Wanna know something funny? About four years ago, Y and I decided to start a business. I totally slaved over the business plan, I was pretty proud of the end result. Sadly, writing the business plan made us both realize that the business wasn’t exactly feasible (at least not at this point in time–we don’t have $75k to throw around), but writing the business plan was a great learning experience.
Ironically, Stinkerpants Designs has (clearly) gone a lot farther than the other business, but my business plan wasn’t written out until I’d been in business for well over a year (and if I’m being honest, it’s not exactly finished..per se). As my friend Lisa says, it was “all up here” (and I’m pointing to my head right now, in case you couldn’t picture it). I don’t work very well that way, though. I am a very organized person, and if I don’t have things written down, I feel very…discombobulated.
I have a traditional business plan written out (minus the financial section, I have to admit–I am STILL avoiding that section!), which I’ll talk about in a second. But the most helpful part of my business plan (and the part I access most frequently) is the “Notes” section I have at the top, which functions as sort of an informal biz plan. And because that’s a lot less daunting than a formal business plan, I thought I’d share it with you guys. Maybe you could use it as a jumping off point to starting your own business plans!
My Informal Business Plan
At the top of the same business plan document, I keep a “notes” section. This is a quick-access summary that I constantly look at and update. No one is ever going to look at this, so it’s informal. Here’s what’s in that section:
A mission statement of sorts.
- Basically, I wrote: “Stinkerpants is: ” and completed the sentence. What is your business to you? If hold your business as close to your heart as I do, your answer may sound like the answer to the question “Who are you?”
What I want the business to look like.
- One of my main reasons for wanting to own my own business is flexibility. With chronic migraine headaches and a serious desire to focus on the fun in life rather than work, I need a job that will allow me to work at odd hours (and, in the future, work fewer hours). As a result, the future of my business is very closely entwined with my life goals. So I asked myself: In an ideal world, what do I want my life to look like? How does my business fit in?
Then I made an itemized list and worked backwards. How do I get there? For example, let’s pretend that your life goal is to sit by a pool and blog all day.
- I want to sit by a pool and blog all day.
- I will need someone to pay me to do this. Advertisers maybe.
- I will need to have a big enough following to get advertisers to pay loads of money for space on my blog.
- In order to have a giant following, I should probably be famous. I can get famous by hanging out with famous people, writing a book…
- You get the idea, right? Go all the way back to where you are RIGHT NOW, so when you’re done, it will look like a step-by-step manual to get you to your ideal life.
I then write out my main goals for the business right now. If you’re on number 15 on your list above, what do you need to do to get to number 14?
- Underneath my main goals, I write out any and all ideas I have on how to accomplish these goals. This is anything from “figure out what I should be focusing my energy on” to “send out press kits.” I answer questions like, “What do I need to do in order to accomplish ABC?” with an entire list of ideas and thoughts. Everything is organized in ordered and unordered lists (can you tell I like bullet points?!).
- I also randomly include little notes to myself or talk out my fears: “I am scared that XYZ will happen and my business will fail as a result”or “I feel like people want to see less expensive items, but I don’t know if I have time to do them right now. What’s a priority?” To be honest, in some places this “Notes” section reads like a diary! I also find notes that my past self has written to my current self: “Don’t worry about XYZ. That is stupid, and this is why. Don’t be stupid.”
In summary, I put any and all ideas in this section. Goals for right now. Goals for the future. Goals that might be good to have in the future. No matter what it is–ideas, goals, fears–get it out of your head and into a Word or Google document. It feels fabulous.
My Formal Business Plan
My formal business plan is a constant work in progress, as any good business plan should be! There are a lot of great resources for writing business plans, and I don’t want to spend a bunch of time writing yet another guide. Instead, I’ll share links to the guides that I’ve found especially helpful:
- Design Sponge’s intro to a strategic business plan: This is a great introduction to business plans and will help you wrap your mind around what a business plan is.
- Sage Wedding Pros 13 Step business plan: this is a fabulous resource for creative businesses– not just for people running wedding-related businesses!
- The Modish Biz Tips Business Plan Challenge. These are great posts–six of them.
- Nolo’s Business Plan Basics: this is a good resource for the most straightforward and traditional business plans. This is also a good place to read about why you should have a business plan.
What I’m about to talk about might stir up a little bit of controversy with my handmade readers–but I would really like to hear what anyone and everyone has to say about this subject: I am going to get rid of my Etsy shop, and here’s why.
After having an Etsy shop open for a little over two months, I am really unimpressed. Here are my first impressions.
I’m not sure Etsy is good for me, or for sellers in general, for several reasons:
- Updating two shops is a pain in the neck. When you’re running your own business, time is precious, and it’s easy to get overwhelmed. I’d definitely be willing to update both shops if they served different purposes, but the shop on my website and the etsy shop do exactly the same thing, and Etsy costs me more to run. I would rather spend my time giving good customer service to my custom clients, and spend the money I’ll save on listing fees improving my own shop.
- I thought Etsy would bring me traffic (thus the reason why I started it), but as it turns out, I have to drive traffic to it. Why would I want to spend energy marketing a shop that is hosted on someone else’s website, rather than my own?
- I know that I am not being paranoid when I say that people on Etsy steal things from one another, and it’s really not cool. Yes, you risk getting your ideas stolen by simply being out there on the internet, but Etsy is a virtual treasure trove of ideas, and all the people interested in stealing your ideas know about it. It seems a bit like you’re marketing to the people who want to steal your stuff, and the people who want to buy and enjoy it are secondary.
- But the biggest issue for sellers, and the one that I’m going to focus on here, is this: By nature of having a bunch of handmade stuff in one spot, Etsy drives the prices down and makes it extremely hard to make a living wage.
When handmade items were something you could only find at craft fairs or featured in random places, there was a sense of “specialness” to them. The artist could name their price, and if someone liked the item enough, they could buy it. The key here is that the artist was able to name a price they were comfortable with, and the buyer could decide whether they were willing to pay it.
Whether or not the artist charged a rate that could pay the rent is another story completely.
Unfortunately, artists aren’t generally the most savvy business people. After all, they don’t teach pricing, marketing or tax management in art school. As a result, a lot of artists don’t attach a fair price to the items they create.
Take, for example, a scarf. Anybody buying or selling scarves is going to have a problem breaking even. Yarn is darn expensive. Say each skein of yarn costs you $8, and you need 4 skeins to complete a project. You just spent $32 on yarn, and now you have to make your scarf. If it takes you 12 hours to complete a scarf (which is modest, I’d say, at least for my knitting skills!), and you want to make $8 per hour, your labor comes to $96. So in order to be paid a fair wage and cover your materials, you need to charge $128 for your scarf.
Now, who the hell is going to pay $128 for a scarf, even a pretty one, when they can go to the Gap and pay $20? That’s right: no one. And that’s by paying yourself the same wage you’d get working at a fast food restaurant. Unless you have a partner who is responsible for paying the rent, you’re not only going to be a “starving artist,” but a homeless one as well.
For the sake of argument, though, let’s say you’re not responsible for paying the rent with your scarf business, and you’re doing this for fun.
So you’re a pretty smart person, right? You know that no one is going to pay you $128 for a scarf. But they might pay you $50. If you charge $50 for your scarves, and you’re able to sell a few of them, you’re feeling pretty good about your situation (likely because you’re trying to forget that, after the cost of yarn, you’re only making $18 a scarf, which is equal to $1.50/hour). Yeah, that’s way less than McDonald’s. But at least you don’t smell like hamburgers at the end of the day.
One day you come across a website called Etsy, where you can sell your scarves for a small fee. Suddenly, everyone who wants a handmade scarf can find you by searching for “scarf.” After your listing fees and Paypal fees, you’re making about $15 per scarf, and you’re feeling even better about your little business, because you’re really busy!
Then one day, a new seller starts a shop. The new seller realizes that there’s no difference between her scarves and yours, so she decides to charge $45 for her scarves instead of your $50. Your customers leave you until you undercut the new seller by only charging $40. Before you know it, you’re not even making 50¢ per hour because you’re charging so little. Think I’m being dramatic? Search Etsy for “scarf”–I’m not even kidding.
Have you heard of Etsy’s custom section, Alchemy? Basically, a customer can name a price for a custom-created item, or ask sellers to give a price at which they’re willing to create the item. Usually, people are requesting something like a custom necklace for $10. A custom necklace for ten dollars. And you know what? They’re getting their custom necklaces made for $10. This is not cool, people.
Yes, I know that these people are naming their own prices, so theoretically they’re only hurting themselves. Unfortunately, though, tha’ts not the case. Even if these sellers aren’t trying to make necklaces for a living, their prices are hurting the sellers who are trying to do this for a living. I’m sure that the quality of that $15 necklace isn’t as good as the person who is selling a $150 necklace (at least, I hope not!), but the buyer doesn’t necessarily know that.
At the end of the day, I think Etsy hurts sellers. Yes, I think it’s awesome to make handmade items available to the general public…but at what cost?
I would love to hear your thoughts.Comment
Recently I’ve been working a bit more on marketing–or at least thinking about it. A lot of the blogs I follow are of fellow crafters and stationery designers. Recently there’s been a lot of coverage of the National Stationery Show, and people are now talking about the Renegade Craft Fair, which was this past weekend in Brooklyn and will be hitting San Francisco next month.
I haven’t done any of these craft or stationery shows. I’m not sure that I really fit in at a craft show, as my wares are pretty much limited to greeting cards and artwork–everything else is custom, which kind of defeats the purpose of a craft show, right? People come to purchase.
I would love to do the National Stationery Show (or the Gift Fair), especially for my greeting cards. The cost of attending those shows is seriously prohibitive, though (think thousands of dollars, plus the cost of travel and booth decorations).
I’ve done one bridal show–Lovely Details for two years. It’s a smaller show and is much less expensive than the bigger bridal shows, which can be $1500 for a booth.
Last year, I didn’t get much business from the bridal show. It is a small show, so that’s not to say that I wouldn’t get a better return at a bigger show. This year I had the pleasure of meeting a few of my readers (hi guys!) and people seemed to react with more enthusiasm at my table (which, appearance-wise, hasn’t really changed that much since last year). Maybe people are looking for more personalized/different wedding stuff than they were last year? I have no idea.
One cool and slightly unexpected thing I found last year was that there are a bunch of really amazing wedding vendors in the bay area, and they are very fun people. This year was no different. I had the opportunity to meet Amanda of Blueberry Photography, Audrey at Glowing Bridal, Andrea at Sift Cupcakery, Jennifer at Jennifer Longaway Photography, and John at Enhanced Lighting. These are super nice people, and they make me really excited to be part of the wedding vendor community. Last year I wanted to be best friends with Lisa + James, Huckleberry Karen and Lisa at Bellissima Vita (more on these four in about a month), and I’m happy to say that I am now pretty good friends with all of them.
So there are benefits to doing things like this, other than just getting business. I don’t think of it as networking–I think of it as meeting awesome new people whom I would love to see again.
But is it worth the high cost for some of the bigger shows? I’m not sure. As a bride, I only went to a few shows, and I didn’t book any of my vendors after seeing them at a show. How about you guys? Would you book a vendor because you saw them at a fair?Comment
One of the most frustrating things about running my business is something I’d like to avoid dealing with forever: Money.
Money gives me anxiety. I periodically wake up at 3am and obsess over my $30k in student loans. I start to panic that I haven’t paid off my bills by the due date, and that my credit will be forever ruined, or that I will have somehow overdrafted all of my checking accounts simultaneously and owe approximately 10 million dollars in fees. Yes, this is a bit of an overstatement, but not by much.
When my friend Jessica Lynn contacted me via Twitter and asked me to write about how I manage my money, I kicked myself for not having done this earlier. I’ve learned a bit about money management, and would have loved to see a guide of some sort when I started out. So here we go! Thanks for the kick in the pants, Jessica!
I’m going to break this down into five parts:
- Business Bank Accounts
- Anticipating Taxes
- Record Keeping
- Receipt Organization
- Paying Yourself
So get ready.
Business Bank Accounts
Getting at least one business bank account is VERY important. Everyone I talked to about managing my business told me to keep my business finances separate from my personal finances. I *think* this has some sort of legal purpose, but I’m not sure. It will definitely keep you sane, I’ll tell you that.
When I first started my business, I’ll admit to mixing the business stuff with personal stuff. I barely made it through tax season this year (my husband, who did our taxes, almost killed me for having about two months worth of very confusing paperwork). Now, however, things are much better.
I have two business bank accounts.
When I went to open my business account at the (now defunct!) WaMu, they told me to open one account for income, and one for expenses. This was, theoretically, supposed to help me with taxes because income would be in one bank account and expenses would be in the other, and all I’d have to do is print out my statements.
In practice, however, this was a terrible idea. The expenses account was not supposed to carry a balance of any kind. I was supposed to transfer money from the income account to the expense account to cover each individual expense. Not only is this a major pain in the ass, but it’s not practical. When ordering things like envelopes and shipping supplies, companies like Waste Not and Paper Mart do not calculate shipping until the item ships. Meaning that you’ll be charged a different amount than you were originally quoted. Meaning that you have a very high likelihood of overdrafting your stupid Expense Account.
It took me two mistakes (read = two overdraft fees) before I gave up and started using the first account as a business account, and the second one as a “tax reserves” account. But more on that in a second.
You can use bank accounts in a lot of ways. I shared the previous method with you because (apparently) it works for some people, and it might work for you. No matter what, you need at least one separate account for your business. You might even want a business credit card, just in case. I don’t have one (not for lack of trying: I was flat-out denied because of the economy. Poor me). How you choose to manage your accounts is totally up to personal preference, and doesn’t make one iota of difference to the government.
You know how I said that I started using my first acount as a business account, and the second one as a “tax reserves” account? Let me explain.
When you run your own business, it may seem like you’re raking in the dough. You’re like, “OMG! I just made a thousand bucks! Sweet!” Uh, yeah. No.
First off, you have to figure in sales tax. Every. Single. Thing. I do. Is. Taxed. Every single thing, including my design fee. I feel really guilty about charging my clients tax (especially California’s new 9.5% sales tax!) on my design fee. But the government is a biotch, so I have to. Each client gets an invoice, which includes the sales tax I had to charge them on envelopes, printing and design fees. Once the client pays the final invoice, I deposit their payment into my main business account, then transfer the sales tax they paid into my “tax reserves” account. Each year, the government sends me a nasty letter telling me to fork over all of the sales tax I owe. Rather than take it out of my main business account (and cry when I see the balance decrease), I can take it out of the “tax reserves” account. After I transfer money into it, I pretend that the tax reserves account doesn’t exist. I don’t want to think that I’m entitled to use that money, not even for a second.
In addition to sales tax, there’s income tax. I’m not sure exactly how much the government is going to take from me at the end of the year. Because I hope to be pleasantly surprised, I guess about 40% of my income. I pay things that are not taxable, such as my bills from the printer & my computer loan, and then I transfer 40% of what remains to my “tax reserves” account. At the end of the year, I hope and pray that I don’t owe that much, so then I sorta-kinda get a refund (I take my kicks where I can get ‘em, obviously).
Of that $1000, I am left with roughly $550. Sad face.
I should just call this section “Quickbooks.” I mean, who are we kidding here? There aren’t many good options out there for managing money, especially none with the same Turbo-Tax connectivity as Intuit.
For awhile, I was using Quicken for both my personal accounts and my business accounts. A few months ago, I took the plunge and bought Quickbooks.
Learn from my mistake: start out with Quickbooks. It was a pain in the neck to transfer all of my information from Quicken to Quickbooks, and Quickbooks allows you to be much more thorough. You can tailor your accounts specifically to your business, so that all of your different types of income and expenses are categorized, just in case of an audit. If you have the type of business where you invoice people but might not get paid for 30 or 60 days (which I don’t, at least not yet), you need Quickbooks. You can also set it up to track inventory, if need be. It’s just better.
I keep track of my two checking accounts, my Paypal account (which I now use just for business), and the loan from my parents for my computer (which they kindly gave me when I couldn’t get a credit card!).
I update my Quickbooks about once per week. I am very diligent about keeping my receipts in one place, before I enter them in. My mom updates her Quicken nightly, which I think is ideal. It’s really not that hard, and I should be doing it every time I make a transaction.
I am a very organized person. When I pay for something online, such as envelopes or shipping supplies, I print out my receipt (on 100% recycled paper, of course). I keep all receipts from in-store purchases in my wallet until I enter them in to Quickbooks. Once things are entered into Quickbooks, they enter my fancy file system:
Okay, it’s admittedly not that fancy (haha). My file drawer has three Stinkerpants-related sections. Legal, Contracts, and Income/Expenses.
The “Legal” section is where I put copies of payments I make to the government, and copies of all the annoying crap they send me. If the government sent it to me, it’s in there. I rarely access this area.
The “Contracts” section is split up into years. All of my contracts from each year, in order, are filed here. I rarely access this area, except to add new contracts.
The “Income/Expenses” section is the most frequently accessed. I’m not sure why we’re supposed to keep receipts–I think it’s in case of an audit. In any case, this section is split up into months. Any receipt I get goes in a folder for that month. I also make copies of each personal check I receive, just in case, and put them in the folder for that month. I don’t know why I do this, I just know that I’m supposed to. Each month I make a new folder and ignore the previous months. If you input everything correctly into Quickbooks, you should never have to reference this stuff outside of an audit. But if you are audited, you’re gonna be VERY happy that you were so organized.
Now, for the last section. This is your reward for making it through the last 20 pages of this post (haha).
For some reason, I was anxious about paying myself. I felt like it had to be more complicated than it seemed. How much of this money am I entitled to use personally? How do I track it?
The answer is: all of it (after you’ve deducted your anticipated taxes, of course), and easily.
Pay yourself however much money you need to pay yourself. Make a transfer from your business account to your personal account, and log it in Quickbooks as “Salary.” Easy Peasy!
So that’s all I can think of as far as Managing Money. Please feel free to ask me any questions you can think of, and I’ll try to answer them in the comments section. Also, if you have a topic you’d like me to cover in this “Business” section, please let me know! I’d be happy to do so. :)Comment
Have you ever noticed that businesses tend to refer to themselves in the plural, even if the business is clearly owned by one person?
Why is that?
Is it because we, as consumers, tend to trust bigger businesses? Do business owners think it makes them more legitimate? Does it make them more legitimate?
Personally, I feel like a goofball if I refer to my business as “we.” As a result, I just don’t do it. I don’t have so much as an intern (yet), so it would be a blatant fabrication to say that this business is more than just me behind my computer screen (for now). Although, I guess I could count my cats, dog and chicken flock as employees. Then it would definitely be a “we”! ;)
If you’re a business owner, do you refer to yourself as “I” or “we”? Why?
If you’re a consumer (and we’re all consumers) what do you think of this?Comment
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