. You might decide to transition to an LLC or other structure, and you’ll be so glad you formed the right habits from the start!

Use credit cards sparingly

I recommend trying to use your business credit card like a debit card. Don’t put purchases on that card if you don’t have the money to pay it off right away! 

By doing so, you’ll be able to reap the benefits of a credit card (like cash back, miles, etc), without losing money longer through high interest. 

Understand financial software and basic statements

Implementing a solid software to track the money going in and out of your business can be hugely helpful to your overall financial health! I personally use Quickbooks. Regardless of the system or software you use, just make sure you understand how to use it to track your business’ profit and loss, so you know where you stand financially.

Above all else, don’t turn a blind eye to the monetary aspect of running a business! Sure, you might love what you do enough to even do some work for free… but you can’t improve your business and work if you don’t know what’s going wrong. You also can’t celebrate your wins if you’re not sure that you actually won!

Set Aside Money for Taxes

Never, ever, ever forget that you’re going to have to pay taxes on your income! If you think you’ll owe more than $1,000.00 at the end of the year, the government will want you to pay quarterly estimated taxes throughout the year. So, make sure to set money aside for those estimated tax payments!

Outsource financial tasks

If you’re not good with money, or don’t want to spend time on that portion of your business, consider hiring someone to help you with it! In the beginning of your business, you’ll likely be doing all of the financial work by yourself. But if it’s a huge pain point for you and the most important thing to get off of your plate, then outsource it! 

There are a multitude of ways to outsource financial tasks for your business – you might opt for simple bookkeeping assistance, or help filing your taxes. You might even want to outsource both! Thankfully, you’re the boss, and you get to make the decisions on when it’s time to seek extra help.

Running a small business might include its fair share of hurdles, but I think I speak for the both of us when I say that it’s worth it! Keep an eye out for the next part of this business blog series that talks about what systems I invested in early on in my business 💻

Missed the first post? Check out The 5 Best Decisions I’ve Made as a Creative Business Owner

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i'm sarah (she/her) , your new quirky, color-loving friend!

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My goal with every client is to cultivate a fun, creative, and approachable vibe. All types of people, all types of bodies, and all types of love are welcome here.

Color and creativity fuel my soul, and whimsical details make my heart happy! I believe in finding joy in the everyday, that real emotions are better than perfectly posed, and that building real connections with my clients is what allows me to create honest photos and capture genuine moments.

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