Small Business Tips for Success Finances

Once you set yourself up as a legal business entity, the next thing you need to do is open up a business bank account. By extension, you will probably want to get a business credit card with some perks like money back, flight miles, and so on.

Once these are setup, all business purchases should be made with them. This creates separation between your personal assets and business assets, and is critically important if you were ever audited.

Any time we need to spend our hard earned money, we do a lot of research to make sure we are actually going to get some benefit. Marketing costs are normal and associated with any business. Some areas where we have spent money on marketing include:

We keep our marketing costs low by doing some things ourselves – such as graphic design work. The exchange here is our time, but we like to have control over things like this when it’s possible.

Paying taxes is one of the funnest parts of owning a business. If we could avoid this, we absolutely would. Unfortunately, it’s not possible. As your business grows, you become liable for even more tax payments, and the government will be awaiting its payment 

For most businesses, you will need to pay your taxes on a quarterly basis. In the US, this will cover both state sales tax and federal income tax.

A certified public accountant (CPA) can really help spare you from financial headaches. An accountant can be used to literally maintain your books throughout the year, or just at the start of the year to file your taxes.

In between, meeting with an accountant, much like a lawyer, will help to give you guidance on how to approach certain things.

Currently, we use a CPA to file our personal and business taxes. It’s just something we’re not comfortable to do by ourselves, so we pay someone professional to do it!

Need help finding a CPA? Use CPA Finder.

Business insurance is what will help cover your costs if you damage equipment or do something that would lead to you being sued. There are two main forms of business insurance you can (and should) buy:

General Liability Insurance. This covers most things you will definitely want covered such as damage to most of your equipment, personal injuries (of you or your employees), damage to property, etc. small-business-tip-insurance

Professional Liability Insurance. This type of insurance is geared towards providing protections to you in case you were sued. It can cover your lawyer fees and, in the event you are found guilty, can pay out what is owed instead of you having to pay from your actual money. The big stipulation here is that, normally, professional liability insurance won’t cover you if you do something illegal intentionally. For example, you intentionally mislead a client (ie: commit fraud) and they sue you. It is good to have in place, though, in case something was ever done unintentionally or in the event someone just wanted to sue you for the fun of it.small-business-tip-2-insurance

While there are many insurance providers, and you should absolutely check rates between them, we recommend Hiscox Insurance. It’s what we’ve used from the start, and we’ve never had an issue.

One of the easiest tax credits to take advantage of is the deduction of your mileage. If you do any driving for your business, you can write this off on your taxes.

As professional photographers, our core job involves a whole lot of driving. Sometimes, we drive for several hours one way just to do a shoot. This is compensated by being able to get reimbursed at tax time by the government at the federal mileage rate (in 2018 this was 54.5 cents/mile).

The best way to track your mileage is by using MileIQ. This is a simple application that allows you to track all of your drives and classify them as personal or business. In 2018, we drove so much that we earned ~$4,500 in tax deductions from driving alone. For a service that costs $60/year – it is one of the few things we’ve bought that literally pays for itself.

MileIQ can be used for free as long as you want for up to 40 drives a month. If you need to log even more, upgrade to a paid plan and you can receive 20% off your first year by using this link. For more information, check out our MileIQ review.

You know the phrase “introductory offer”? We hear it all the time!

As a new business, offering introductory pricing for some of the first clients you work for is a good way to help you standout from your competitors. In the long term, you’re prices will need to increase so you can stay competitive and have enough money to support your business and personal needs. But, in the short term, it’s an easy way to attract clients who aren’t 100% sure of what they should expect.

In the photography industry, this is very common. New photographers come onto the scene, check what others are selling their services for, then offer to do the same types of shoots at a lower-than-average cost. If you do great work, having some initial reviews written online will help build your reputation through social proof. Not to mention, a happy client will likely talk to others, sending word-of-mouth referrals to your business.

We mentioned getting a business credit card already, but would like to discuss how it can really benefit you.

In terms of your credit score, having a business credit card and keeping the balance low and paid off will benefit your credit. This is both your business and personal credit. If you are interested in the future in taking out a business loan, buying an office space, or purchasing a home for yourself – your credit score will come up again and again. A higher credit score will allow lenders to have more trust that if they give you money, you will be able to pay it back.

Never leave money on the table. This is one of the keys of a successful business. A good business credit card will offer things in return for your use. Some common perks you will stumble upon include:

Our preferred perk is the percentage back per purchase as it most suits our needs. With our PNC Business Credit Card, we get 2% back on every purchase. This means that for every $10,000 we spend (and money goes quickly on photography equipment), we get $200 back.

Most credit cards will offer an introductory period where you can make purchases without accruing interest. This means you can carry a balance for upwards of a year or longer without having to make more than the minimum payments.

If approached smartly, this can be used to help get some initial large business purchases out of the way without having to cover the bill in full immediately.

In our business, we used this approach to gradually pay off a $4,000 camera purchase. We did this by mapping out how much money we would be bringing in over the course of the year, and determining how we would pay this down in the time period of our 0% APR. It worked like a charm.

Your specific financial situation will dictate a lot of things you do with your business. It will impact how much you charge clients for services. It will help you determine how much you should actually pay yourself. And so on.

Your finances should be broken out into your personal wants and needs, and your business requirements. How we approach this is pretty simple:

We list out our current personal expenses. This includes all of our bills such as our mortgage, student loans, car payments, car insurance payments, and so on. We also factor in how much we normally spend on groceries, gas, and for entertainment (going out to eat, going to the movies, etc.).

Once we have all of these things added up, it helps give a baseline of how much money we actually need to maintain our current lifestyle.

Most people will likely want to pay themselves a little more than this figure to account for some personal savings. If you like traveling (as we do), having extra money to put aside for trips is also valuable (if not essential).

Every small business needs to spend money to succeed. There are really 2 major time periods we’ve experienced ourselves:

This requires the most upfront capital. You spend most of the money you earn. Some people even go and get a business loan to cover the initial purchases they need to make. As you can imagine, some industries are more expensive than others.

For our business, our start up phase lasted 1.5 years and led to us spending in the area of $50,000 dollars. We funded this out of pocket through personal funds (initially) and overtime, by money we made from photographing weddings and other sessions.

Every business is going to have some recurring overhead costs. These are expenses you can count on having consistently. For example, we use some paid service platforms that cost money on a yearly or annual fee. You can add all of these services up, and determine how much overhead you have on an annual basis.

Normally, these costs will be pretty low. Only once in a while will you need to seriously update equipment being used, such as your computer, and this is something you should have some extra business savings for.

If you want to know more about the products and services we use for our business, check out our Resources page!

Bookkeeping is the way you account for all your earnings and expenses throughout the year. It becomes a record that can be viewed by anyone (particularly an IRS auditor if it came to that) that can be used to measure how well your business is performing financially. Come tax time, your books will be looked at by a CPA (unless you are doing your taxes yourself) and used to determine how much can be written off your taxes, and what your tax liability is.

There are different ways to keep your books in order, but we’d suggest going with a dedicated bookkeeping platform. A few popular ones out there include Quickbooks and Gusto.

Diversifying your revenue streams will enable your company to survive even challenging times. Some of the largest corporations out there offer a large number of products and services so they can sell themselves to just about anyone. While you shouldn’t offer just anything, smartly determined products can be attractive to a larger range of clients.

As wedding photographers, our core product option are in selling wedding photography packages. These are our bread-and-butter and sell for $3,000 – $4,000 per package. This is a great starting point, and we build on this by offering clients to buy prints of their images, access to special file types (ie: RAW image files), and so on. Paired with this, we also offer smaller photography sessions for solo portraits, families, newborns, and the like.

In addition, we’ve expanded our business to start including products and services targeted towards other photographers. This has included opening Formed From Light, and dedicating content to education. This content is optimized with advertisements and affiliate marketing to help us produce another income stream.

It’s easy to get carried away with spending money as a new business. This is especially true early on, when you may feel more desperate and prone to buying anything – including snake oil. Later on, when you have more money on hand, it can also be tempting to spend some of it “just because.”

These small business tips should teach you that any money you spend should be calculated. Think to yourself: do I really need this product or service?

If there really is a need and you have the money, then yes, absolutely spend away.

But if it turns out you really don’t need this thing, and you’re money is tight, it’s likely worth not making the purchase.

One of the hardest things for many new businesses is figuring out how to price themselves. As we’ve already mentioned, the first few clients you will likely want to offer discounted rates to, but what happens next?

You should begin to increase your prices to be competitive within your industries market. At some point when you are more established, your prices should continue to move up as people begin to pay for you. Your skills and expertise. Your reputation.

In the early days of our wedding photography business, we did full wedding day shoots for $500 dollars. These days, we charge $3,000 – $4,000. It has taken time to become established, but it would not be a sustainable business without charging what we are worth. Gradually raise your prices and see what the market will allow.

The recurring costs you have every month and year should be seriously monitored in order to keep them low. One way to do this is consistently check on competitor products and services out there. For example, if you are paying $400 a year for a bookkeeping service, and a new competitor comes out that offers a comparable platform for $200 a year – you might want to seriously consider a switch. Saving money on one service can impact your bottom line just a little bit, but doing this with a number of other services can end up adding up to serious savings.