Finances

Time to get to work

Sometimes people approach Howard and I to ask our advice on starting up and running a small business. Our responses vary depending upon the particulars of the person asking, but we always caution them to pick a failure point. This is a defined set of circumstances under which it is time to give up and do something else. No one wants to contemplate failure when they are the shiny, exciting end of a new business venture, but without a defined failure point a failing business can sink the person or family as well. We know too many small business owners who completely bankrupted themselves and their friends trying to keep a business alive through force of will. A thriving business is always work, but it should not be a constant scramble.

That last point had me worried earlier this week. Very often lately it feels like our business has been full of scrambling. So Howard and I sat down and had an overdue conversation about the current state of the business with a specific emphasis on what we will do if sales decline from where we are. Obviously we hope for the reverse, but the conversation was very important to have. It also gave us a chance to throw all our business fears into a communal pile rather than each of us keeping a separate stash. That too was distinctly unpleasant and it took us a couple of days to shake it off. The thing is, all evidence suggests that our business is thriving despite currently being in something of an ebb. This is happy, but we are aware of the fragility of what we have built. Right now we have a little organism. We’d like to have an ecosystem with multiple organisms. We want there to be the comic, but also Howard wants to write prose novels. I want to write books. We want to spread out our sources of income so that we do not have to panic at the thought of losing one.

What this means on a day to day basis is a careful rescheduling of our time. We need to retain the hobbies and leisure which bring us joy, but trade in all the mindless time-killing activities. We’ll trade the latter for work which will hopefully bring new organisms into our financial ecosystem. This means it is time for writing and revision to fit back into my days. Now I just need to figure out how.

Without financial considerations

What would I do with the next year if money were not a concern?

There are things I would buy (like new glasses or a replacement for the embarrassing front room couch) that have been waiting for a long time. There are home repairs I would pay someone else to do. But the most important expenditure of money would be to hire some one else to be the business manager/shipping clerk. I would turn over all that product design, email management, convention preparation, and book shipping to someone else. I would keep all the parenting stuff. It is mine no matter how much money I have. Then I would use the free time to garden, read, bird watch, and write.

What would I write?
I would finish that essay book. I would create family photo books. I would still do book lay out for the Schlock books. I would write the short stories which have been kicking around forever. I would write half a dozen picture books and put them into print. Perhaps after all that, I would discover space in my mind for a novel to grow.

So my life would look pretty much exactly as it does now, just in better repair with more discretionary time.

This points out to me that some of my current emotional wrangling is not about whether or not I should be writing. It is about how to spend my limited resources of time and emotional energy. I question the value of my writing only because it does not currently provide any money. The ironic bit is that if I could stop spending emotional energy fretting about money stuff then my life would be all around happier.

I should point out that we don’t actually have money worries, I’m just fretting because I don’t have six months worth of bills sitting in my bank account right this minute. Some parts of my brain argue this is a reasonable goal for a business owner whose primary income stream fluctuates dramatically. Other parts of my brain point out that most people don’t have that much money stashed away and I can see where the money will be coming from in the next six months. Then the first part of my brain starts spouting about counting chickens before they’re hatched. This causes the second part of my brain to express disdain that we’re resorting to folk tales as the basis of arguments. At this point I realize that I’ve spent 30 minutes thinking the same set of thoughts that I’ve spun around before and it didn’t take me anywhere this time either.

So I need to figure out how to silence the voices and use those 30 minutes for writing, or gardening, or anything else instead. It isn’t as easy to do as it is for me to type. I need to perform the same mental trick on all the business management stuff that I do. Because while I would hand it off if we could afford to pay someone, there are parts of the job that are really satisfying. And the truth is that these tasks have a much larger emotional footprint than they need to have. I stress over them too much. If I could get that piece under control, then the actual time to do the job is fairly negligible.
Why do I stress over little things?
because if I get them wrong it might interrupt the flow of income.
Why is the income so important?
Because I love the life we have and I want to keep it.

Strange how money stress can trickle through and change the colors of everything if I don’t pay attention to what is happening. If I am not careful, money stress can destroy the very happiness that I want the money to preserve. Fortunately since this problem is in my head, I can fix it there. Then suddenly my life will be brighter and more hopeful even though my actions and situation have not changed a bit.

Or so the theory goes. I’m working on it.

Finance for Freelancers

While at Penguicon I moderated a panel called “Finance for Freelancers” with co-panelists Tobias Buckell and Catherine Shaffer. I wasn’t intending to moderate, but I was foolish enough to be the first one to ask who would be the moderator. Having everyone introduce themselves and tell why they became freelancers gave me just enough time to scribble a few notes so I could direct the discussion.

I feel like the whole thing went very well, due in large part to the wealth of experience that Toby and Catherine were able to share. It is a joy to moderate a panel of competent people who know how to make their points concisely. I learned some things and I felt like we shared useful information with the audience. I wish I had a transcript to post, but I can remember a few highlights. What follows is loosely connected notes from the panel:

The insecurity of not having a paycheck: All three of us agreed that the idea of freelancing sounded really scary when we were at the beginning of it, but that after doing it for a few years we all feel more secure in our incomes than we did before. This security comes as the result of having many different sources for income. When one contract dries up, the others carry you until you can pick up another contract to fill the financial gap. Both Catherine and Toby talked about having the ability to stop working for people who are difficult and how that contributes to contentment.

Health insurance: Toby gets insurance through his wife. Catherine has been getting it through her husband, but is considering cutting free of that. Like freelancing, the idea of searching for health insurance is scary, but once you get into it the fear goes away and it is merely expensive. Toby made the point that the price of health care needs to be calculated on top of what you need to pay your bills. This is part of the calculation you make to figure out how much money you need to bring in as a freelancer to make ends meet.

Organization: I spoke a little about organizing time. I have an assigned accounting day once per week where I look at my accounts. During the early years there were some weeks when I merely glanced because there wasn’t anything else to do, but I still kept the accounting appointment. We all talked about how it is important to keep the business accounts separate from the personal accounts. There was some variance about when a freelancer should incorporate, but Catherine quoted a $40,000 per year figure after which it is really to your financial advantage to be incorporated. Catherine uses a free financial management program to track her money (I can’t remember the name.) I use Quicken/Quickbooks. Toby uses Excel. All of us stated the importance of being able to do reports based on the financial numbers so that the freelancer can see where money is coming from and make good predictions for the next few months or years.

An additional note on organization: I think this point was made in a different panel, but it fits here. Creative people often have a learned helplessness when it comes to business organization. They don’t like thinking about numbers and they tell themselves that they can’t do it. Business thinking and financial organization can be learned. I taught it to myself. Over years of practice I got pretty good at it. Organization can be learned. Good financial record keeping can be learned. These things can be just as much a habit as putting on pants in the morning.

I know there was other good information in the panel. I may add it as I think about it. I’ll reiterate what I said in the panel, if you’re considering being a freelancer, you should check out Toby’s blog. He talks about this stuff and does seriously useful number crunching.

Managing an irregular income

Our income does not arrive in regular checks made out to the same amount. The bulk of what we make in a year will arrive in the month surrounding a book release. All the money arrives and sits in a big pile in our bank account. It is our reserve and for awhile we feel rich. But then the months pass by and the reserve dwindles. We still have bills to pay and we tighten our belts until the next book release.

One of the things I do to manage the money is keep separate accounts for the family and the business. The reserve sits in the business accounts and gets transferred to the family by means of small regular paychecks. This allows me to manage the family budget the same way I did when Howard still worked for a big corporation. At least in theory. The actuality is that when the business accounts begin to run low, we go longer between paychecks and the paychecks get smaller. Sometimes we even pull money from our home equity to cover bills for the last month or two prior to a book launch. That money gets paid back as soon as the next book launches.

We are currently at the lean end of our income cycle. Last year we launched a single Schlock book and then invested money into inventory in the form of XDM books, a reprint of Under New Management, and slipcases to make boxed sets. The inventory investment was necessary, but it diminished our reserve more quickly than usual. Since last August we’ve been about two months from having to borrow money to pay bills.

I did the accounting this morning and we are still about two months from having to borrow money to pay bills. This is largely due to additional advertising revenue. However all the scrambling we did during the Fall definitely helped. It also helps that Schlock fans were generous and bought the things we scrambled to make. Christmas sales went well.

Now Christmas sales are largely finished and advertising revenue always takes a nose dive in January. However, the end is in sight. Travis is hammering away at the coloring for the next book. Howard is hammering away at the bonus story. We should be able to send the book to the printer right about the time our reserves run out and we start to borrow. The borrowing makes us nervous, but the truth is that our home equity and our IRA accounts represent an enormous reserve in themselves. We stock them up when the money flows freely so that we can draw on them when things are tighter. If we are depleting a couple months of the year and accumulating the rest, then we’re still in good shape.

We really are very fortunate to get to do what we are doing.