Knowing Your Numbers: The Importance of Accounting for Designers
You’ve heard the depressing statistic … nearly eight out of 10 small businesses fail within 18 months.
The silver lining? Your business doesn’t have to fail, and it won’t – as long as you avoid common pitfalls that plague new business owners. The most common mistake that I see my design clients make is one that threatens to murder your profits.
They hate dealing with the numbers side of their business and avoid it like the plague.
Here’s the cold, hard truth: numbers are the lifeblood of your business.
There’s an old adage that still rings true: If you don’t know your numbers, you don’t know your business. For some reason, creatives don’t like to hear this. I constantly hear some variation of…
“Peter, you know I hate math.”
“The numbers side of my business makes me want to cry.”
“I hired you so I don’t have to deal with the numbers..”
Your aversion to numbers is killing your bottom line.
Many creatives I work with would rather go to the dentist (yes, I’m slightly offended) than visit an accountant, be asked about the numbers side of their business or engage in conversations about their fiscal health.
The fact is, knowing your numbers – even just having a general sense of them – helps you make smarter, more economical decisions.
When clients listen and start to understand their financials, the magic happens. Most of the time they start making better decisions almost unconsciously. Just knowing their numbers affects how they spend their money on a daily basis.
Oftentimes I’ll get a random call from a client I’ve been working with to understand their financials. Amazed, they tell me that their profits are higher than ever.
When you know your numbers, your bottom line grows tremendously.
It’s time to regain control of your finances, and stop stressing about your bottom line and wondering if you’re going to make a profit.
Here are some of the ways I recommend my clients take control…
1. Quit making excuses. So you dreaded math in high school and decided to be a liberal arts major in college to avoid precalc. As a business owner, you just need to know what’s going on with your financials. There’s no pop quiz, you aren’t getting a grade and precalc isn’t required. Be the boss you always wanted to be and own your financials.
2. You don’t need the brand new Audi to impress clients. Yes, I get it. You’re a designer with an image to project to clients. What says “success” like a sparkly new luxury vehicle, right? Wrong. There are economical cars you can get that aren’t ugly and, more importantly, won’t blow your budget. Your clients are concerned with what you can do for them … not the type of car you roll up in.
3. Enlist the help of a professional who understands your business. CPAs are a dime a dozen. You can walk into any H&R Block to get your taxes done in the hope of getting an instant refund. You can opt for the traditional accountant you’ve used since your dad set you up with him circa 2004. Or you can take control of your finances by choosing a CPA who specializes in the nuances of your industry … one who uses your software, understands your business and has a track record of helping other designers explode their profits.
4. Visit your accountant at least once a quarter. In fact, I meet with my most successful clients once a month as a part-time CFO. We discuss their goals, measure their progress and ensure they’re on track for the month. These clients rely on me as a profitability partner, and as such I make sure they are on the path to greater revenues in less time.
I’ve worked with many clients who have (for the most part) gotten over their fear of numbers. They don’t sit around all day analyzing their financials (that’s my job), and they sure as hell don’t worry about precalc.
What they do is make more money.
I see this all the time. By simply giving themselves a chance to understand their business financials, these clients unconsciously make better choices about how to spend and allocate their money. Come on, now. Are you really going to let a few numbers get between you and higher profits?
Take a look and download my guide on the 3 Issues Facing Designers in 2019 to learn more and avoid costly mistakes.