Pay Your Taxes

Here’s the deal – you gotta pay taxes, and you gotta prepare for tax season so you’re not caught off guard.

If you have set your business up as an LLC, you’ll want to pay quarterly estimated taxes. The IRS likes their money, and they like it early.

Work with an accountant, even for just a single call, to ensure your business is set up correctly and you are estimating your taxes properly.

What’s worked for me is saving 15% of “real revenue”, meaning the revenue the business brings in after I pay contractors and the costs of producing the product I create.

Then I divide that estimated number by 4 and pay that amount when quarterly estimated taxes are due.

Even then, I always save 15% in a tax account and save it until tax time. Some years I end up with more in that account which makes for a nice bonus. Other years I owe more than I paid in estimated payments, and it’s nice to have that amount just sitting there.

The business also takes care of any personal taxes I may owe, which is one nice thing about having a separate entity rather than using your personal business account(s) to run your business.

Since taxes could end up being thousands (or tens of thousands) of dollars each year, it’s worth taking the time to prepare properly to pay them in full each year.

@darentsmith | daren.blog

Invest In Assets Not Liabilities

One of the downfalls of many creators who want to turn their craft into a business is investing in the wrong things.

Assets are investments that generate more money for you, while a liability costs you money.

Your office is not an asset – you have to pay for it every month.

Your computer, your equipment, anything you own outright that you use to make money is an asset.

But let’s take it a step further.

Investing in a bunch of equipment on it’s own won’t help you grow your business. Cameras, computers, hard drives, and the like, if they just sit there, won’t generate any money for you on their own.

But, if you use that equipment to create assets that compound, that’s the goal of a successful creative business.

Use your camera to take photos that you then sell online. That single creative effort can pay you forever.

Use your computer and recording equipment to record a song that you can sell and license.

Write a book that you can self-publish and sell online.

There has never been a better time to be a creator, because you could, today, with just your phone, start a creative business and start creating selling digital projects to anyone in the world.

Start thinking about where you spend your time and money. Invest in and create assets that compound over time, and your business will start to grow.

@darentsmith

Financial Literacy for Creatives

One main reason why creatives fail at becoming professionals – making a full-time living from their work – is because they are not financially literate.

Financial literacy can be summed up like this:

  • know how much money you need, how much money you make, and how much money you spend.
  • understand how to make more or spend less and when to make those decisions
  • create a business that supports your work that generates the results you want for your lifestyle

Over the next month I’ll write a short, “atomic” essay every day on a different topic. Read each one and by the end of the month your financial literacy will be much improved.

How much money your creative business needs is a simple equation:

How much money do you need to support your lifestyle? That includes all of your personal bills, savings, spending, etc.

How much money did you spend from your personal bank account the last three months? Divide that number by three and that’s how much you spend.

Now double that number.

That’s how much your business needs to make each month to afford taxes, operating expenses, paying yourself, and to have a little profit for growth.

@darentsmith

Lead With Value

I messed this one up this week.

My brother and I have been gearing up for the launch of our new web app Benchmark, which goes live on March 30th.

Part of this “gearing up” was completing a Typeform Quiz that would help those who take it to quickly identify the current stage their business is in and what they could focus on to grow.

But I broke one of my rules.

Lead With Value

To lead with value means that you serve and contribute before any transaction occurs. That could be a monetary transaction, or even signing up for something with an email address. You’re still transacting – trading an email address for more information or access.

I hate that. 

I don’t want to be promised that the value lies just beyond this $1 signup, or entering my email address. I want you to prove to me that you have the goods.

It’s like that movie, Hitch. You come 90, I come 10.  

My mouth was open, Albert!”

The order matters. YOU come 90, then I come 10.

Not the other way around. 

Well, I messed this up. 

In the Typeform, I made the email question required, even though the wording said it was optional.

Meaning that I put the order in reverse. I was promising value on the other side of that email transaction, but hadn’t done anything to actually provide any value up to that point.

Oof. 

The results speak for themselves:

12 people started the quiz. Zero got past question 2, “what is your email address”.

Whoops.

Once I spotted the error, I quickly fixed it and double checked that it was CLEAR that people didn’t have to enter their name or email in order to take the quiz. 

People started taking the quiz and getting the feedback they needed from us, which was the whole point of adding a quiz to the website in the first place.

Now, I could have approached it differently and said, “well, we only had 12 people try it, so we just need to get more traffic and get that number up in the thousands”. 

But the principle is the same – people don’t want to transact first. They want you to prove to them the value that you have created and show them the results before the transaction. 

I highly recommend approaching your business in a value-first way. Don’t think about optimizing funnels, adding more people to the “top of funnel”, or any of that nonsense. 

Treat people with respect. Show them the goods before you ask them to transact with you. Prove your value and give them some results up front, and the right people will be naturally pulled toward you and your business.


PS – If you want to take the quiz for yourself, you can do so at http://benchmark.app/#quiz

Also wanted to shout out two great people that I came in contact with this week. Randall Kanna has being doing amazing things in growing her Twitter account, and just launched CrowdFox, a new tool to help you manage your Twitter growth.

Stefan sent me an email about a new tool to help get control of your calendar back. Rather than having people schedule blocks of time on your calendar for meetings, they can now, using his tool Callworthy, just get in line, and you can decide when and who you want to call when it works for your schedule. Pretty brilliant. 

You can use code DARENSMITH at checkout and get 10% off for the first year. It’s a pre-order, so if you’re hipster like me and getting in early on awesome new products, this one is a perfect opportunity to do just that.

The Resilient Creative Business

Here’s the story of how I built a resilient business.

man on edge of cliff
Photo by Sead Dedić on Unsplash

In the fall of 2009, I’d been working in the film industry for a few years. It completely shut down as the economy went through the biggest recession in my lifetime.

A friend and I were in the middle of raising money for a feature film. We were even making some progress, but it all stopped overnight.

I had to take a job selling cars – I couldn’t find anything else. I got married a few months earlier and needed to provide for my new family. It was the only job I could find that would pay me enough for the life we had started together.

So, I did what I always do – I got to work. I figured out what would lead to making more money and more sales. I did months’ worth of training on the cars that I was selling in a matter of weeks. I got Porsche, Audi, and VW certified by Christmas, and became one of the top sellers that month.

I still have the Audi watch that they gave me for selling the most Audis of any salesman in December.

The quick success, it seems, was too much for some of the other salesmen. Rather than working harder, they decided to lie about a sale that I made – they claimed that I stole the customer from another salesman.

I was working at my desk, putting in the info from the sale, when all of a sudden the computer locked me out. Confused, I tried logging back in when the phone at my desk rang. My boss, the general manager upstairs asked me to come up and talk…

He told me that I was being fired for lying and theft of company property.

And just like that, my job was over. Income, gone. It was the only time I’d ever been fired in my entire working life, and still is to this day.

What I learned from that experience is that I never wanted to have a boss again. That way, I could never be fired ever again.

That single point of failure was just too risky for me and my family.

Working For Myself

Fast forward to 2017. I technically have a business, but it’s not great. My business partner and I are making maybe $150k total in a good year – which, after expenses and taxes and overhead, means we’re barely taking home $50k each.

The business isn’t working. The partnership is strained. The clients we have aren’t happy with the work we’re doing and we’re struggling to find new projects.

I end up going over $15k in debt to keep the business afloat and to try and save it, but it doesn’t work.

While I had removed the possibility of getting fired, I found new points of failure in my business. There was no way to save it.

So I need a business where I can work for myself. I need to remove all the constraints and the single points of failure. And, it needs to be a business that pays me enough to have the lifestyle that I want.

It’s not a big ask – low six figures would do it.

No boss that could fire me, no single points of failure…

a resilient business.

Into The Unknown

But I had no idea how to build it.

Who was gonna teach me? Who was gonna help me?

I bought courses. I signed up for seminars. I followed people on Twitter and bought their books and signed up for their email lists.

It was a tough lesson, but I finally realized that more information wasn’t the answer.

I had to build it myself.

So I did what I always do. I got to work.

I started by making sure I had enough money – the first point of failure. I now needed to have enough money to provide for my family of five, our house, everything. Cash flow in a business is like oxygen, it can’t survive without having enough of it.

The first thing I did was find a big client that was going to keep me busy – and paid – while I worked on the other areas of my business. Now I could breathe.

I started adding more clients. This time, however, only clients that I wanted to work with. I removed the single point of failure of only having one client.

If one client represents a huge percentage of your cash flow, it’s no different than the risk of having a boss that could fire you.

Get more clients.

I built systems for the other constraints in the business – sales, marketing, finances, and growth.

I found new partnerships – ones that were beneficial to both of us, rather than dependent on each other. Partnerships where working together wasn’t just 1+1 = 2, but had an exponential possibility, where 1 + 1 could equal 3, or 5, or 20.

I started creating and leveraging assets that I created rather than only trading time for dollars, which diversified the ways that I made money so that the business became even more resilient.

I built a resilient business over the last 3 years, and now I’m building two more this year. Craftsman Creative will be a resilient business in about 12 months from when it started. Benchmark App within a year as well.

Building A Resilient Business For Yourself

It’s a framework that’s built using a process that works.

Now that I’ve figured it out, the only thing I want to do is to help others to do the same: To build their own resilient creative businesses.

The process is straightforward. You start by building a solid foundation and systematically build on top of it, one brick at a time.

If you do the work, it works.

The process inevitably leads to a resilient business that supports your work and the lifestyle you want for yourself and your family

I’m devoting a huge part of my time, focus, and effort to helping other artists, creatives, and freelancers build resilient businesses in 2021.

I’ve created a 12-month, interactive coaching program. It involves monthly training, accountability, a community of peers on the same journey, and one-on-one coaching to give you everything you need to build your own resilient business.

If you’re ready to get to work, I’m excited to join you on the journey ahead.