07. Building a profitable business

Being profitable is a key part of having a sustainable business. Common thoughts about increasing profit include selling more and increasing prices. Both can be really good, but I want to talk about a couple of other things now. Paying yourself first, and reducing expenses. This is how you start building a profitable business.

A business without profit

Without profit, and without paying yourself you don’t really have a business. For my first few years, I didn’t pay myself, and I spent more than I made. And I’m sure you’ll hear from a lot of people that that’s how it has to be. I just read a book called Profit First, and Mike Michaloviz who wrote it would not agree with that. He says you should be profitable right away. And he ever made a system for that. I’ve tried to adapt that system to fit into my mentoring program.

If you haven’t listened to the episode Money Confidence with Jillian Todd, go and check it out, you will find so many insights to adapt them to your business and improve your financial situation.

Listen to the episode Money Confidence with Jillian Todd

Episode 2

Profit first

Now that I’ve made a system, I’ll know exactly how much I get paid every month. And paying myself is the main priority. I set aside money for taxes, and I focus on spending less. 

I’ve set up 6 bank accounts. 

1. The main account. This is the one where all the payments get deposited into. The bank account listed on your invoices, and that’s connected to stripe etc.
2. Salary account.
3. Bonus/profit account.
4. Tax account.
5. Sales tax account
6. An expense account. 

Twice a month, I’ll review the money that has come into my account. Let’s say it’s the 10th, and I’m received $125. Out of that $25 is sales tax so I add that straight into the sales tax account. I’m now left with $100.  I take $50 and add them to my salary account, $5 and add to my bonus account, $15 and add to my tax account, and the remaining $30 goes to the expense account. If you don’t have a sales tax, you don’t have to worry about sales tax, but here in Norway, that’s important to consider. The numbers here are just an example. You might have something completely different, but I’ve based this off the book profit first. 

This way it makes it so much easier to know right at the top of my head how much I actually will get paid for a job. The bigger number that you get paid- say 5,000 dollars for a wedding, might end up to 2,000 as payment for me. That way I might not accidentally trick myself into saying yes to something that’s less than what I think.

Some objections

Ok, so your objections are probably that it’s not possible to know what your expenses will be. That you have a lot to pay for etc. The genius of this method is that when you have less, you spend less. If you know you only have $100 left this month, you buy cheap food, cancel streaming services, and stop buying plants. You make it work! The same goes for the business expenses you have. I bet you’re paying for some things you don’t really need. I bet when things are going well, and you’ve just got a couple of big payments into your account you splurge on new equipment. A new lens, a printer, a few bills you had forgotten about. And suddenly – that money is gone. But new equipment rarely makes you more money. 

You don’t NEED to pay for all the services out there. There are usually free options that work just as well. At least to some extent. And you have to consider what you can actually afford, and what benefits you before deciding to go all in. In my first years, I used digisigner.com, a free service where you can have a certain amount of contracts every month for free. Only when that got included in the adobe package that I already had, I started using adobe sign. I had the free pic-time package for a long time as well. You can use Dropbox and Google Drive. You don’t need those fancy solutions to be a pro!

My 85 lens broke a few years back. I only bought a new one last year and I made due without it. For years! If I had read Profit first earlier I might not have even replaced it. More isn’t better. Paying for more stuff won’t get you more clients, or more money. I’ve often bought my clients thank you gifts. But Honestly, I don’t think anyone cares. It’s a waste of money. The same goes for fancy business cards, cute packaging and 50 different client dresses, a bunch of subscription software and top of the line equipment. The next best, or next next best, or sometimes even old and well used is more than good enough. keep in mind where you budget for is where you’re gonna spend.

Key takeaway

The point with this is – you can get by with a lot less than you think. And even if you’re not selling as much as you want, you can still be profitable. Actually, the sooner you get into the habit of paying yourself, the better! And you can start small, my goal is that 50% of everything I get paid is for me! + a 5% bonus. If you’re unsure, you can set a smaller goal and work your way up. That’s better than the other way around. Even if you start with a 1% bonus that is giving you a great start. And, if you’re thinking 1% is nothing, it shouldn’t be a problem for you to run your business just as well as you do today without that one percent. 

So why not do it? At the end of the year, you might end up with enough to visit a fancy restaurant or take a trip abroad. Setting habits and starting small is underrated.

Some benefits of this system:

• You cut expenses, which means there’ll be more for you. You get more inventive and you can compete with other photographers. The goal is more pay for you, not more money coming in. 
• Now that you have a system, you know how much you’ll get paid, not to mention you will get paid. Even if it’s not that much at first.  
• And then as you work on cutting expenses, you can slowly increase those percentages and gradually work your way up to a decent size monthly salary.

I bet you can get by on a lot less than you think. And I want you to remember that the key is to MAKE money in your business – not to spend. A lot of small expenses can quickly pile up. 

If you want to know more about this strategy, I recommend you read the book Profit First. You can also sign up for the waitlist for my program; Sustainable Wedding Photography if you want access to the simplified photographer version I made, it includes spreadsheets and all!

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