Protect your creative business from a recession

art business tip
Protect your creative business from a recession

This is a tough-love topic and frankly, many of you guys may not be happy with me - I'm the bearer of bad news.   BUT I do have good news at the very end of this article.

So first off always remember: 

Numbers don’t lie, but feelings, news media, and politicians do.  

 

Ready? Let’s talk business and how to prepare your creative business for a recession and frankly what every business should do regardless of economic times.  

 

So what is a recession, anyway?

Economies go through periods of expansion and growth, as well as periods of decline known as recessions that generally last nine to twelve months.

What happens? Business freezes up. Growth stops and maybe even declines. Projects, businesses, and plans die abruptly.

Do you think we are in a recession now?  

Hell yes we are in a recession!  Despite the news NOT talking about it, there is a global recession right now caused by the COVID-19 Pandemic.  No one can deny that we were all severely impacted in 2020 and the economy will continue to be impacted globally.

 

And it is not going to get better for quite a while thanks to the decisions the 2021 Presidential crew steamrolled into the making.  I’ll go more into the economic impact of some of those decisions as we progress. 

What are the key indicators of an impending recession?

This section is a bit of a snore...but necessary: the biggest sign of a recession is the financial market. The top economic indicator is the  “inverted yield curve”. 

 

According to Investopedia.com “An inverted yield curve represents a situation in which long-term debt instruments [long term debt instruments are loans with a maturity of at least one year] have lower yields than short-term debt instruments of the same credit quality.”  

In a weakening economy, short-term interest rates go higher than long-term rates. 

 

But that’s just looking at bonds and interest rates - let’s look at common sense, there are 3 big things happening: 

  1. Big government dictating how businesses run with higher tax rates and increase the minimum wage requirement
  2. Big government spending waayyyyyy too much
  3. Lower GDP (meaning US isn't producing as many products and services because of the pandemic and big government regulations)

When the government spends more than it makes through stimulus checks, ‘free’ programs, and so on - the government is investing its holdings on future investments (your kids and higher taxes) to pay for these programs.  As a result, the current administration continues to increase the debt using, in part, China's funding

AND when you take a look at some of the most recent legislation you will hopefully see how this is going to play out:  

 

  • Regulation Mandate: The government increased the minimum wage from $7.25 to $15/hour.  
    • Effect: This will impact small businesses (you) and your supply chain (think UPS rates will increase, the cost of goods for your art materials will increase, cost of food will increase ...burger flippers will get paid double - so the amount you pay for a burger will increase...) .  
    • In time, your wage vs expenditure will balance out, but until you can afford $60 at the McDonalds window for a family of 4 you will be eating beans and rice. 
  • “Free Money”: The government increased debt by providing stimulus checks. 
    • Here is a quote from CRFB.org (Committee of Responsible Budget) “With the enactment of the American Rescue Plan Act, we now estimate debt will total 108 percent of GDP this year, which will surpass the prior record of 106 percent set just after World War II. Ultimately, we project debt will rise to 113 percent of GDP by 2031.
    • This money will eventually have to be paid back - screwing our children with higher taxes.  

      If you want a REALLY INTERESTING/SCARY READ on just how bad our government is in debt - read this article from the Committee for a Responsible Federal Budget: “How High Are Federal Interest Payments”
  • Taxable Income: Government intends to increase taxes on taxable income (we’ll yeah, they have to pay for all those stimulus checks and ‘free’ programs thereby decreasing your take-home wage).
    • The government is a bit shifty with income tax rates, the rates stay the same, but the dollar amounts within the tax brackets shift.  Like I said, shifty...check out this article from Debt.org about tax Brackets
      • Real-world example: I remember when I got promoted at ADP and got a nice bump in pay, but the pay increase was just enough to get me in the next tax bracket.  In the next paycheck, I found out that after taxes I was making less than before the promotion!
        Work hard and the government says - 'oh good you are worth more to me now and will take more.' Get a bonus for great work, the government takes close to 50%.
        Is this fair - no, no it is not.
         
  • Decrease GDP because jobs are going to go overseas because of the next bullet point that the new boneheads in charge implemented... which will trickle down to everything you do...
  • Increase corporate taxes.  The result will be jobs will, once again, move overseas.  Thereby increasing the fees that you pay for your consumer goods, decrease corporate jobs and so much more. 

Do you see the problem?  

 

 

Hello, Recession…. 

 

So, now is the time to get out of your butt in gear if you haven’t already. You’ve had years of pretty good economic times, but thanks to High Government control under the current administration and low GDP potential, those times of craft fairs, galleries, art shows are going to go on a downturn because the middle class, which made up a majority of buyers, will have less disposable income on luxury goods.  

And art is a luxury good.  

So how do you prepare your creative business for a recession? 

In all honesty, this is something you should be doing regardless of the economy. I mean seriously, who saw a pandemic coming? Always prepare for the worst, hope, and be grateful for the best. 

 

Nevertheless, here are 4 things you can do.

  1. Get Your Finances In Order

If you haven’t read this book or taken the course, get it now!  Dave Ramsey “Total Money Makeover” and Entreleadership  (affiliate link).  This book literally changed our lives and there are 4 key takeaways that can benefit your creative business:

  1. Cash is King. If you don’t have the cash, don’t buy it.  This will cause you to get really creative in finding ways to make/find income when you really need/want something.  Plus in economic downturns, I can tell you, people and companies will negotiate and cash is preferable over credit. 
  2. Personal Finances: Have an Emergency fund that is 3-6 months of living expenses saved. 
  3. Business Finances: Have an Emergency fund of 1 - 2 years of business expenses saved.  
  4. Get out of debt as fast as you can.  

 

For Personal and Business finances, you have to be brutally honest with yourself and assume no income at all. So please, please, please do the math! Your family and your sanity will love you for it later. 

  • How much do you need for rent? 
  • How much do you need for food? 
  • Transportation? 
  • If you run a business, how much do you need to pay your partners/employees? 
  • Will you even be able to pay them?

 

If you aren’t sure on how to do all of the above, get this book and work on it  “Dave Ramsey “Total Money Makeover”It will change your life if you work the plan

 

2. Build Solid Relationships with Your Clients

Each one of your clients needs to know, like, and trust you, because when the recession hits and they start to lag on their payments to their consultants, vendors, utilities - you want to be the very last business they stop payment to. You want them to pay you even after they stop paying others. 

 

Recessions are an intense time where relationships and businesses will be tested.

 

Start those weekly newsletters, reach out to clients individually, get creative with payment structures, promotions, and ensure your commission contracts have late fee terms.  

 

3. Get Another Job

Pride doesn’t pay the bills. A responsible adult does.  Cold, hard, truth.  

 

You do not become less of an artist if you take on another job, in fact, having another job has benefits!  Having a job to support your family and your art enables you to be better focused during the times you get to be with your art.  Having a job also allows you to take risks with your art because you aren’t dependent on an income from your art, it allows you to be freer with your art.  

 

Having a job can, in fact, be liberating for your art.   

 

4. Build a Strategy: Be Mindful, and Get Creative

 

Recessions are a meditative moment. 

 

I know this sounds nuts, but it’s true!  This past year 2020 was transitional for many artists! The quiet time of no-business gave us time to really think about “Do you really want to continue doing what you’ve been doing for the past 10 years with the same people?” 

 

The definition of insanity is doing the same thing over and over again.  What have you been doing that is working?  And what have you been doing that isn’t working?

 

Take the time that recessions give you to actively research your audience and collectors or see what others are/are not doing that could benefit the clients and start offering that!   

Be brave, find the meaning in your work, in your life and your future, and those you want to work with.

 

Conclusion

I am a person of integrity and who loves to help my fellow artists, it is my heartfelt desire to help prevent pain and you can disagree with my assessment of the political and economic environment. That's fine, you have the freedom to do so.  BUT you cannot deny the action plan is logical and should be implemented as soon as possible.  

Also, remember economies are cyclical, what goes down must come back up.  Don't get discouraged, be prepared. 

Good News

After writing this I made a major decision to help my fellow artists!  

In the U.S., prices for everything are increasing (you've seen it at the gas pumps...), so I've decided to reduce my membership price from $49/m to $24.50/month*.

Join today to take advantage of this offer.  

* Note: when the economy goes back to normal, my prices will also go back to normal/increase - I've got to pay for gas too. 

*The temporary price reduction applies to Positive Painter Membership Only. All other program pricing remains the same.

 

NEVER STARVE.  YOU CAN THRIVE!

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