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One of the most profound changes in the way markets work is undoubtedly the emergence of the creative economy. So much of the process for how we find products and choose to buy them has changed because of social media platforms and who we follow.
The emergence of the creative economy has been well documented – and in the past few years it has undoubtedly come into its own. One of the biggest industry stats this year was SignalFire’s study which found that more than 50 million professional creators and another 139 million semi-professional creators around the world. Last year, the creative economy reached more than $104 billion in terms of market size.
There is no doubt that in the age of social media, creators are the new entrepreneurs. But with small and medium sized makers vying for a slice of the pie, it’s becoming increasingly clear that creators often have doubts about the best ways to manage the financial side of their business.
One of our users (who is a creator) told me last week that she is very concerned about becoming a full-time creator. Her story of becoming a creator is typical: it happened organically over time. She was passionate about her biggest hobby and started sharing that passion on social media. As her following grew, brands started approaching her and she started earning more. But she wasn’t prepared for the administrative work or the new tax concerns that came with the income. She had learned how to turn her creativity into a business, but the financial side was a very different learning curve.
She expressed her gratitude for the opportunity to have an income following her passion, but creating content remains an afterthought for her. One of the biggest reasons she hasn’t quit her job as a lawyer in the traditional workforce is that she still has to sort through all the financial considerations and struggles to understand how to take home as much after-tax as possible. This is what I recommended to her:
Related: 6 Money Management Tips for Startup Entrepreneurs
1. Choose your rates wisely
If you haven’t already, it’s a good idea to compile a list of your base rates for the different types of work you do as a creator. Standardize what you ask for a certain number of posts or for posting on a certain platform. Does an hourly rate make more sense for the type of work you do?
Join some of the online content creator communities, some of which exist on the platforms where you operate as a creator, to share experiences and information – from understanding the market price for the work you do to getting these kinds of tips on how to manage your finances.
Also, don’t forget to plan for increases in your rates. I see that creators constantly underestimate their skills. They don’t realize that after they’ve been doing it for a while, they’ve gotten better and now they’re underpaid. Believe in what you have to offer and ask for fair compensation.
2. Get a separate business account as soon as possible
This may not be news, but it is worth repeating. Like so many freelancers, creators usually start by putting their earnings in the only place they know, their personal checking account. The amounts are small initially and they think it doesn’t matter where their earnings are deposited. But when income starts to grow, having a separate business account can make a big difference in your bottom line.
For starters, it’s much easier to keep track of how your money flows. The sooner you make this a habit, the more time you will save on the road. Instead of manually entering everything into a spreadsheet, you can access your bank statements for all the information you need at the time of tax. Going forward, you’ll be thankful you didn’t wait this time to keep track of your income and expenses.
Related: How to Keep Your Business and Personal Finances Separate
3. Get a System Upgrade
Speaking of tracking your income and expenses, you can find tools to do it for you. All types of digital products and systems take full advantage of artificial intelligence to automate the repetitive tasks that used to take a lot of time for people. Be smart about your accounting, because as a freelancer in charge of your own taxes, it’s all too easy to leave money on the table.
Probably the biggest part of this is classifying your expenses correctly. Make sure your business expenses are classified as such. Any of them can benefit you when it comes time to pay your taxes. There are literally hundreds of categories that a maker’s expenses can fit into, and each category correctly classified as a business expense is a deduction from your taxable income.
In addition to the tools that make your job easier, spending itself is a creator’s best friend. Make sure you are aware of all the things that qualify as a business expense for creators, and pay for it with that business account you have set up. The next time you spill windows on your laptop, that $800 computer repair could be a tax write-off.
4. Outsource, outsource, outsource
I see all kinds of freelancers, especially creators, talking about how to do everything themselves – from video editing to relationship management to doing their own taxes, in addition to creating content! Don’t be a hero. It makes no financial sense to save money by doing everything yourself. Those insane hours you spend doing everyday tasks that someone else might be doing could be put to much better use for the more valuable work that got you where you are as a creator.
Related: How Entrepreneurs Can Successfully Manage Their Business Finances
The more of these tips you can use in the way you run your video maker business, the more successful you are likely to be. After all, the creative economy is based on innovation, and so are your financial practices.