This post marks the start of something beautiful…something amazing…something I think you’re going to love a whole lot…
A BRAND NEW YouTube series all about how to sort out the basics of your books as a creative.
I’ll be covering several different industries — like copywriting and online educators — but today, it’s all eyes on designers.
If you need to get those business bookkeeping basics down as a brand and web designer, scroll on (or watch the video below!).
As a brand or web designer, your profit and loss (P&L) statements will look a lot like the ones that other creatives have. The rule of thumb I tell all of my clients is to organize it with your revenue at the very top, direct costs in the middle, and other expenses at the bottom.
Why this way instead of having expenses on top? Because it flows. You see what comes in, how MUCH you start with, and the process of how it goes out. It follows logic…
Money in → money out → money that’s left
You are, of course, free to set this up however you want, but in my time working with designers, this is what I’ve seen work the best!
For brand and web designers, I’d recommend categorizing your revenue streams, one-by-one. For you, this could look like:
You may have tons of categories, or you may only have one. There’s no magic number. The point is to break it down — you want to have a firm grasp on where your money is coming in from.
If you lump everything together under “Sales”, you may never know that you have a specific offering that’s sucking up all of your time but only brings in a small portion of your overall total revenue. That’s extremely eye-opening information for how to make changes in your business for better profitability. Ya feel me?
That way if you ever need to pivot — like retiring an offer or seeing where to expand your services — you know where to spend your time and energy.
Running a design business doesn’t come without a price tag! If you want to grow, or even maintain your business, you will have to dish out some money to keep it afloat — things like software, contractors, YOUR paycheck, the whole enchilada.
And being aware of what you can expect to pay for your industry helps you budget better. You’ll have a more accurate picture of what’s left over for the fun stuff — like buying that fun font that catches your eye just because it sparks your creativity!
When you’re crunching those numbers, don’t forget about taxes too. They can end up becoming one huge expense if you don’t plan ahead for them. (We recommend using the Profit First method and Relay Bank to earmark your cash for tax payments so it never sneaks up on you!) You should also stay up-to-date with sales and state tax.
Leave no stone unturned when it comes to tax expenses (and hey — if you don’t end up needing it, that’s more money in YOUR pocket!). Make sure you’re working with a CPA you trust if taxes got you feeling queasy.
Once you have that sorted, go ahead and take a look at your direct costs. This would include any junior designers you’ve hired or contractors you work with to supplement the copywriting portion of your projects.
And then comes the lengthy part — expenses. But don’t worry, I only say it’s lengthy because you’re looking at each and everything that’s coming out of the money you make. It’s not so much complicated as it is a longer portion of the report.
This includes things like:
Most of the brand and web designers I work with choose to set up their business as an LLC, which in its simplest terms (regarding how you pay yo’self), means that you take an owner’s draw from your business account and transfer it to a personal one.
But if you’re growing pretty fast and start to have A LOT more bottom-line profit, I’d recommend thinking about becoming an S-corp (which means you are an employee of your business and pay yourself a salary). But before you do so, talk to a CPA you trust who can help you run calculations on if it will actually save you money (or if it’ll just be a big ol’ stack of paperwork for minimal tax benefit).
It won’t necessarily change how much you get paid, but it will change how you do your books.
I will say that a lot of designers can make it several years before they need to hire a bookkeeper to manage it all. It’s usually when they open up a template shop or increase the number of transactions that they’re ready to outsource.
BUT here’s the caveat — you don’t actually have to wait until then to hire a bookkeeper. Maybe you hate numbers. Or you just feel like you don’t have the time. Sounds like a good enough reason to outsource to me!
Really, any time is a good time to work with a bookkeeper — so why not us? ?