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- [00:00]
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Hey, guys.
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So last week when we kicked off the pricing and money theme for the podcast, I introduced that by talking about the three business models, the donkey, the workhorse, and the unicorn. And hopefully you have either in the past with me, identified which of those three business models fits your business, or you went and took the quiz at this can't bethard.com quiz to figure out which of those three models is best suited to your preferences, your kind of circumstances, all those different things, right? But the other thing that I mentioned is that profitability isn't just about what you charge. It's about the whole equation, which is revenue minus expenses. So this week we are diving into the expenses side of that equation. And here's the thing. The reason that I put an entire episode together about expenses is that sometimes the easiest way to make more money is actually doesn't involve making more money at all. It involves spending less money. However, figuring out where to cut expenses really requires strategy and thought. And that's why I wanted to take this time and talk about it. Because when you cut too much or you cut the wrong thing, you tend to sabotage yourself. Your time, your business, your bottom line. So today I'm sharing my approach to evaluating expenses in a way that makes your business stronger and your profit margins bigger.
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Welcome to this Can't Be that Hard. My name is Annemie Tonkin, and I help photographers run profitable, sustainable businesses that they love. Each week on the podcast, I cover simple, actionable strategies and systems that photographers at every level of experience can use to earn more money in a more sustainable way. Running a photography business doesn't have to be that hard. You can do it, and I can show you how.
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So the first thing I want to talk about today is the reality that, that you cannot manage what you don't measure or what you don't pay attention to. Right? And I think that it's really normal for photographers to have a general sense of where their money goes, but when it comes to specifics, it's a little bit murky, right? They don't actually know how much they spent on software last year or how much their equipment costs on average each month. Right? So before we talk about what to keep and what to cut, we really need to just get a full accounting of what it is that you are spending money on in your business so that then we can get strategic about it. So the very first thing that I am going to encourage you to do, if you happen to be in the majority of photographers and don't have this readily at hand, is to list out your expenses for, right? And this first step is simple, but it does take a little bit of time because what I'm asking you to do is list out every single business expense, every single thing that you spend money on in your business, ideally from the last six to 12 months. Now, hopefully you've got a dedicated business credit card and bank account for all of your business expenses. I have mentioned this many times here on the podcast. I talk about it a lot. This is like Business Money Management 101 is separating your personal from your business expenses. If you don't have this, pause the podcast and call your bank and say, I want to open a new account. This shouldn't really cost you anything. You will need to have your business set up legally, which hopefully you do. But as long as you do, you can just set up a checking account, dedicate it to your business, and then from that point forward, you only spend money from that account and or an associated business credit card, right? This makes all of your business money stuff so much easier because you're not having to go through your personal history with your credit card and your bank account and all that sort of stuff and determine, did I spend this for me, Did I spend this for my business? It's much cleaner at tax time, all that sort of stuff. So again, stop what you're doing, go open a business checking account and get a business credit card. This is going to make your life so much easier. Not just for this exercise, but for taxes, tracking, profitability, everything. Assuming you have a dedicated business account, this process should be pretty straightforward. Basically, you just pull up all your statements and you look at everything and you copy each expense, each line item into a spreadsheet or air table if you're me and you list them out. But a few things to keep in mind. Number one, as I said, we're looking at multiple months, right? You can't just look at a single month's snapshot and assume that is reflective of your general spending patterns. Some expenses are monthly, they do come up each month, but a lot of them are not, right? They might be quarterly, they might be annual. When it comes to buying gear, that's something that you actually have to account for over multiple years. But a year should give you a pretty good idea, right? If you paid for, let's say, a conference in November that you're attending in April, you're not going to see the money that went out for your plane ticket or your ticket for the conference or anything. If you're looking just at one month so you want to see the full picture of what you're spending over time. If 6 to 12 months feels overwhelming, start with 3 months and kind of work your way back. Maybe, maybe, you know, set aside 30 minutes each day for the week, whatever. The other thing I want you to do as you're listing these expenses out in your spreadsheet is categorize them as you go. So you don't just want a giant list of charges. You want to group things by, you know, software, equipment, outsourcing, education, marketing, insurance. And again, if you are using, working with a bookkeeper or if you manage bookkeeping on a regular basis, you'll be familiar with this. And you may already have this done, right? This is reconciling your accounts. It's the same kind of process where you're saying, you know, this money that I spent with Adobe is a software expense that I have. But by doing this, especially if you're using a tool like Airtable or something, where you can then say, you know, what percentage of my expenses are software, which percentage of my expenses are gear, that's where you start to see patterns. You spent $1,200 on software, you spent $3,000 on equipment, whatever the case may be. The other thing I want to remind you is don't skip the small items, right? It's easy to just kind of scan through and look for those three and four figure expenses. But it's the $20, you know, coffee date here and the $30, like, notebook that you splurged on or whatever that adds up to can add up to hundreds or even thousands of dollars a year. And so you kind of want to look at those because they're often the easier ones to ignore, and sometimes that's the easiest stuff to cut. So write it all down, every purchase, every, you know, lunch out with a client. And once you have that list, then you're ready for the next step, which is where we get to the strategic part, and that's figuring out what to keep and what to cut. Now, you might remember Marie Kondo. I talk about her. She obviously is very famous. She's got that whole thing where she has you ask whether an item sparks joy, if you're deciding whether to keep it or get rid of it. That is her filter. And it doesn't quite work in a business because obviously sparking joy is probably not how you feel when you think about your CRM subscription or whatever. But the idea is the same. We need a filter for how we determine whether to keep or get rid of Something And I actually recommend that you use two filters. The first is whether a particular expense matches your business model. So I want you to think about this kind of like caring for a plant. If you've got houseplants, you know that all plants, no matter what, unless they're plastic, they need water, they need sunlight, they need nutrients, but they all need different variations on that theme, right? If you give a cactus the ca the same care that you give to a fern, it's going to die pretty quickly. So you have to understand what kind of plant you have in order to give it the right care. And the same thing goes with your business. All businesses have expenses, but the expenses that make sense for a unicorn business might, you know, tank a donkey business and vice versa. So you need to ask yourself, what model am I working toward? What model do I have? And does this expense match that model? So I'm speaking rather broadly here because every business is different. But if you're building a unicorn business where you've got, you know, your whole thing is that this is high touch, it's luxury. You charge premium pricing. A unicorn business can't cheap out on things that sort of give it that luxury feel, right? Custom branding, professional website design, client gifts, beautiful packaging. Those items aren't optional for a unicorn business. They are in fact usually the thing that your clients are paying for. That's what, that's why they found you and wanted to sort of splurge, right? So you can't cut corners on the things that make it obvious to your client that this is a luxury business. But you probably can skip the Facebook and Instagram ad budget because you're not getting clients from ads most of the time. You're getting clients from referrals, from networking, all that sort of stuff. You definitely don't need the premium Yelp listing. You may also not need a lot of automation software or the like super premium CRM features. If you're running a low volume business, right, you may be able to get away with a more basic system. Although I would caution you, I mean, I feel like good systems are kind of baseline for just about any business. So exercise caution. When you are considering getting rid of your CRM, that's probably the sign of bigger issues in your business than just needing to save 40 bucks a month or whatever. On the flip side, if you are building a donkey model business, you've got high volume, you're efficient, you're systematized, those are the sort of key factors in your business, then your investment is going to look like Things that save you time and make it possible for you to serve more clients. So whereas a unicorn doesn't need to spend any money on ads, a donkey might spend a lot of their budget on ads. They're also definitely going to be investing in automation tools, you know, self scheduling software, all those kinds of things. But they can skip the fancy branding and the fancy packaging and the high end client gifts because that's not what their model is built on. And then finally, the workhorse business expenses are a little bit trickier, right? As I said last week, the workhorses exist in the middle. And one of the big things that a workhorse has to do is figure out how they differentiate themselves from all these other businesses that also operate as workhorses. And your expenses are going to go along with that. And how you spend money in your business is going to sort of be dictated by what those points of differentiation are. So you're investing in the things that you sell your business on and you're skipping the things that aren't moving the needle for your specific clients. I don't have hard and fast rules about that because there are none. But hopefully listening to the other two, you started to get the sense. So that's the first filter, right? Does this expense that I'm looking at right now match the model that I'm building or that I already have in my business? The second filter, the second thing that you need to ask yourself, is this an expense or an investment? Is this just costing me money or is it factoring heavily into making me money? And just to clarify, an investment isn't just something that directly generates revenue. An investment can be something that saves you time, makes you money, or some combination of the two. But this is where I think we all tend to get tripped up, because I don't think any of us are buying stuff for our businesses just for fun, right? Most purchases start with the idea that what you're spending money on is going to help you save time or make money, right? Software, gear, subscriptions, these are all things that, you know, their sales pitch is I'm going to help you make money, save time, whatever, that we're going to improve your business. But inevitably, sometimes we make the wrong call for our businesses, right? We think that something is going to help us and it turns out not to. We buy a set of presets and don't end up really using them, or we sign up for a coaching program that unfortunately doesn't turn out to be super useful. Then there are instances where we get overly enthusiastic Right. We want that 1.2 lens because it's super sweet and the bokeh is amazing. And, you know, it's just like, ugh, I've been dreaming about this lens. But if you're looking at cutting costs, you have to ask yourself, like, how many of your clients wouldn't come back if you were shooting with a 1.8 instead of a 1.2? Can they tell? Do they know? Are they really. Is it really that extra little bit of shallowness in your images that they're hiring you for? Same thing with, like, if you're subscribed to software and you're on the premium version and you look at how you're using it, and really you could get everything but maybe one feature on the basic version of that software. Maybe it's worth it to reduce your cost by half each month. When it comes to past purchases, I want to caution you, like, don't beat yourself up. Obviously, again, we all make these mistakes. We're all out there trying to figure out what's going to work for us. And sometimes you just have to try something to see whether it is going to work. So don't beat yourself up. But certainly note where you tend to make mistakes. Because, you know, some of us might over invest in education, some of us might over invest in gear. We all have some spending habits and the things that we like investing in or spending money on. And when we know those things about ourselves, we can change our behavior going forward. So if you're somebody who has a hundred dresses in your client closet, chances are you could probably stop adding to your collection. For now, that is probably plenty for your clients, even if that's something that you enjoy building out. And obviously if you've got subscriptions or gear or whatever that you're not using, that's a great opportunity to cancel them, sell them. You know, if something isn't saving you time or making you money, you probably don't need it. But, and this is the part that I think is really important and worth mentioning as we are talking about cutting expenses. You can't starve your business and expect it to perform for you. This is the time of year we're coming off the slow season. Your bank account's probably looking kind of small. And at this time of year, I see a lot of photographers freaking out about expenses and slashing and burning everything, right? They cancel their email service provider. They stop investing in education. They downgrade their software to the cheapest possible options. And I get it right when you're looking at Your profit and loss and you are not seeing the numbers that you want. It's tempting to just kind of burn it to the ground, but you are running a business. And although our businesses have relatively low overhead, in the grand scheme of things, it does take money to make money. So if you start cutting the things that are actually helping you run an efficient business, or helping you grow, or helping your clients have a better experience, you're going to feel it and your clients are going to feel it. You're going to spend more time doing things manually. You're going to make more mistakes, Things will slip through the cracks. You're going to feel burned out because you're trying to do everything yourself with like, duct tape and free tools that don't actually work well together. High quality software, good systems education conferences. These things may seem expensive in the moment, but they're often more directly related to your ability to make money than, say, buying another piece of equipment. So, yes, cut the wasteful expenses, Cut the things that aren't matching your model. Cut the things that aren't actually investments, but don't starve your business of the things it needs to thrive. You have to nurture your business with the resources that it requires. The key is just being strategic about where it is that you spend that money. Okay, so we've listed our expenses, we've evaluated them. Now we need a system to keep track of everything going forward so this doesn't become a once a year or once a decade scramble. So, surprise, you need a system where you can see all of your recurring expenses and all in one place and track what you're spending month to month. Again, if you work with a bookkeeper, then you probably already have this set up and you're going in and doing this already, which is amazing. If you don't have a bookkeeper, you could use accounting software. You can put this into Google sheets. You know, you can make it as simple or as complicated as you want. In the photographer's business dashboard, one of my favorite pieces of that dashboard is a table. And again, the, the business dashboard is built in airtable. The course is kind of like a course template thing where you're learning how to use airtable and you get this dashboard that kind of comes along with it that you build out and customize. But one of the tables that I teach in there is a subscription table where you enter all of the subscriptions that you have in your business and then you get automated reminders when the payments are coming up so that you can decide, like, is this Something I want to keep do. I want to cancel it before the renewal date passes. And I set that up years ago in my own business, and it has saved me thousands of dollars. Because how many times have we, you know, subscribed to something annually or whatever, and then halfway through the year, we stop using it, but we forget to cancel it, and then we don't even think about it until two months after your credit card's been charged and you're looking at your statement, you're like, ah, that is a frustrating thing. Setting up auto reminders for yourself for these things makes a huge difference. But no matter what kind of tool you're using, what matters is that you implement this system, that you create this system, and then you actually use it, right? And at a minimum, I would say that you want to set scheduled time to review this. Every quarter. Every month is ideal. Every quarter is still fine because again, we don't have tons of expenses in our businesses. So every three months, you open your spreadsheet or whatever and you add your new expenses. And then you ask yourself, am I still using this? Is it still delivering value? Does it still match my business model? And could I get the same result for less money by combining things or whatever? This shouldn't take hours, maybe 30 minutes every few months. And again, this will save you hundreds or even thousands of dollars a year. The last thing I want to point out is that your expenses aren't static. They are going to change as your business evolves, and they should, right? You're going to grow, technology is going to change, new offers are going to come around, your business goals and your needs will evolve. And. And certainly if you listened to last week's episode, if you're anything like me, your model may change, right? So if you started out as a workhorse and you're transitioning into a unicorn, or if you're starting out as a unicorn and you sort of work your way to a donkey model business, it's not just that your offers and things are going to change. Your expenses will need to shift as well, no matter what, over time. Your business is a living, breathing thing, right? It's not static. And your expenses shouldn't be either. So build this review into your calendar, put it on your schedule, make it a regular part of how you run your business. This is normally where I would talk to you about your action of the week, your action step of the week, but really, we've been talking about this the whole time, right? This whole episode has been one big action step. So let me Just review step one. I want you to pull out your business bank account and credit card statements for the last three to six to 12 months and make a list of every expense along with a categorization. Right. The second step is just running it, running each of those expenses through the two filters. Does it match your model and is it an investment or an expense? The third step is just to. And maybe this is where the action step comes in. I want you to identify at least one of those expenses that you can reduce or remove. Maybe that's a tool that doesn't match your model. Maybe it's something that you're paying the high price for when the basic version would just be fine. Maybe it's a lens you can sell. I am positive that there is something that all of us can trim from our business, business budgets. Right? And then take the money that you're saving from that one thing and put it into an account for your taxes or your slow season coverage or just a rainy day and give yourself a big pat on the back. These are unfun, unsexy chores in our businesses, but when you do them, it feels so liberating. It feels like, ah, I've got a handle on this. I know what's going on. So next week we are talking about how to make more money per client with without raising your session fee. Right? We're keeping the what we're charging people the same this month. And next week's episode will be much more fun, I promise. We're going to be diving specifically into revenue stacking strategies. So how you use like pricing tiers and offers to kind of maximize the lifetime value of every client. And I'm bringing two photographers in who are using versions of this strategy to make significantly more money. So you're gonna definitely wanna put that on your calendar to tune in. It's gonna be a good one. I will see you guys next week.
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Well, that's it for this week's episode of this can't be that hard. I'll be back same time, same place next week. In the meantime, you can find more information about this episode along with all the relevant links, notes and downloads at thiscantbethard. Com. Learn. If you like the podcast, be sure
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to hit the subscribe button.
- [24:51]
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Even better, share the love by leaving a review in itunes. And as always, thanks so much for joining me. I hope you have a fantastic week.