It may be painful to reflect on the financial aspects of your undefinable contribution, but by doing so you will take the guesswork out of your livelihood. This way, you can determine how much you need to earn or save to cover your expenses and create your goals and milestones around.
A few questions you’ll want to answer to help you begin making your art into a business: What do comparable artists charge? What is the minimum you can pay yourself? What have you sold your art for in the past? How much does it cost to produce one piece of art?
Five steps to launching your art business
Now, here are five steps to really begin your process of launching your art business:
Step 1: Profit and Loss (or P&<). This sounds difficult but is quite rudimentary. First, list out all of the art you have sold. Then total it and label it “total revenue.” Next, list all of your expenses to create it. (Fixed Costs are expenses that must be paid no matter what and do not fluctuate with demand. Variable Costs increase or decrease with demand.) Then total that and label it “total expense.” Next, deduct the total expenses from the total revenue. This is called your Net Income/Profit.
If you have more expenses than income (negative Net Income), you are a normal artist. Becoming established is challenging and requires intrinsic fortitude and motivation that impatient businesspeople do not have and can’t buy. Seeing the loss makes it real, which is good.
Pretending to be successful when you have massive losses will never help you turn things around. If you intend on doing projections or a budget, add a contingency for wasted materials and mistakes.
Step 2: Funding. You could list all the things you need, and then determine how you will pay for those things. You may not need to fund your business and be totally fine with everything you have got so far.
If not, this section can still help you explore your goals.
Getting a loan will be a challenge because you will be soliciting funding on speculative earnings. Will you use your savings? Or a grant? Are you seeking a grant or do you want to find one? How much do you need? Where will you get that funding from?
Here are some popular sites for artist grants:
Step 3: Profit Projections. This is an explorative puzzle to determine how many units you must sell at what price. The word break-even is scary, so use the word scoping instead.
By doing the competitive research, you will know the pricing for each type of business model and be able to guess at a potential income stream. You can also see what offering makes the most sense to spend your time on.
Hypothetical Art Sale Per Piece: $1,000
Desired Profit: $80,000
How do you make $80,000 in profit from a $1,000 piece of art?
Just like the Sales and Expenses Exercise from the P&<:
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Sales: $100,000 (you tracked and totaled all of your sales)
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Expenses: $20,000 (you tracked and totaled all of your expenses — $10,000 for studio rent/fixed costs and $10,000 for art supplies/variable costs)
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Net Income: $80,000 ($100,000 – $20,000)
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$80,000/$100,000 = 80% Margin
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Margin = 80%
Test Equation:
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Amount you want to make divided by your margin (80%).
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$80,000/0.80 = $100,000 in Revenue is needed to make $80,000
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Divide $100,000 by $1,000 = 100 art pieces sold (100/12 = 8 or 9 a month)
You maintained an 80% margin and sold 100 pieces at $1,000 to make $80,000
Step 4: Break Even. How many pieces of art do you need to break even? This is by far one of the most important aspects that nearly every artist leaves up to someone else to determine for them but shouldn’t. Doing this helps an artist understand what they need to charge for their work. It is also how you get paid to do what you love the most.
Break Even
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Expenses: $20,000 (assuming the expenses are the same $10,000 for studio rent and the amount of supplies stays the same at $10,000)
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Hypothetical Art Sale Per Piece: $1,000
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$20,000/1,000 = Sell 20 Pieces (your art paid for itself)
Break Even and Paying Yourself
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Expenses: $20,000
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Your Salary: $20,000
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Hypothetical Art Sale Per Piece: $1,000
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$40,000/1,000 = Sell 40 Pieces (Your art paid for itself, and you to do it)
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If you can sell 40 pieces, you can cover all of your expenses and pay yourself a salary of $20,000 if you sell each piece for $1,000 ($40,000/40). Sometimes, making more art will cost more (variable expenses). What if supplies cost more for more pieces? ($60,000/40) Then, you would charge $1,500 per piece.
Step 5: Tracking Your Income and Expenses. An accounting software called Wave is free, easy to use and has a simple user interface. It lets you enter your income and expenses for each business transaction you make. It is easy to use, and helpful for tracking expenses.
Once your transactions are there, you can make a P&< statement with a few clicks. You can also use Wave to create professional looking invoices.
If you only have enough interest to just track your income and expenses, you can hire someone to ensure it balances.
Related: How entrepreneurs can raise money for a new business—and the advantages if you’re over 50
Obviously, you cannot do everything yourself, and probably shouldn’t. Learning how to do taxes and financial analysis is not the best use of your time, and will take time from your art. As a businessperson, there is no shame in building a team around you.
Artists are usually too afraid to ask for help because they have probably gotten ripped off before.
John Endris is author of “The Paid Artist: How to Make Your Art Into a Business,” an artist and a business geek. He is a business strategy adviser, a serial entrepreneur, an active investor and has an extensive background in the financial services industry.
This article is reprinted by permission from NextAvenue.org, © 2020 Twin Cities Public Television, Inc. All rights reserved.
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