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: What Does It Mean To Be "Paid?"

The Back-To-Business Series: Index


Hey everyone. Me again! Before I get started on today's topic, I want to apologize for my spotty posting schedule of late. Simply put... things are getting busy here in Portland, and it's leaving me less time for sitting in the office and writing. In coming weeks I'll still strive to post a new Back-To-Business entry every Monday... but if I don't make it, you can bet I'm probably on set or prepping for my next project (there are OODLES coming up - I'm going to have a very busy August!) Be sure to put your email address in the box on the right-hand-side of this page, so changedetection.com emails you when a new post is added - or follow me on Twitter or Facebook. That's the best way to assure you're in-the-know when a new post pops up here.

So... as I've mentioned in previous posts, I'm going to be spending the next several entries talking about the resources we actors - and all businesses - need to manage so we can be successful and stay in business. Before we get into the specific areas represented in the "golden triangle," though, I want to speak to something that's important to all of us: getting paid.


Chances are if you're reading this, you consider yourself a professional. Professionals don't work for nothing; they expect compensation for what they do... that's one of the things that makes them "a professional."


Compensation, though, isn't "all about the money." Remember, as I've said so many times before, money is just a resource... and you've got other resources to manage in your acting career. A professional actor is no different than any other professional - s/he should never work for nothing... but that doesn't mean money is an actor's only concern when looking at the compensation offered for his or her work.



Now, I can already feel some of you starting to steam... bear with me. I'm not saying that actors shouldn't be paid money - hell, I like money! I like money a lot! I'm just saying that there are considerations beyond the money. Look, read all the way to the end before you pass judgement on what I'm saying - and then let me know what you think via email or twitter. I can take it (and besides, we have to put SOMETHING up on Wednesday :) )



Take another look at the "golden triangle" above... go ahead, scroll up. I'll wait.

No, really... I'll wait.

Still waiting...



Ok, you're back. The triangle represents the resources we actors use to conduct business, and as I said in my last post we need to find a way to balance those resources. There's more to "the business" than that, though - the real trick of any business is finding a way to build these resources while finding a way to balance them.


You probably understand this concept when it comes to your money... we all want to increase our money without spending too much in the process. That's called profit, right?

Well, the other resources in our triangle work the same way... we all need more time, right? Never enough hours in the day to get everything done... but we don't want to spend so much time trying to "get organized" that we end up late for that next appointment! We also don't want to gain the reputation that we don't have the time to devote to a project, or an important contact who might bring us money. We have to find a way to build more time into our lives, while still being open to those who want to pay us that money we're so worried about!


And speaking of "worrying about the money..." we also don't want to get the reputation that we're always after money... that the paycheck takes precedence over everything else! We want to spend our time working on things that mean something to us, right? That means being comfortable enough with our money that we can negotiate - but not come across as greedy or desperate about our rent!


So, what's all this got to do with the topic of today's article... gettin' paid? Like I said above, actors need a pool of all three resources in the "golden triangle" to do business... and they need to add to that pool with every project - the more you have of one resource, the easier it is to balance the others! How do you get more of these resources, though, to add to the pool?


You get them from being compensated for your work, of course. An actor should never work for nothing... but s/he should keep all three resources in mind when considering how he or she will be paid for that work.


Yes, money is important... will that project you're considering add to your reputation? Will you meet important contacts who will help you gain money down the line? Will and those industry contacts see you work in the finished product, and tell their contacts about you... thus saving you time down the road when you skip the audition and go straight to the producers?


How much time will the project take? Will it save you the time it takes to build solid material for a demo reel that can increase your reputation with those people I just mentioned who are looking to hire you? Is the money you'll be paid worth the time you're putting into the project? If you don't think your reputation will be increased by the project (because it's for a small audience, for instance... or because you're not allowed to use it on your reel) - is the money you're being offered worth it?


Above all else, caveat emptor folks... no one's going to look out for your business. No one's out to be sure you have all your resources covered. When considering what you're going to be paid for a project, remember that YOU'RE the one who runs your business... you're the one who's in charge of building it up to the next level. You're the one in charge of building - and balancing - those resources.


Let's get to work...


-Harold

Back-To-Business: A Question of Balance

The Back-To-Business Series: Index

I introduced you to the "Golden Triangle" in our last "Back-To-Business" article (I would say "last week's article," but as you know... we had a small problem there...) We're going stay focused on managing the resources you - and any business - use to generate profit over the next few weeks, and you'll notice that I'm going to keep coming back to this Golden Triangle as we do so. You see, the Triangle is a tool to remind us of the resources we need to keep track of - and it's a symbol we can use when we think about the way we run our acting business.

There are a couple reasons why the Triangle is... well, a triangle. The most obvious is that there are three basic resources you need to manage in your acting career. A lot of actors get stuck on the money - and it's understandable, since you're trying to make money as an actor without spending too much money in the process (that's how you measure the profit of your business, after all... the amount you've brought in versus the amount you've spent.) Money's just one of the resources you need to to actively manage, though, to have a successful career. Time is just as important, as is your reputation amongst those in "the business" - and amongst your audience.

There's another, more subtle reason for the triangle in the symbol above. I use that shape as a reminder to keep all my resources in balance. As actors, we strive for balance in our daily lives... balance between work and play, between feeding our souls and feeding our bellies, between pursuing work and actually working... it's a long list. Balancing our business resources, however, is just as important as balancing our personal life.

What do I mean? Well, lets think about our personal lives... if we spend too much time working, and not enough time with our families, our personal relationships suffer. If we spend too much money at the bar and and we don't have enough to cover our rent, our finances suffer. Spend too much time at our "survival job" and not enough time acting? Then our hearts suffer. I'm sure you've enountered at least one of these scenarios in your own life... we have to balance the things we need (work, family, friends, fun) to live a happy and fulfilled life. I'm not saying that's an easy thing, mind you... but its something every human strives for.

Businesses strive for the same balance in their "lives" - but they seek to balance the resources they need in order to be successful. HP, for example, needs certain resources to make their products, and to generate a profit. They need raw materials like silicon and plastic and glass... they need workers to assemble their products, sell them, and manage daily operations... they need an image or "brand" to trade on... and of course, they need the money for all these things. If they spend too much on one of these resources (such as personnel), they won't have enough money for another (such as advertising). Similarly, if they run into a shortage of one resources (like raw materials), they'll have to spend more on it... and they won't have enough money to put into other resources. They have to balance the resources they use in order to make their products - and thereby make a profit.

Guess what - your acting business follows the same pattern as your personal life... and HP's business "life" (even if you don't use the same resources they do.) You have to keep your resources balanced to make your product (your performance) and generate a profit. If you devote too much attention to one area (say, money) then another area is going to suffer (the time you could be spending working on your lines - or your reputation in "the business.") And because of the nature of our business, if those areas suffer our personal lives are also going to suffer. Balancing your businesses resources will help you balance your personal life - and will help you stay happy at work and at home!

There's a third reason I use a triangle to help track the resources in our acting business - it's because those resources are interrelated.

As I said above, a lot of actors get stuck on money... but consider - you have to have the time to work in order to get that money. You have to invest your money in building your reputation (headshots and reels aren't free, you know... nor are the drinks at networking events!) If you build a good reputation in your market, directors and producers may start approaching you directly to read for roles (or just hire you outright), thus saving you the time of tracking all over town looking for auditions... but building that reputation takes an investment of time and - in some cases - money!

You see, these resources don't live in a bubble. None of them can be the be-all-and-end-all of your life, or of your business (as I said a couple weeks ago, "business isn't about money!") They all relate to one another, and when you put too much emphasis on one, the others naturally suffer. Keep this idea of balance in mind as we move into a more in-depth look at each resource over the coming weeks.

And for now...

Let's get to work!

-Harold

Back-To-Business: Managing Your Resources - Mailbox

The Back-to-Business Series: Index

I got a lot of response to Monday's article on managing resources in your acting business - and not all of it was grammatical (thanks again, Bostin!) I'm going to handle a couple of the "light" ones first, and then I'm going to get a little philosophical. Fair warning!

Oh come on... no one dreams of acting on screen with Kristin Stewart - she's awful! JC (Philadelphia, PA)

247 million trillion kagillion Twilight fans would disagree with you, JC... I didn't say YOUR dream was to act with her. The important thing is to know what your dream is - whatever it is!

I can't believe you campare actors and lawyers! Lawyers are the lowest bottom-feeding form of life. Are you saying we should all be like them? GA (Portland, OR)

No, GA, I'm not saying that all actors should be like lawyers (though, to be fair, some lawyers could probably benefit from acting lessons). I AM, however, saying that the business model lawyers employ isn't that different from an actor's business model.

Think about it for a few minutes... what does a lawyer do, when s/he isn't in court? S/he prepares for court (research, writing, practicing arguments... come on, you've seen Boston Legal) , s/he cultivates new business while keeping in touch with the current client-base (Denny Crane Denny Crane), and s/he does the work of running his or her business (bookkeeping, making the sure the license is paid up, training, getting the invoices out..)

Actually, Boston Legal is a terrible example (Denny Crane Denny Crane). That show - like most shows on TV - focuses on a big, expensive law firm. Think about the sole practitioner who DOESN'T have Candice Bergin around to run the store... how does s/he do all the things I mentioned above? S/he may have an office, or s/he may not. Clients still have to be met with, and new clients have to be wooed. The bills still have to be sent out, and the money has to be dealt with. Time has to be spent writing briefs, practicing opening statements, and researching... and s/he has to do it all him or herself.

And how is this different than what WE have to do as actors? We may have an office or we may not - but we still have to audition for new clients, and keep in touch with the contacts we already have. We have to do spend the time needed to run our businesses - depositing the checks... getting invoices out... We have to rehearse and research OUR work, too. And, unless we have a "team" to help us, we have to do all this ourselves.

When you think about it, the way we conduct business isn't all that different. Don't let the practice of law blind you to this, GA!

OK, here's the big one. I got a LOT of comments along the lines of this one:
How the HELL can you say that business isn't about making money? If you're not trying to make money, you shouldn't be in business - what's the point? PD (Lafayette, LA)

So... I warned you that I was going to get a little philosophical today. So here it is...

Like I said in Monday's article, money has to be part of business. If you're not selling a product, an idea, a service, your expertise... whatever for some sort of reward, then you're not in business. You're running a charity, or you're engaged in a hobby... but if you're not making some money at it, then you're not in business.

That being said, the notion is business is about making leads us down the rabbit hole to the blackest part of human nature; it says that all we're about is getting as much for ourselves as we can, whatever the cost. Sorry, I just don't buy into that. Yes, I want to make money - I'm not anti-capitalist by any means... but I do recognize that the motive to just "make money" leads to avarice, greed, and (it's been argued by economic minds much smarter than I) the economic sink-hole we find ourselves in today.

Look, it's a question of perspective. Why do you do what you do? What is it that made you want to be in the business you're in? If you were to ask other business owners (in other fields), they'd have a variety of answers... but I don't think you'll find "getting rich" to be among them. They went into business to provide something for someone - either something that didn't exist yet, or a better quality "something" than was available... yes, they wanted to get paid for their efforts and yes, they hoped that their businesses would support not only them, but their families. It wasn't about money, though... it was about what they were providing.

When a business is all about money, it begins to fail. It's as simple as that... the consumers start to hate it, and don't mind looking to the competition for a better value. Look at the airline industry today - almost every carrier is charging their customers a per-bag fee. The airlines that don't, however, have seen their business surge - because the customer thinks of those that do charge per-bag fees as greedy... and no one wants to give their money to a greedy company.

By contrast, the couple that own the UPS Store I get my mail at go above and beyond the call of duty for me regularly. If I call them to see if a package I've been waiting on has been delivered, they go and check... they don't tell me I have to come in and look for myself. Heck, once, they told me the package I was waiting for wasn't in, then took the initiative to call me BACK 10 minutes later to tell me they'd found it. Strangely enough, I have no desire to give my business to their competitors... even though they're located across town from me. They realize that their business isn't about the money they can get from me - it's about the SERVICE they provide TO me, that brings my money to them.

Businesses aren't about money. They're about products, or services. Businesses are ways to get money, yes... but if you make them all about money, you're headed down the rabbit hole. And it's a long way back up.

We're going to talk some more about money next week... and about the other resources in the "Golden Triangle" that you, as a business owner, need to manage in order to be successful. Feel free to keep in contact via Email or Twitter... and between now and then...

Let's get to work!

-Harold

And Now, Something NEW: OregonFilmAndTVDollars.com!

So you remember this post from a couple weeks ago? It's actually gotten quite a bit of attention... it was even re-posted in The Oregonian's online "The Stump" section, and garnered a couple of comments (one of which was fairly critical of the Oregon Production Incentive Fund... I hope I didn't make an enemy at the Oregon Center for Public Policy with my response :) ).

As I mentioned in the article, a lot of states are scaling back or cutting their film incentive programs. Given the woeful state of Oregon's economy, our next governor (and legislature) might be tempted to do the same thing - it's a politically expedient thing to do, after all... many people see the OPIF as a "give-away to rich Hollywood filmmakers," without looking at the milions of dollars and thousands of jobs the program brings in to the state.

If we don't want to see that happen, we in the Film, TV and New Media industry need to raise our visibility... we need to keep reminding everyday Oregonians that this industry provides jobs to lots of people - not just actors and crew members, but drivers, carpenters, electricians, and so many more... we need to remind them that the money these productions pay filters throughout the entire state, not just the urban areas... we need to remind them that our industry is vital, growing, and providing opportunities to everyone state-wide.

So... I've started a new web site: http://www.oregonfilmandtvdollars.com/. As I say in the "About" section, there are lots of sites that talk about Oregon Film… this site is something different. It's focused on highlighting the economic benefit our industry brings to the state - we'll be re-posting news stories, writing editorials, and most importantly sharing the stories of people in Oregon who have benefitted from the money our Film, TV and New Media Industry brings to the state.

So... here's where I ask for your help, Oregonians. I'd really appreciate it if you could:

>> Spread the word - tell everyone you know about http://www.oregonfilmandtvdollars.com/.

>> Subscribe To The Site - In the upper-right of every page is a button to "subscribe" - clicking this button and registering will send you an email every time a new post is published. I promise I won't overdo it... hey, you see how often I post on this blog!

>> Send me your stories - Have you gotten money - even $1.00 - from the Film and TV Industry here in Oregon? We want to hear from you - visit the "Share Your Story" page and let us know about it! If you have a photo you'd like to attach to your story, feel free to email it to me. While you're there, scroll down and place a pin on the Oregon Film And TV Dollars Google Map - show everyone how Film and TV dollars filter through the entire state.

>> Show The State (and the World) You Support The Industry - Yeah, this one's gonna cost you a few bucks... but only a few! You'll notice a box in the upper-right corner of each page leading you to my Zazzle Store, where there's a variety of T-shirts, Caps, bumper stickers and bags (more products will be coming in the next week or so) telling everyone how you use Oregon Film and TV Dollars. Spend a few bucks and let everyone know that it's not just "rich Hollywood filmmakers" that benefit from Oregon Film and TV Dollars - YOU use them too!

There ya go, folks... start spreading the word, and start sending me material for the site. With your help, we can keep the film and TV industry here in Oregon first-and-foremost in people's mind when they're looking at ways to heal Oregon's ailing economy. You and I know that the film industry, one of the few industries growing in Oregon, has a lot to offer the state's economy... now it's time to let everyone else know about it!

Hope you're all doing well...

-Harold

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

Back-to-Business: A Taxing Situation III - Bank Run

The Back-to-Business Series: Index

So, my last post left you with a little tease... I mentioned a way for you to get all your business income and expenses for the year tabulated on a sheet of paper, and sent to you in the mail (or electronically) every month. Of course you probably already have something like that sheet of paper... it's called a bank statement. Now, the bank statement you receive is most likely for your personal bank account - it's not going to help you separate out your business expenses, though -unless you set up a separate bank account for your acting business.

Now, a lot of my new business coaching clients freeze up when I suggest they open a separate business account... it sounds complicated; it sounds like a lot of work; it sounds expensive! Before you start to hyperventilate over the idea, think about it - does the CEO of Target pay his company's business expenses out of the same account he pays his family's grocery bill with? That'd just be silly - and improper... the IRS frowns on people dipping into company funds to pay for private expenses! I think they have a word for that... starts with the letter E...

Lets go at it from a different angle - does a plumber buy his supplies out of the same account s/he pays the rent with? S/he could... but there are a lot of costs associated with running his/her business - does s/he really want to come up short on the rent next month because s/he had to buy a few too many flapper-valves? Sounds like risky business... and not the kind with Tom Cruise and Rebecca De Mornay. S/he keeps the business funds separate from his/her personal funds - and s/he "pays him/herself" periodically out of the business funds to cover personal expenses.

Remember what I said last week about 1099 income and "Schedule C's" - if you're reporting to the IRS on a Schedule C, they think of you as a business. That means you have to behave like a business - just like the CEO of Target or our hypothetical plumber. Otherwise, our friends at the IRS might not accept your income as business income. They might decide that its "hobby" income instead... and like I said a while back, a model train collector can't write off his/ her tracks.

Besides, it's not really all that complicated... most banks or credit unions will let you open a second checking account for little or no money. Your business account doesn't necessarily have to be what your bank calls a "business account" - an account which often has extra fees associated with it. If you're running a Schedule C business (as opposed to a corporation or LLC), all you need is a separate checking account to put your 1099 income into, and to pay your 1099 expenses out of.

Paying your acting expenses out of your business account has an added advantage - aside from seeing all your business income and tax deductible expenses laid out every month on your bank statement. It gives you a fund to save up for those business expenses. How many times have you heard an actor say that s/he needs new head shots, but doesn't have the money for them? If you put all your acting income into a separate account, and leave a portion of that income in the account after taking a "draw" for you personal expenses (that's an accounting term that I'll go into in more detail later)... then you'll build up the money needed to get those new head shots. Or that new PDA. Or to pay for that demo reel. Or... you get the picture.

But wait a minute... What about W-2 income and expenses? Remember the difference between 1099 (or Schedule C) income and W-2 income... 1099 is "self-employment income", and W-2 is "Wage" income. If you get paid as a W-2 employee, you can still take expenses related to your career off on your taxes (the rules for this are a lot more restrictive, though - consult a tax professional in your area about this). The income you receive, however, is categorized by the IRS as the same type of income you might get from a restaurant, or as a temp - it's not "business" income in the IRS's view. They expect that pay check to go right into your personal checking account.

A lot of actors still want to get a statement of their acting expenses every month, though - even if they're primarily paid W-2 income. They use a credit card for this purpose - they simply charge all their acting expenses to the credit card, and they pay the card from their personal account. Depending on the way your taxes are structured, you might even be able to deduct the fees and interest on that credit card - but again, these rules are very restrictive, and you should really check with a licensed tax professional on the details.

I myself am not the biggest fan of credit (and by extension, debt) - I've seen too many people get in over their heads by thinking they can charge something now and pay for it later... and later... and later... all the while getting buried in interest fees. If you decide to go this route, be sure that you've got the money to pay off your credit card balance at the end of the month. Don't get dragged down paying off debt you've accrued, when you could be putting that money towards saving up for the tools you need to do the job - and the tools that make doing the job easier.

Here's the thing, though - how are you going to know whether you have enough money to pay off that credit card balance at the end of the month? We'll go into some tools to help you keep track of your money - both W-2 and 1099 - in next weeks post... and these tools will make next year's taxes even easier! I'll see you then - remember, you can always email me your questions, or pose them to me on Twitter. I answer reader questions each Wednesday (or, some times, I write a whole new post around them!) For now...

Lets get to work!

-Harold

Back-To-Business: A Taxing Situation II - Track The Money

Sorry about the late post, folks... once again, the "scheduled posting" function doesn't seem to have worked on Blogger; I need to get better about checking to be sure my posts go up when they're supposed to. My apologies!

The Back-to-Business Series: Index

So, do you hate me after last Monday's post? Did you curse and scream your way through collecting receipts and figuring out how much you drove and whether that drink you had with your actor friends was a legitimate expense or not?

Sorry about that guys... I really am. It stings me more than you know to see actors sweating at tax time, trying to pull all their paperwork together in a race to get their taxes in by the deadline. It really doesn't have to be that way - not if you do a little preparation and management throughout the year.

A large part of my private business coaching sessions with actors is dedicated to setting up systems; systems that - when they're followed regularly - make tax time a lot easier, and keep actors on top of their business throughout the year. Over the next few weeks we'll go over some of these systems - and hopefully you'll start keeping track of things, making next April a lot easier.

As I said in the first post of this series, IRS rules determine a lot about how we do business. The IRS tells us what expenses we can write off - and by doing so, they tell us what we should be investing in to grow our business. You've probably heard the old saying "you have to spend money to make money," right? That saying gets to the heart of what we report to the IRS every year - expenses and income - and it also gives a nod to the reason for most of the stress people feel at tax season: the hustle of pulling together all their pay stubs and receipts to show how much money they spent to make their money.

You can cut down on that stress a great deal if your acting business income and expenses are already separated from your personal income and expenses. One of the simplest and cheapest tools an actor can use for this: a manila file folder. That's it - costs you just a few cents per folder. When you buy something for your business, you put the receipt for that purchase in the manila folder (making sure to note the purpose of the expense - like "Lunch with Director ____," or "Photos by ___"... you get the idea. Remember, if you ever get audited, documentation is everything!). When tax time comes around, you open up the folder, separate your receipts into the categories listed on Actors Tax Prep's handy expense list, and you get to work filling out your tax form.

Hey, while you're at it, invest another few pennies in a second manila folder, and put the pay stubs for jobs you've worked during the year (or copies of the check, if there's not a stub enclosed) into it. That way your business income is ready to be reported as well - you just have to sort it into W-2 and 1099 income!

But wait a minute... that's not really making the tax process much easier... you still have to sort your receipts and pay stubs to get your taxes ready. There's got to be a better way to do it so you don't have to spend so much time in April... what if we pre-sorted our expenses and income into the appropriate categories during the year? It'd be a pain using our manila folder method... you'd have to open the folder every time you got a new receipt, paper-clip it to the other receipts in that category... eh. What a pain!

Unless there was a way to divide your expenses and income into categories automatically... like, maybe, one of these? Costs a little more than a manila folder... but it saves you time in April, because you can assign a category to each pocket at the beginning of the year, and then drop your pay-stubs or receipts into the appropriate pocket as the year progresses. Come tax-time, your paperwork is all pre-sorted.

Except... You still have to take the time in April (or March, if you're on top of things) to pull all that paper out and sort it, add up the numbers, and transcribe it onto your tax forms. Still seems like a lot of work, doesn't it? Isn't there a way to get all your income and expenses onto one sheet of paper, without all that labor?

Of course there is... and you probably get one of those sheets of paper in your mailbox every month! Next week we'll talk about your bank statement, and how you can use that to help you run your business... and get you ready for next year's tax season!

Lets get to work...

-Harold

The Back To Business Series

You know how I yammer on and on... This directory will help you find posts in the Back To Business Series. Remember, you can always send your questions to me via email or Twitter - you might just have your question answered in a Wednesday Mailbox post!

• 2/22/2010: Introduction
• 2/24/2010: Mailbox


• 3/1/2010: A Taxing Situation
• 3/3/2010: Mailbox
• 3/8/2010: A Taxing Situation II - Track The Money
• 3/10/2010: Mailbox
• 3/15/2010: A Taxing Situation III - Bank Run
• 3/17/2010: Mailbox
• 3/22/2010: A Taxing Situation IV - Tracking Tools
• 3/24/2010: Mailbox
• 3/29/2010: A Taxing Situation V - Using PerformerTrack
• 4/26/2010: Back-To-Business Will Be Back...
• 6/7/2010: Back-To-Business Comes Back Next Week
• 6/14/2010: The Right Time To Invest In Your Business
• 6/16/2010: Mailbox
• 6/21/2010: Aside - Acting Is Believing
• 6/28/2010: Managing Your Resources
• 6/30/2010: Mailbox
• 7/12/2010: A Question of Balance
• 7/26/2010: What Does It Mean To Be "Paid?"