Trish and Harold's Weblog

News, information, and random thoughts from the busy lives of Trish Egan and Harold Phillips.

Wednesday, June 16, 2010

Back-To-Business: The Right Time To Invest In Your Business - Mailbox

The Back-to-Business Series: Index

Howdy folks

Well, I got a lot of email and more than a few Twitter comments about Monday's post about investing in your acting business... let's dive right in!

... What you said about investing in my career sounds good, but I need that money I make from my theater jobs to pay my rent. I'm not GM or Apple - I can't afford to be spending my hard-earned dollars on fancy software programs. GA (Baton Rouge, LA)

I get what you're saying, GA - believe me, I do! If you're pursuing acting as a profession, rather than a hobby, then you're using the money you get to pay your bills, eat, put gas in your tank... etc. No one's arguing that those needs have to come first.

That being said, to get ahead we have to do more than just subsist on what we earn - we have to use our money wisely, and put some aside for when things are slow... or for those unexpected "emergency" costs... or for investments in our business. This is why I encourage my career coaching clients to set up a separate bank account for their acting businesses - and to hold back whatever they can afford in that account to pay their business-related expenses.

Trust me, I'm not saying holding funds back is an easy thing - like you say, we've all got expenses that need taken care of. With a little forethought, planning and frugality (cutting back on our purchases of things we want instead of things we need, for instance... or making your own coffee instead of buying it, fewer trips to the bar after the show... that kind of thing) actors can save up a little cash to reinvest in their business. It's not necessarily easy - but it's possible.

PerformerTrack calls this little savings fund the Performer Trust account (once again, remember you can save 20% off a 1-year subscription with coupon code PORTLAND9). After a few months of holding 5%, 10%, or 20% of your pay checks back you might be surprised at how much cash you can accumulate to invest in your business!

... Sorry, but it is a job - actors should always be paid as employees, and congress agrees: so you'd better be wondering where that next "job" is coming from. SD (Seattle, WA)

I'm not saying actors should or shouldn't be paid as employees, SD. As I've said in the past, until every actor gets paid for every project as a W-2 employee, it's important for us to know how to operate as both 1099 "independent contractors" and W-2 employees. If you don't want to work as an independent contractor, that's fine - but plenty of other actors are accepting 1099-based contracts.

Whether you're working as an employee or a contractor, though, I'd suggest always treating your career a business. It's a question of focus and perspective - a lot of actors I've known approach their careers with the perspective that they're "working a job," so they put all their focus on doing that job (nothing wrong with that, right?) When that job ends, though (as all acting jobs eventually do), their focus is fully on finding a new boss to give them their next "job."

Businesses don't work this way - they have a range of clients or customers, and they work on cultivating more of them even as they're doing work for their existing clients and customers. Their perspective is that they're selling a product or providing a service to a group of people, and their focus isn't solely on the work they do for one client, but all the work they do for all of them (including those they haven't met yet.) Consequently, when work for one client ends, they don't panic and run around looking for work - they simply shift into work for their next client.

W2 or 1099 aside, mentally it's to an actor's advantage to emulate the way that business.. well, does business. Following that model is what allows us to build a sustainable career... as opposed to waiting for one job to end before we frantically look for the next one.

I don't disagree with what you are advocating, however, there is one major aspect of an acting career that differs from big business. ROI. Return On Investment....The annual income statistics that the unions put out continue to be pitiful. And let's remember that's averaging in all those gazillion dollar salaries of the major stars. It's simply a fact that the ROI of most actors will be a negative number. BC (Studio City, CA)

ROI is important, BC. I don't agree that "the ROI of most actors will be zero" (my emphasis, not his), but it's important to keep ROI in mind when considering investments in your business.

Before we go much further, lets get one thing out of the way - the term "ROI" is more of that "Nightly Business Report" language that a lot of actors' eyes glaze over at. It's a simple enough concept: You spend money (investment.) You want to make at least as much money as you've spent (the return) as a result of that investment. How much money you make (or don't) beyond what you've spent is the return on investment. Of course, most of you readers have probably already figured that out... but I figured it was a good idea to define the term for my "special" cousin Eustace (Auntie-Norma-Jean got him one a' them there computer machines fer his birthday, ya know...)

(Great, now I'm going to get hate mail from all you readers named Norma Jean and Eustace. Sigh... moving on...)

Like I said above, ROI is important. If we're going to lay out money on something, we want to see a positive result from what we spend. If we pay to get new headshots taken and printed, for instance, we want to see more auditions and booked projects (and therefore more income) as a result of that cash outlay. The question is... how do you know whether you've got a positive or negative ROI on what you spent?

This is one of the many reasons why I use PerformerTrack. Unless you're tracking what you've spent and what you've brought in, there's no way to know what the ROI on those headshots was. By entering my income and expenses into PerformerTrack, I can print out an Income Report and an Expense Report, and I can see if I'm making a profit this year or not (if I'm making a profit, I'm getting a positive ROI - everything I've invested in has cost me less than I've brought in, after all...)

If I'm not making a profit, then I have to look at what I've invested in and see what's working or what's not. I might need to spend more money to balance things out (those headshots I paid for? Not working? Ok... I guess I need different ones), or I might need to reduce the amount I spend on memberships... or subscriptions to breakdown services... or...

The point is, we should never assume that we're going to have a negative ROI. We should invest expecting a positive ROI - and then we should pay attention to be sure that our expectations are met. If they're not, then it's time to make a correction of some type or another. Our income level doesn't necessarily factor into this - if we know how much we're making, then we know how much we can spend.

Expecting not to get a positive ROI, though, just becomes a self-fulfilling prophesy. Why invest in something that could make us more successful if it's never going to pay off, right? Like I said to SD, it's about perspective and focus - focusing on the "fact" that actors "will" have a negative ROI just allows that to happen... focusing on making wise investments to be sure you have a positive ROI, on the other hand, just prompts you to keep track of things. And keeping track of your business is what allows you to grow your business.

That's it for now... more on managing your resources in Monday's post. For now...

Let's get to work!


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