Like it or not, a side effect of being a freelance photographer is becoming a small business owner. You are the star talent and the housekeeper/janitor. You’re the sales force and the accountant. With the right habits, choices you make for your emotional fulfillment, can translate into the reality of operating a profitable and sustainable business.

Controlling expenses and developing better savings habits is an important concept as you set financial goals. Most of us know we should be saving more money, whether it is for retirement, college expenses or simply for an emergency fund. So it’s ironic that business owners frequently pay themselves too little or sometimes, nothing at all – preferring instead to put their earnings back into their businesses. You’re the one taking the biggest risk if the business should fail. To be successful in accomplishing financial goals, you need to keep in mind an important business mantra: pay yourself first.

As your own Chief Financial Officer (CFO),

Successful businesses accumulate wealth by creating more assets than liabilities.
Utilize two basic tools:

The net worth statement is simply a list of your assets minus your liabilities. To clarify, your Hasselbad ™ may be an asset, but the “practice portrait” of your neighbor probably is not. Think of your income statement as a tank, where water flows in <<<<< and out >>>>>>. Be mindful of making adjustments to the amount flowing out so that there’s always an ample amount remaining in the tank.

Some professional photographers have a tough time determining what their compensation should be. Determining how much to pay yourself can be emotional. Cash flow of many businesses is unpredictable – especially during the early stages. You may want to consider relying on bonuses rather than a regular salary for much of your compensation. By doing so, you can determine when and how much the business can afford to pay you. Bonuses may come once or several times a year depending on your needs and the business’s performance. It is OK to seek out additional sources of income, if your enterprise is not generating enough cash yet.

Try this exercise of creating an income statement: On the left side of a sheet of paper, total up monthly incoming cash flow sources such as wages, investment income, and bonuses. On the right side, track your expenses for a typical month, writing down every dollar spent. Include all the regular payments you make each month, such as mortgage or rent, education, utilities, groceries, gasoline, and day care expenses. Assign a monetary value to the time you devote to non artistic business activities. Don’t forget about ongoing expenses that aren’t as obvious, such as taxes, insurance premiums and home repair expenses. If you have a bill you pay several times a year, factor that into your calculation.

Try this exercise of creating an income statement: