Three things I avoid: debt, overhead and employees.
That’s the mantra Lucy, John and I follow. And I probably should just end this blog entry right there. The practical side of running a small business like Lost Art Press plus my personal household is complex enough to write a book about – thank goodness I have John as the other half of the business and Lucy here at home. Partnerships are tricky. I am extremely fortunate to have people who view money and work through the same lens.
So with that said, let’s start with debt.
When my wife, Lucy, and I were 23 we made a solemn vow while sitting on the washing machines in our apartment complex: We would avoid debt at every turn.
Within a couple months we paid off a few thousand dollars of debt we had on our credit cards and since then have – with the exception of buying a house – never carried debt on credit cards or consumer loans or anything.
I know there are people who will convince you that debt is good, but I’m too stupid to buy that argument. And so we buy only what we can afford and we save whatever we can. We live in an inexpensive city outside Cincinnati, Ohio, which allows two low-paid writers to raise a family and live fairly well. I cannot image making this life work in New York or Chicago.
Once you get rid of debt, the rest of the bills are easy to manage, even with a inconsistent salary like mine. The following are some of the things we do to make the numbers balance every month. But before I delve into this, it’s important to say that money does not occupy the center of our lives. We think of it as water from the faucet: It is there when you need it, but for Pete’s sake don’t waste it.
Utilities and Other ‘Fixed’ Costs
Costs are like fingernails. They have to be constantly tended to or you’ll end up looking like that creepy guy in the Guinness Book of World Records. So every spring Lucy and I review our household costs.
The review isn’t about figuring out which TV channels we can live without on cable. It’s about checking in on the utilities themselves. Years ago we discovered our phone bill was creeping up every year even though we weren’t using the phone much. After 10 minutes of digging we discovered that the phone company had long ago discontinued the “package” of services we were using and offered packages with more services at half the cost.
We felt like suckers.
Now we check the websites of our cable company, phone company, internet provider and insurers each spring to make sure we’re getting the best published price. We’re not trying to whine and get an artificially lower rate; we just want the best rate they offer to anyone.
Hint: Try this with a magazine subscription. When they call you to renew at $36.95 per year, simply ask for the best price they can offer. Most magazines will immediately give you the introductory price with no arm twisting. This can save you 50 percent.
With our insurance carriers, we ask for a “rate review” every year. It’s a quick 10-minute phone call that usually results in them saying: Hmmm. You pay your bills on time so we’d like to offer you a discount to stay with us. Another good tactic with insurers: Ask them what you could do to save money on your rates. You might be surprised. We saved more than $1,000 a year by agreeing to have a dumb monitoring device installed on our cars for 90 days. Yeah, it’s creepy Big Brother stuff, but I’ll play along if that means I have an extra $1,000 for lumber and good food.
With Lost Art Press, John does similar reviews of our expenses and does them quite regularly. This has saved us thousands on on our phones, credit card processing fees and the like.
Have none or almost none. Use your house as long as you can for your business. At one point we had boxes of books packed under every bed in the house. All of us – both my family and John’s – packed parcels for customers until we could afford a warehouse service.
Even when things seem stable, try to trim overhead. Lucy and I recently bought a building in Covington, Ky., which might seem like we’re doing a dumb thing and increasing overhead. But we’re actually reducing it – we’re going to sell our current home and move into the Covington building, which is worth about half of our current house and is smaller with less maintenance. This is a multi-year plan, but it will pay.
Don’t buy equipment thinking it will help you get work. Buy equipment because you absolutely have to purchase it in order to complete some work you have on hand. But when you buy, buy the best you can afford.
Don’t go into debt for equipment. If you don’t have the money to buy it, then you can’t afford it. You might have to turn down work as a result, but growing slow is better than having to be a slave to a machine and its monthly debt service.
When you do buy equipment, keep your accountant in the loop (see below) so you can amortize it. When you get rid of equipment, let your accountant know, especially if you live in a state that taxes personal property (I do).
Get an accountant who specializes in small businesses. Ask to talk to him or her about your situation and assist with tax planning – if you make this phone call right before you quit your corporate job it will help you sleep at night.
Our society isn’t set up to encourage small businesses. So you need to deduct everything allowable and legal. You can make your vacations deductible if you are smart. Learn to track all your expenses and mileage to reduce your tax burden. I know this sounds tedious and antithetical to living free of “the man,” but we are never free of “the man.” Once you set up a few spreadsheets and manila folders for receipts, you’ll do it automatically, like brushing your teeth. It makes a difference.
You might ask your accountant about incorporating as a limited liability corporation (LLC), which has some tax advantages once you start to make money.
Making Money & Marketing
Unlike every other generation before, we have a huge advantage when it comes to marketing a tiny business: the Internet. Every person on the planet has access to free tools that allow them to communicate anywhere in the world that has an Internet connection.
If you aren’t using free social media tools – Facebook, Twitter, Instagram and old-school blogs – then you are making life more difficult.
Using these services is like learning good hygiene. The first time you floss your teeth, it sucks. Eventually, you feel weird if you don’t do it.
Document your work with the camera on your phone and put one thing out there every day on some channel – even if it’s just a photo with a caption. (Warning: Putting 20 things up in a day could hurt you. Instead, think about the best thing you did that day – it could be an image, an idea or a dumb/clever joke. Post that on the channel it is best suited for. Then get on with the rest of your day.)
As you get started in social media, the best way to grow your presence is to interact with others. Add meaningful comments on their channels. Contribute. Be thoughtful and honest. You will generate a gravitational field and people will find you.
How does this make you money? It doesn’t. But if you are a talented, consistent and reasonable voice in your community – whatever community that is – eventually people will want to hire you. This is where it gets sticky. People will ask you to work for free or almost nothing. It’s tempting to do this a few times for “exposure.”
Here’s a typical example: Last year a guy in our town asked me to build a custom garden bench to put in front of his yard for runners and walkers to rest. He said I could put my company’s name on it and I would benefit from the exposure. Other people would see my work and want me to build furniture for them. Bullcrap.
Don’t work for free. If someone asks you to work for free, ask them to do something of equal value for you. That’s as close as I get to working for free.
Getting paid is the hardest part of living apart from a corporation. A regular paycheck is a seductive thing. But after a few years away from corporate life, you will have this epiphany: The regular paycheck is like a drug that can be snatched away at any moment. You can be fired and have the rug pulled out from under you, leaving you to scramble and make bad decisions.
If you are a freelancer, you never depend on one source of income. When one source dries up, another one can take its place. Eventually you’ll understand that this makes you far more resilient than someone with a regular paycheck that can disappear with a pink slip.
Do Your Own Work
Lost Art Press now makes enough money to have an employee or two. And some days it is tempting. I’d love to offload some administrative work on hired help. But we won’t do it. When you hire people, you have to manage them instead of doing what you are good at.
And, I hate to say this, but most people who are looking for a job are not the right sort of person to work with an independent entrepreneur. What you really need to do is to clone yourself. You can’t do that (yet), so don’t assume you can find someone who cares as much about your work as you do. As a former manager, I can say this is a rare quality.
John and I know we could expand the business if we hired people. But then we’d just be managing people all day. And that’s not what I love, like or even tolerate.
When we need help at Lost Art Press, we hire contract work and use other independent artisans.
There are about 10,000 things I could add to this entry, but the above points are the most important ones to me. And there are areas in which I have gotten lucky. Lucy has health insurance through her business, so that’s not been something we’ve had to wrestle with, such as utilities or overhead.
If this all sounds daunting, it’s not. If you have the passion and work ethic then the administrative part of life will fall in line.
— Christopher Schwarz
30 thoughts on “Cut the Cord, Part 2”
You are 100% correct about how easy life gets when you are Debt Free.
I no longer listen to anyone who tells me to take a loan out for this or that.
You hit the proverbial nail squarely on the head with this one!!!
Luck is the intersection of preparation and opportunity.
Opportunity is in front of all of us – however only some are prepared for it.
Not daunting at all. You’ve made your life satisfying and enjoyable, a great reward for the principles you follow. Being debt free, and finding compound interest on what you save does indeed make money like water.
Thanks for all the tips!!!
If ever invited to give the commencement address at a major university (a scenario I can envision), your speech is prepared.
Being self employed for 25 years and not drawing a paycheck has been a tough choice.
At this point I am unemployable. It is worth all the risks and Chris has a lot of great advice!
Right, we do become Unemployable.
And… nobody but us will take care of us either.
Chris, are you comfortable talking about specific numbers?
Did you have a sales target in mind when ATC started to sell well?
As in “if I reach 1000 books sold I’ll break even and keep working at PW but if sales reach 5000+ this is viable and I’ll go all in”?
I didn’t have a target to hit with ATC or any of our books – before or after that one.
The most important math was on the cost side of the equation. Lucy and I had cut our expenses to the place where I could completely absolutely and utterly fail – and we’d still be OK.
We could do that because we had no debt. It’s almost impossible to put someone out of business if they don’t have debt or overhead.
Great advice, this is best the way to go to have a satisfying and creative life. The only thing to add is to put a little away every month for retirement. Thanks Chris.
Retirement. What’s that word?
I seldom thought about retirement and didn’t care as I enjoyed my working days so much. But the rules of money and debt Chris tells lead to good things. After 37 years at 69 this is my last year. And somewhat unplanned, I have lots of money. I didn’t waste it and put some in places, mostly real estate, that have significant value now. My Grandmother, Scotish of course, told me long ago “If you want a lot of money put a little away for a long time”.
I think Chris commented on another thread not so long ago to a similar comment: “I am retired.” Its been my experience that people that get the opportunity to work for themselves and love what they do don’t think about ever stopping. The bastards. 🙂
Where is the top illustration from? I’m pleased to see a period source with guards on the bandsaw – I have a similar one that terrified me until I figured out to guard away the blade and bottom wheel.
Two great posts!
Being debt free, above all else, is the only way to make a “secure” living as a creative.
As a mentor once told me, “if your outgo exceeds your income, your upkeep becomes your downfall”.
Rhett! So glad you are alive and among us!
I agree with everything you just said. Especially the paycheck part. Been self employed since 2003. >
Hiring and accountant and considering incorporation are both paths that help to protect small businesses from difficult and complicated problems. Do you protect yourself with insurance as well? General liability? Completed products coverage? Inland marine to cover your tools and equipment?
We have tons of insurance on ourselves, our inventory and our equipment.
Two great posts — thank you.
How do you define overhead? What sorts of things do you include?
“Overhead” expenses are expenses that do not directly make money. So buying a computer is overhead, but buying books from the printing press to sell in the store is not overhead. That’s “cost of goods sold.”
Usually overhead includes equipment, utilities, rent/mortgage, insurance and the like.
Hope that helps.
Thank you. That does help. Not knowing stuff like this is what I get for being a callow liberal arts major. (Would it have killed me to take a business class or two?)
“…ask them to do something of equal value for you”.
Soooo true. That one question does wonders to educate the ignorant well intentioned, and dissuade the outright clowns.
Chris, you mention to “…put one thing out there every day on some channel…on the channel it is best suited for.” Are you talking about how sometimes you post on the Lost Art Press blog and sometimes you post on the Popular Woodworking blog? I don’t even have a blog, but that’s a pretty good reason to start blogging. Are there other channels besides blogs?
Yes, and also our other social media channels. We’re on Instagram:
These are two excellent posts. I must admit that when you first announced that you were buying a storefront out of which to do business, I was a little concerned for LAP, thinking that you might be going heavily into debt, which kills so many small businesses. You can hardly find a book on starting a small business which does not include a chapter on financing the business by taking out loans.
You and your wife have your heads screwed on straight, living debt free and keeping expenses to a minimum.
I think that a book on how to run a woodworking business would be a best seller. Call it, The Anarchist’s Business Model. No charge for the suggested title. 🙂
Wow! These last two posts have been unexpected but welcome.
Back when we were both in grad school, a friend studying economics told me “never use debt to buy a depreciating asset.” I took that advice to heart, never ran a credit card balance, and was able to retire at 54 to pursue important things lik woodworking and writing.
Loved these 2 blogs on business. As a self-employed software developer, I followed a similar business model and found it worked very well. I am now retired and woodworking and am very happy that I put away something each month towards my retirement.
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