I must admit it isn’t one of my strong points. For as long as I remember, I really don’t like doing numbers. I suppose that I get by well enough. After all, I have made it through over half a century and done OK.
But being a small business owner and watching the business grow means that it is no longer optional to stay on top of the figures and keep track of things along the way. After all, how can I make intelligent business decisions if I don’t have full and accurate information? For years I was ‘estimating’ or ‘guessing’ how much things cost me and how much I made on particular jobs. More often than not, I probably estimated to the positive side, leaning in a direction that would justify what I was doing at the time. All that got me was a lot of ‘red ink’ at the end of the year, as I spent much of my time doing things that just didn’t help the business grow (and sometimes, even drained it!)
Why do we do these things to ourselves anyway? (Come on – I see lots of others who are starting out in business do the same thing. I know I am not the only one!)
As designers and artists, we tend to think with an optimistic view of things. Our longing for being creative is so strong, that we will go to great lengths to justify our doing it as a living. This can include not accurately calculating our time, materials and supplies that go into creating, as well as under charging for our end products – all because we want to convince ourselves that we are doing “good” so we can continue.
I know this very well because it was exactly what I used to do. And it was almost put me in the poor house.
Well, no wonder I didn’t like numbers! They were the stark reality screaming in my face of the fact that things weren’t working as I had hoped. While it was nice to get compliments and feel as if I was helping others out by working at a cut-rate price, these warm fuzzies didn’t translate well to bank accounts and soon I found myself “tying dollar bills to the products I was selling” (as my accountant put it) and almost having to give up my business altogether if I didn’t change my way of doing things.
When it came to a choice of eating and having a place to live or doing what I wanted, the basics necessities had to win out. I either had to shape up financially, or give things up altogether.
Well, I am still here, so you can guess which avenue I followed. While it is sometimes difficult for me to do, I find myself applying numbers to ALL aspects of my work. I have learned to use the simple formula ‘if it doesn’t pay, I can’t do it’ and as difficult as it is at times, I have learned to use the word “no” when asked to do things that just don’t help the business. This is one of the hardest lessons a creative person can learn in business.
But while it is hard, it is also very freeing. Over the time that I have made the transition from hating numbers to accepting them as part of my life – and a good part at that. While I can’t honestly say that I love seeing the numbers and figures of my business, I find that I like them more and more for a couple of reasons.
First of all, it is very freeing to have everything in absolutes in front of you. While at first I disliked numbers because they lacked emotion and feeling, for that same reason, they can be very functional to your business. There may be a time when you are working at your limit and you receive a request that has a heart-tugging story attached to it. You know by doing the job you will lose money, but being the kind-hearted, compassionate person you are, you agree to do it. While doing this once in a while is fine, habitually following this behavior can be disastrous for your business.
The same goes for when you are selling your creations and people play on your emotions. They compliment you and say how they would love to have what you made, only they can’t really afford it at that price. I can’t tell you how many times I lowered my price (at a time when I could not afford to, mind you!) and sold my product at my own expense.
Finally, another example I will use is when you are asked to do something for a group or event ‘for the exposure’. Many times this involves large orders for several pieces and you are charmed into do them because you think of all the people that will see your work and subsequently order from you. I think this example is the worst of all because not only are you losing money and time on one item, but that loss is multiplied many times over.
I only speak of these things because I have done all of them in the past, and it has hurt me tremendously. By not keeping good records, I would be blinded by my own emotion and only when tax time came at the end of the year would I see how detrimental this behavior was to my business. Finally it got to a ‘sink or swim’ point and I knew I had to change things or find another job.
So little by little I am learning to like numbers. I have learned from others (like Big Tiny’s Blog on Basic Financial Planning here on Lumberjocks- Thanks Paul!) that pretending that I am making money when I am not is not a good thing. While I wish I had enough money to do nothing but charity work for others and give away my designs, it just isn’t my lot in life. Like everyone else, I need to make a living at this or I have to do something else.
When those two choices were laid in front of me, I really began to change how I did things. I have learned to embrace numbers as a good part of my business, as they help me make better decisions and keep my business healthy. AND – they allow me to do some occasional charity work and freebies when I am able without feeling as if I am doing them at the expense of myself. I am learning they are a good thing.
I spent the day yesterday tallying things up. I do admit that I have been a bit lax in that area this summer – we have just been “too busy.” But it reached a point where the receipts were piling up and if I didn’t post them, I would fall behind so much that I wouldn’t be able to get back on track. So I bit the bullet and spent a couple of hours yesterday posting and organizing and now everything is cataloged and accounted for and I feel GREAT! I once again have a clear picture of where my business is heading and I know it will help me make better decisions.
While it may have not been my favorite way to spend my extra day, when I was finished I had a great sense of accomplishment. Come April, when I am usually scrambling to get everything ready for my taxes to be calculated, I will not have to go through the normal anxiety that I had in the past. Here it is September and I am still on track and every receipt is present and categorized and documented. Usually I do the first three months of the year (when I am doing the previous year’s taxes) and it drops off soon after, only to have it pile up for the next year.
I think I finally broke the cycle.
Today I will be packing up my wholesale order to go out tomorrow. Then I can move forward with new things and have fun doing them, knowing where I stand with my business. I am beginning to almost like numbers. As former enemies, they are quickly becoming a great asset to my business. The more I use them, the better friends we become.
Have a great Tuesday.
-- Contributing Editor, Creative Woodworks and Crafts Magazine, If you like reading my blog, come visit at Sheila Landry Designs http://www.sheilalandrydesigns.com "Knowledge is Power"