Life can have unexpected turns, mountains, valleys and even cliffs that no one could ever predict. The beginning of 2016 Brandon and I came to a cliff. As we peered out over the vast seemingly bottomless abyss we could feel our hearts leap from our chests to our throats. With knotted stomachs, parched mouths and veins filled with anxiety we held hands, put our faith in God and leaped into the great unknown.
What was this crazy Leap?!?!
We decided to have Brandon go full time on the business with me. For the last 7 years I have ben running the business by myself full time and Brandon has been my pro second shooter. But, he has also worked full time in Ministry giving us two incomes and a sense of security. However in the beginning of 2016 we came to a cliff, a do or die moment. We needed to decided if Brandon was going to continue in Ministry (which meant mostly having to retire our business) or if we were going to make the jump to allowing our business to fully sustain our living.
We jumped and with a little help + planning so can you. Below are a few tips to make your jump a little less scary and more invigorating!
1.Frist and Foremost… KNOW YOUR NUMBERS
•Cost of Goods Sold • Net Profit •Gross Income •Fixed Cost
*Cost of goods sold (COGS) are the direct costs attributable to the production of the goods sold by your company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. … Also referred to as “cost of sales.”
For example, if we offered a $4200 wedding collection – $1152 cost of goods sold = $3050 net profit per wedding
*Gross Income is your company’s revenue minus cost of goods sold. Also called gross profit and, when it is expressed as a percentage of revenue, gross margin.
By multiplying your average net profit per wedding and the number of weddings you photograph a year, you’ll find your gross income. $3050 x 40 weddings = $122,000.
*Fixed Costs is a cost that does not change with an increase or decrease in the amount of goods or services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of any business activity.
All businesses have a specific amount of income they must generate every year to cover all expenses. Examples of fixed cost are: Rent/Mortgage for your business, Cell Phone, Internet, Web Hosting, Business Insurance, etc. There are also Variable Costs that you will have each moth which may fluctuate… Utilities, Shipping Supplies, Technology based Upgrades (computer or gear upgrades) Advertising, Meetings, Education, Branding, etc.
2.PAY YOURSELF – this may sound obvious but it can be very tempting to put all your profit right back into your business and not pay yourself. Which is the fast way to burn out and give up on your business. Below is how to figure out what you should pay yourself.
Gross income (after cost of good sold) – fixed and variable costs = Your Salary
We personally have a little safety net so our equation looks a little more like this:
Gross income (after cost of good sold) – fixed and variable costs – unforeseen cost = Your Salary
The “Unforeseen Cost” is basically money that stays in our business account just in case something would happen, for example: computer or hard drive unexpectedly crashes, gear or equipment break, an unanticipated rent increase, cell phone gets lost or dropped in toilet, etc.
We hope this you make the leap to using you business as a source of sustainable income!