Starving Artist? You Don't Have To Be... And The OMPA Agrees!

Hey there kids - as I was doing some year-end tasks (pulling together mileage records, invoicing producers, seeing where the retirement accounts are - yeah, retirement accounts.  Trish and I are actors - in Portland, OR - and we have money set aside for retirement.  It really can be done, ya know...) it occurred to me that I haven't shared this article I wrote for the December issue of the Oregon Media Production Association's monthly newsletter, The Call Sheet about just this sort of thing.  See, for the past year I've been working with the OMPA's Talent Committee to put on a series of workshops that give film and TV workers resources to live a sustainable life... well, it's all right here in the article:

OMPA’s Talent Committee Takes On The Myth of the “Starving Artist”

By Harold Phillips

Most people working in our industry have been exposed, at some point, to the romantic notion of the “starving artist” – that person who lives in poverty, works three jobs to make ends meet while pursuing his or her creative endeavors on the “off-hours,” and is often hungry (but nourished by those endeavors.) 

It’s a romantic notion, to be sure, and our hat’s off to anyone who can make a life like that work for themselves and their families.  OMPA’s talent committee, however, doesn’t believe our members need to starve to work in this industry.  On the contrary – we believe that our industry is only weakened if those working in it are living “hand-to-mouth.”

Of course, we know first-hand how difficult it is to make a living in film, TV, commercials and new media here in Oregon – the variable work, the sometimes (if not often) low wages, the unpredictable schedule… we also know there are ways to take charge of one’s life and business that will not only help those working in our industry “make a living” – but LIVE a stable life.

Over the past year the Talent Committee has presented a series of seminars aimed at giving OMPA members and others in our industry the resources they need to get their business and personal lives in order.  In February, the Committee held a workshop on tax planning.  In September, we presented a panel discussion on health insurance options.  This coming January, the Talent Committee plans a panel discussion on saving, investment, and retirement.  These seminars, and others the Talent Committee has planned for 2012, are presented free of charge for OMPA members (and are open to the public for a nominal fee.)

As our members toast the end of 2011, we hope they’re also analyzing the challenges and missteps that may have occurred this past year… and that they’re laying plans to make 2012 an even stronger year.  The Talent Committee’s seminar series is there to help with those plans.  We hope you’ll join us in the coming year as we explore ways to make our industry stronger, by keeping those working in the industry from starving.

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: http://www.abajournal.com/news/article/feds_poised_to_pursue_misclassification_of_workers_as_a_crime/ 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!

-Harold

Back-to-Business: A Taxing Situation III - Mailbox

The Back-To-Business Series: Index

Hey there folks

I actually got quite a bit of mail related to my last post in the Back-to-Business series. Some people were surprised when I suggested setting up a separate account for their acting income, and had a lot of questions about how to go about doing so, like...

... what you say makes sense, and I think I'll go ahead and set up a new account. I haven't made any money acting yet, though - won't my bank need me to put some money IN the account when I set it up? JL (Philadelphia, PA)

... what I want to know is what's the best bank to set up an acting account at? AS (Saint Paul, MN)

...When it comes to using money I have earned from my day job to pay for say a class or head shots, would it be best to take the money out of my personal account and deposit it into my business account in order to track the expenses and then note the deposit was not a payment for services or just pull from my personal account? LH (Portland, OR)

They probably will, JL. Depending on your Bank's policies, they might want as little as $5.00 or as much as $100.00 to start a new account. That doesn't mean that you have to make $5 or $100 as an actor before you set up your business account, though.

LH's question touches on this fact - businesses get venture capital all the time to help them start up; there's no reason why YOU can't invest in your business, just as a venture capital firm would, to help pay for your start-up costs. Just "loan" yourself the money you need to open the account - but record it in your records as a loan, not as income.

We're going to get a little more into basic accounting in a future post, but think of it like this - you as an individual are loaning your business a certain amount, with the understanding that your business will pay back you - the individual - in the future. Make a commitment to yourself (as a start-up business would commit to its investors) to pay that loan back within a year - heck, you can even commit to paying the loan back with some sort of interest. Setting things up with this in mind starts you down the path of thinking about your acting business as a business - It's makes your career about more than just going "finding a job." It focuses you on building a profit that you can return to your biggest investor - yourself.

As to the "best bank" to set your business account up at, AS... I can't really make that judgement for you. You have to look at the types of fees the banks in your area charge, whether they have a minimum balance requirement (more on that in a second), whether they offer checks and a Visa or Mastercard debit card (essential for paying your business expenses!), location, hours of operation... etc etc etc.

I myself prefer to keep the money I make in my community, instead of giving it to a large private bank... we've seen what some of the large private banks have done with our money in recent years. With that in mind, I've opted to keep my business account at a local credit union here in Portland. That's me, though... you'll need to figure out which bank is right for your needs.

...It sounds good in theory, but I don't make enough from acting to keep the money in a separate account. I have to pay my family's bills and that takes every dollar I get. BJ (Oakland, CA)

I see your point, BJ. Hell, more than that, I know exactly where you're coming from - there are some months where my business account has around $23.00 in it because I've taken "draws" out to pay my family's bills (again, "draw" is an accounting term... we'll get into that in a future post). We run into unplanned expenses from time-to-time, and the money has to come from somewhere. Luckily, the money's there - and it's ours to use.

Don't think of your business account as a "lock box" that you can't touch (remember Al Gore and the "Lock Box?" Still comedy gold...) If you're a Sole Proprietor, then you don't have to keep every dollar you make "locked up" for your business. You're not paying anyone's pension (unless you hire employees... but that's another subject entirely). As far as the IRS is concerned, your Schedule C income is yours to do with as you will.

This actually touches on another question I received:

... so if I put all the money I get from acting into a business account, how do I get it? Do I write myself a check for a salary? KD (Albuquerque, NM)

Yes and no. This is one of those accounting things we're going to get into later on... but as I said above, the IRS considers your 1099 income your money, to do with what you will. That means that you can write yourself a check (or transfer funds electronically through online banking) any time you like. It's not salary per-se, though... salary is an expense that businesses pay to employees. Since you're not an employee of your acting business - you're the OWNER of the business - you don't get a salary. You get paid as a "draw" on your business's "equity..." which isn't recorded as an expense for tax purposes.

As I keep saying, though, concepts like "draws" and "equity" are topics for a future post. For now, we're going to focus on tracking your income and expenses for tax purposes - and next week we'll focus on some tools for helping you do that throughout the year so tax season won't be so taxing. Keep your questions coming - email them to me, or feel free to shoot me a message on Twitter. Til then...

Let's get to work!

-Harold