[by Todd Joyce]
Six Thoughts for Better Cash Flow
Being in business for yourself can make cash flow difficult. Slow paying clients or a few slow months can throw off everything if you don’t plan well. Here are six important thoughts to healthier finances.
- Set aside working capital. Working capital is what it takes to run your business, which includes paying yourself. Live like a starving artist until you have at least 6 months saved. Shit happens – accidents, fires, floods, not to mention things like wars and terrorism that have instantly altered global business. Clients go out of business and when they do, you are likely one of the last to get paid if there is anything left at all. And, it’s not just the obvious things…Several years ago, I lost 60% of my business within one month because something happened to my two top clients. One got a great job offer 2,500 miles away and the other one died.
- Ask for half up front. Slow pay or no pay clients put you at risk when you have expenses for jobs. Ask for half of the bill or all of the expenses up front for jobs, big or small. It makes the sting of a slow or no pay client a bit less painful.
- Have a relationship with your bank. A great banking product to help with the ups and downs is a line of credit. It’s a pre-qualified amount that is available to you without having to apply when you need it. Think of it as a loan that is just waiting for you to use it. It’s important to understand that banks don’t necessarily want to loan you money when you need it. So, apply for a line of credit when your business is doing well.
- Diversify your client base. If you specialize in photographing the oil industry, you are likely struggling right now. You can still photograph much of the same kinds of things, but do it for various sectors of the industry so that you won’t be hammered if a specific industry is struggling.
- Be money smart. Be sure all of your regular monthly obligated expenses are necessary. You’ve always wanted a big studio space…but do you need it? Can you use freelance vs employing someone? Do you need that new piece of glass or camera right now? Can you rent it when you need it, or is purchasing it the best route?
- Live within your means. After you’ve stashed away your 6 months of savings, set a standard of living that is an average of the good and bad times, and stick to it. Living on that average allows you to save when times are good and weather the lean times. Look for patterns of earnings and learn from them.
Todd Joyce has been in business as a freelance photographer since 1990 and has seen many changes, lived through several recessions and dynamic shifts in business, and is still alive to tell about it. See stills at http://joycephotography.com and see motion at Optic Lizard Productions http://joycephotography.com/index.php?splash=1#/motion.