Are you a makeup artist or hairstylist who is working for yourself? A freelancer, or sole proprietor? Do you know what your business is costing you?
Perhaps you know the cost of the PRODUCTS that you are using for each person who sits in your chair, but what about all the other expenses that go into running your own business? They sure add up!
In this week’s video you’ll learn more about these other expenses, and how you can work out the cost of your business and how many clients you need to see each month to make a profit.
When you became a makeup artist I’m sure it wasn’t so you could work with excel spreadsheets, budget, and balance your books. You do this because you love being creative and helping your clients look and FEEL beautiful.
The reality is, however, that if you want to have a successful business, you need to manage your business finances. It’s no good just watching money come into your bank account and spending it all at will, and throwing your receipts in a shoebox until the end of the financial year, and THEN thinking about them (or worse, handing the entire box over to your tax agent to deal with).
This is a mistake that is costing you money! (and I’m not just talking about the money spent on paying your tax agent to take care of your books)
While I find that most artists have a pretty good idea of what money is coming IN, what they are earning, and if you’re using a system like Square for your invoicing, they even produce summary reports for you), I also find that most artists have NO IDEA how much they are spending on their business.
And here’s the thing – what you EARN isn’t as important as what you get to KEEP. In business, what you get to KEEP is known as your profit, and the simple equation is Income minus expenses equals profit.
For example, if Mary Smith makeup artist is charging $100 per makeup and sees 10 clients this week, she has EARNED $1000, however, her expenses might be $200 for the week, meaning her profit is only $800. (and that’s before she has even paid her taxes!)
Now the good news is, you only pay taxes on your profit, so it stands to reason, that you want to ensure that you are recording ALL your eligible expenses, so that you minimise the amount of tax you need to pay (legally, of course). If you are only keeping records of the actual makeup you buy, you end up paying much more tax than you need to.
So when it comes to expenses, some are really obvious.
- Your kit! Especially when you are first starting out, you will spend a lot of money getting your kit set up. Even if you went to college and were given a kit when you enrolled, you’ll probably find you want to add to that and replace some of those products. Setting up your kit can definitely run into the thousands, which is tricky when you’re doing it at the beginning of your career and likely aren’t earning a lot of money yet.
But even when you’ve been around for decades, you still need to restock products (especially things like mascara that needs replacing often, skincare, and popular foundation colours which you use a lot), and you also need to keep buying disposables. I try not to buy too many new products each year, I have my workhorse products that I know perform for me, and I’ve learnt not to get caught up with buying every new product!
Here’s some other expenses that you also need to account for:
Rent (salon, studio, home office)
Parking and tolls
Further Education and Professional Development
Phone and Internet
Bank charges (including fees for using Square etc)
Marketing and Advertising
PPE – masks, gloves and hand sanitiser
Motor vehicle expenses.
Now obviously I’m not an accountant, and I’m not qualified to give financial advice, so all of this information is general, and a starting point. You should definitely chat to your accountant to make sure you are maximising your deductions, as depending on where you live, there may be others you can claim (eg, depreciation on larger items, perhaps even including your car)
So what do you do with all that information once you have it?
Well, I’ve created a resource for you, which is a worksheet that you can fill in your rates and expenses to determine the cost of your business, and so that you know exactly how many people you need to have in your chair (or, how many days if you do commercial work and charge a day rate). This will also help you know when it’s time to put your prices up!
You can download the worksheet at suelouise.com/rates – its totally FREE!
Let me know in the comments below if you can think of any other expenses you might need to account for.