The HeART of Design Business: Finance Basics for Freelancers

TheHeARTofDesignBusinessPart1MoneyWhen you, as an owner of a design practice, face business realities like finances, schedules, sales, and employee turnover—does the creative part of your soul start to shrivel? Does it feel like all the creativity gets sucked out of the room? As an artist or designer, you live with an uneasy tension between your creative side—the work of your heart—and the necessary encumbrances of business. The struggle is not so much about business capability as it is an inner conflict. The artist within strives against the business matters without. This inner tension between matters of money, time, marketing, and management can stunt and stifle the creative heart.

Are you tired of simply living in an uneasy détente with the business side of your work?

This is part one in a five part series on the HeART of Design Business. I’m going to address the five main areas of business that artists and designers must face—whether freelancers, or owners of design firms: money, minutes, management, marketing, and motivation. The artist in you comes to each of these important facets of business with a unique set of challenges related to your creative wiring. It’s not easy. The tensions run deep. But your creative heart, and the demands of business can be reconciled.

We’ll Start With Money

If you’ve been to art school then you will know that what I’m about to say is true, though often unspoken. There is a perceived hierarchy of prestige and purity between the various departments in art schools. The fine arts are at the top, and the applied arts—the commercial arts—are at the bottom. It is often thought that fine art, produced in the studio, is a more pure form of artistic expression because it’s pursued for its own sake. Money is only a peripheral concern for the fine artist. The sale of their artistic expressions comes after they’ve been produced. Therefore they are deemed to be a more pure artistic product. In contrast, designers must negotiate fees and contracts before applying their skill to a problem—their product tied to money—thus tainted.

Now artists are typically a kindly lot, so these hierarchical notions are usually left unspoken. Nevertheless, commercial arts hold a less noble place in the hierarchy of esteem—and are sometimes demeaned as artistic compromise, or worse, a sell-out. Those who choose to pursue the commercial arts struggle with these unspoken tensions—even if only deep inside their own hearts.

Of course this hierarchical idea is nonsense. There is no shadow of compromise cloaking your design business in shame. Designers have enough to struggle with just learning proper business skills like bookkeeping and financial measurement without having to bear subconscious accusations of “sell out” that undermine their business efforts.

What is Money?

Let’s fix this. And let’s start by remembering what money is. It’s often said that money is the root of all evil. Not true (and wrongly quoted). Indeed loving money (a.k.a. greed) is a root of much evil, but money itself is not evil. And it’s not even merely neutral. It is actually a very good thing. Have you ever stopped to think about how much good money does simply by existing? Try imagining the alternative. Suppose you had to trade and barter for all the goods and services you need. What if, every time you needed a gallon of milk or muffler replacement, you had to locate a farmer or a mechanic who also happened to need a new logo? Money enables us to trade our goods and services and hold onto the value of that transaction, either storing it for when we might need it later, or use it to acquire what we want at a fair and stable rate of exchange. We benefit tremendously every day simply because money exists.

So money itself is not the problem. Maybe it’s the inordinate accumulation of money, leading to greed, that makes us think our business transactions as somehow tainted? Maybe it’s capitalism—the deliberate attempt to increase profits—that turns art into avarice?

Are Profits Tainted?

Well maybe, but not so fast. Again let’s consider what profit is. Profit is just the leftover money after all the costs of an exchange have been paid out. And the truly wonderful thing about these transactions (when they are entered into fairly and without deceit or coercion) is that at the end of any business transaction both parties benefit from it. The remainder of that beneficial transaction, after your costs are paid, is your profit margin. And that margin, that measure, is in a tangible way, measuring the degree to which your client values the benefit you provided. So a good and healthy profit margin is not something to be uncomfortable with. It actually represents the value of the service you provide. Do you think design is a valuable service? Do you think your work is valuable? Of course you do! You wouldn’t do it otherwise. If you value your contribution to the world—you should be eager to have that value affirmed. And your profit margin (for better or worse) tells you how much your work is valued.

Further reading: Pricing your freelance and small business work can be challenging for creatives. Eric Holter shares how and when you should increase your rates.

The point is this, you should not let the commercial nature of the kind of creative business you’ve chosen to pursue diminish your love for your craft and the value you place on it. Money ought to be a token to you of the goodness and benefit your work provides to others. It is not a stain on your creative efforts—it is its reward—in more ways than one. Frankly, if there are any uncomfortable, sketchy financial distortions going on in the arts, they are far more often encountered in the bizarre valuations of the fine arts world than in the commercial arts!

So when you look at your balance sheets (which you should do on a monthly basis) and when you see your total equity increasing—that should warm your heart that your creative vision and artistic skill is producing measurable good in the world. Your profits are an expression of that.

And then you can put those resources to work doing even more good. You can create new jobs for designers through your growing firm. Or you can invest back into your skills through professional development, thus improving all the more the services you provide to future clients.

Money is necessary for you to move in these positive directions.

So don’t let art school angst keep you from embracing the financial aspects (budgets, cash flow, balance sheets) of running your firm. You can embrace the money side of your business as a good and necessary part of fueling much good, more beauty, and increased benefits for many people.

In part two of this series I’ll apply principles of the HeART of Design Business to the limited number of minutes each day has—how your time is measured, and constrained—and how your artistic heart is affected by those business realities.

Z6476_new_2Not only is there much misinformation regarding money and apprehension in dealing with it, but it’s also a subject that is mostly taboo. People working in creative fields don’t talk about it and are afraid to reveal their ignorance or share their secrets with potential competitors. As a result, they may not know how to handle money or what financial techniques will help them succeed. The Creative Professional’s Guide to Money provides a collection of tools and ideas that will address financial questions common to many creatives.