What Is Your Art Business Costing You?

At some point in your art career, you need to stop and evaluate the bottom line.

Sales might be good, but how are your expenses? How much is it costing you to make those sales?

Artist Liz Crain took a look at all of her venues, matched them against expenses, and posted the results on her blog.

What she found was that the venues where she had decent sales weren’t necessarily the ones that increased her income. There were additional hard and soft expenses that needed to be considered.

Liz Crain, Articulated Zen. Ceramic.

Liz Crain, Articulated Zen. Ceramic, 7 x 8 x 5.5 inches. Used with permission.

Why This Matters

It feels so good to make sales and see new money in our accounts that we often forget everything we had to do in order to earn that income.

If you are truly trying to earn a living as an artist and not just giving lip service to the effort, you care about both income and expenses.

You want to know your profit margin. How much did you really make? Or, if it comes to it, how much is the sale costing you?

There’s another reason this matters.

If you’re like most artists, you are stressed for time.

If you have a venue that is repeatedly losing you money, it’s an easy decision to stop messing around with that venue and start focusing on the ones that help you earn a living. At least it should be an easy decision.

Identify Expenses

Determine what your expenses are for each of your venues. These might include the following:

  • Entry, booth, and rental fees
  • Membership dues
  • Reception costs
  • Commissions paid
  • Travel, transportation, hotel
  • Paid assistants (for installation, booth sitting, etc.)
  • Postage or shipping
  • Insurance
  • Advertising
  • Printing
  • Time (e.g. gallery/booth sitting)

Then . . .

Crunch The Numbers

Income/Sales – Expenses = Profit or (Loss)

You probably already know this formula. If you are running numbers through it on a consistent basis, you won’t be spending time on costly ventures.

Liz ran the numbers for sales of $1000, $2000, $3000, $4000 and $5000 at her various venues with, surprisingly, no variation in results.

How did you do?

What is it costing you to show at your venues?

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30 comments to What Is Your Art Business Costing You?

  • I think a lot of us forget to think about what each venue is costing us for the sales we get. At the end of the year, I looked at where my sales were coming from – galleries vs self. I will add to figure the expenses of the sales – thanks for the article.

  • Along with travel costs, add travel TIME. Those days out of the studio can be costly whether for shows, gallery delivery or workshops.

  • I just dropped a craft show that I’ve done for the past 8 years and it was a hard decision. The show is run by a state-based organization and I loved being able to socialize and network with the other local artists. Unfortunately, that’s not why I was there. The financial loss from last year was enough for me to finally cut it loose.

  • I think this is a GREAT point! Last year, before the holiday season, I sat down and created an extensive Excel spreadsheet to help me understand how much it costs me to make my most common holiday sales items, like cards or buttons. I was so surprised to find that the profit margins on some of those items could be so drastically different! It was extremely helpful to me by allowing me to be strategic in what items I sold in which venues.

    Since then, I’ve calculated the cost for everything I make, and it’s helping me focus my energy on the best items for my bottom line. I’ve also started keeping a separate bank account and a Quickbooks file for my business, and it feels wonderful to know exactly where I stand at all times. So much better than the past when I would only see whether I had a profit at the beginning of the following year when I did my taxes.

    As a result of this work, this year has been my most successful year yet, even though I haven’t had as much time to devote to my art as in the past. I can’t wait to see how well I’ll do when I have more time for my art. I say that accounting can be very exciting! :)

  • There is another thing to keep in mind. Let’s say you show your work in a gallery in your “Dream City” (Santa Fe, New York, Miami, Wherever) Sales are slow. Weigh the cost against the “prestige”. Usually the cost to stay in such a gallery is just the cost of shipping your art. I’d stay in that gallery (while looking for a replacement gallery!) If the gallery is requiring you to spend money on advertisement etc, then it’s time to give it another thought.

  • Apart from anything else, the Taxman is not very sympathetic to artists per se.
    He has a very narrow measure and if you consistently show ‘costs’, without good records — and no profits that he can tax — he’ll quickly write you off as a hobbyist and disallow ANY of your claims of expenses.

  • jc langford

    Great beginning thoughts about the true cost of selling art in this post. Two thoughts arise.
    1. Doing a cost/benefit analysis is good business but the other thing to consider is the contacts one makes from a venue. That is something that needs to be added into the equation.
    2. Did the artist get paid for putting together this as a guest post? I hope so… That’s just good business.

    • JC: Of course there are other benefits. Stay tuned for my post next week.

      This wasn’t a guest post. I was riffing off of something she wrote. It’s all my writing.

      I never ever pay for guest posts and would never asked to be paid for a guest post. It’s not a model I embrace.

      Liz said she got 10x the traffic from my post here just because I mentioned her.

  • In my previous life in the business world (before I started writing business software for artists), we, for years, assumed that all the perks we gave our “most valued customers” must have been coming back to us in increased income. Well, the time came when we started to track all those costs vs the income we generated from those customers, and Surprise!, they turned out not to be our most profitable customers at all. And the same is true for artists.

    There is absolutely nothing wrong with participating in, say, a non-profit sponsored fair where you donate, discount, etc., as long as you are aware of the dollars and cents part of it. As Eric said above, the IRS is not very sympathetic to businesses that don’t keep good records. I have told artists for years that if you don’t keep track of your business from a profit and loss, income and expense, perspective, you don’t have a business, you have a hobby.

    There are many ways to accomplish this. Some people use notebooks, some use spreadsheets, some use specialized software (like mine, I hope! :-). But the goal is always the same. You want to know…..
    1. What artwork you have, where it is, etc.
    2. What did it cost to generate that art as a final product, ie, supplies, etc?
    3. What was the sale price, if it’s sold?
    4. Who are your patrons, suppliers, etc etc?

    There are a lot of nuances to tracking that information. You can track a lot, or a little. Better tools allow you to combine information in various ways to gain more knowledge about your business. Who are your most profitable patrons? What show is good for your? And more.

    And, I harp on this a lot, and it isn’t really the topic here, but keep copies of your really important information in a safe place. Know what you’re going to do if a disaster strikes. In the business world, this is called things like “disaster recovery” or “business continuity planning”. Losing your contact list can put you out of business.

  • There are so many great comments – thank you all for commenting. I’m a weaver and dyer in Canada so the number of shows available for my work is pretty small….so it was very hard for me to let go of a couple of my favorite shows last year. They were so much fun (and tons of hard work!) to attend, I loved talking with fellow artisans, and in our area they were shows held in high esteem but….I finally had to let go. I was always hoping that “this would be a great year” or “I might finally get that account/make that contact/ etc”. Each year was more costly than the previous (ie expenses higher than revenue) though I really enjoyed socializing with friends…I was supposed to be working. (The socializing did not develop into serious business…just a lot of hoping.) So I had to either go to the shows as “vacations” or let them go…so I let them go. And still, every year when the time comes for jurying or the actual show dates, I get melancholy.

  • This is such an important subject – Thanks Alyson!
    COGS – cost of goods sold – are the most important four words as one tries to become financially independent as an artist or to run a lawn mower service. But some of the equations will shift in importance over time. A newbie will gain some much needed experience and marketing tools by being in various venues in the early days and it is very hard to value that learning experience. But while you are setting up that first booth and getting your feet wet, don’t get bogged down in mud with bad pricing.

    While knowing that a widget that does have a good record of sales is important – it is only valuable if it is also making you money. That is important on day one and year 20. In my 20 years – I have timed and costed out every single design and if after a few prototypes I can’t see the full retail price working in the marketplace – it’s gone. My designs are, in part, inspired by profit margins AND hopefully they are “valued” for solid sales. A few of my favorite designs just never clicked – and I hated not making them anymore, but…

    I have a mortgage to pay, health insurance to buy, and… well…I am just grateful that I am making a decent living doing what I enjoy. So if a design gets shelved, so be it.

    “Next”

    PS- and Annette said a mouthful: time out of the studio to do events, etc. is a COST. AND one more thing, the time spent applying for shows (if traveling – getting all the travel organized, too), and prepping your display, and organizing the inventory and then… post show issues, too. I used to lose another couple of days to getting the bookwork done, re-entering work into inventory, packing up the display, following up on leads, updating contact lists… honestly… there were always about 4 days lost for each show. Retail shows are very costly.

  • I know exactly how much my Art Studio of Meltemi costs.

    It is not rocket science to figure out Microsoft XL and then build a spreadsheet for all of those cost centres. From mine I know exactly how much I have spent this month and this year so, far on…paints…brushes…canvas and all those things like the utility bills.

    You do not need any costly so called customised accounts package. You the artist are the only one who will understand your art business.

    Just save up all those receipts and put them into your spread sheet on your monthly administration day, e.g the Lastof each month…

    An art studio is a business and it must be run just like any other micro-business

  • This past year was the first time filing taxes. I took a heavy loss as I had to replace my primary vehicle, however in the big picture, I had relatively low expenses. I had one show which I had a hard list of expenses and the rest were soft operating expenses. (differences were travel and show expenses vs. internet, website hosting, business cards, electricity ect) Irregardless of how much you earn a year, at the end of the year it’s how you chose to reinvest in yourself that the IRS looks at. If you work at your art “with the intent of making money” (that is how the law is written now) and being successful and your expenses reflect a frugal budget, then the IRS will take you seriously, and not write you off as a hobbyist. The law used to be you had to make 500$ to be considered profitable enough to need filing. Now it is written with your intent in mind rather than your success. Running a business is more than how much you spend vs how much you make. It’s how wisely you are spending it. This year I have gone to shows on average of twice a month, however I am spending considerably less than I was two years ago driving several hours and spending three or four weekends a year at a non local show. My profits are up and expenses are down. It was a change I was forced to make when I reviewed my expense budget. In hindsight I am glad I did make that change. A regular hard review of shows including expenses is healthy. If your not building your client base, getting your name out there, or selling anything, then why are you there? How can you justify spending the time resources and effort? This is the hard look every one of my shows gets. If at the end of the day they don’t measure up, then I may go to the show, but I will not be vending. I will simply go to enjoy the company, not to make a profit. There is that line that as a “business person” you need to be able to draw in the sand for yourself. It’s ok to go to a show because you enjoy the show, but don’t spend the money if you can not afford to not see the return.

  • Phil,
    With all due respect, whether or not an artist can manage their business simply with a spreadsheet or wants or needs something more sophisticated is really something only the artist can decide.

    There are certainly many artists who can do well, or at least manage, with a simple spreadsheet, or a more sophisticated Excel setup that does much more. Some need more than that, or would like to have the benefits that go along with this kind of software, and prefer not to build it themselves..

    I’m not here to sell my software, but it’s a fact that my system costs less than Microsoft Excel. And, it comes built in with a variety of tools for the artist to use to manage their business. It really isn’t a matter of whether or not the artist can learn Excel. It’s more a matter of determining if that’s where they want to spend their time. Learn Excel and then start building what you need with it, or learn a software package and then just start using it to benefit your business. Some people certainly prefer to “roll their own”, and more power to them. Others would rather spend that time on their art. It’s really up to the artist to decide what will work better for them.

  • This is a wonderful article!!! if you dont mind, I gonna translate it to spanish and publish on our site with your reference.

    Kind regards from Mexico

  • Ron, Excel is part of The Office Package…it is not all that expensive…Excel? I learn to use it as I go along…at 66 years of age there is not a great deal to it..more cut & paste than effort…

  • Phil,
    Yes, I know that. Excel, as a separate purchase, sells for about 139.00. As a part of the Office Suite, it can be purchased for about $279.00. Both, to my point, more expensive than my software (and some others), which are already designed to support an artists’ business. Cost should not be the major sticking point, tho. What more important is what is best for the artists’ business.

    It’s great that you are able to do what you want to do with Excel. As I said, that’s not going to be true of everyone. There are artists who don’t have the skills to do something like that. There are also artists that don’t want to acquire the skills to do that. And there are those that simply want more capabilities that you can get with a spreadsheet. My point was that there are solutions available for everyone in the art industry, and that it’s really up to the individual artist to decide what is going to work best for them and their business. If that’s Excel, then that’s great. If it’s something else, then that’s great, too. There’s no more one solution for everyone on this than this is one correct brush, or pigment, or clay, or metal, or bead, or camera, or what have you.

    • Ron… I just visited your site and viewed the program and several of it’s functions. It’s extremely simple and very complete. If I was not totally immersed in my (YEARS of tweaking) excel program, I would jump ship.

      And you are so correct – your program is just another tool and just another choice in the same way as a brush or clay or whatever we want to use to make our art businesses hum along. Some people are able to photograph their own work, some need pros. Some people can create great copy or marketing plans – some join Alyson’s courses. Some can get what they want from excel – others want a template. Some people use quick-books, some people use excel, and some… use shoeboxes and even though tax time is a nightmare because computers are the dreaded beast they can’t tame.

      It was clear when you first posted that you were 95% trying to help and only 5% trying to advertise. I hope others will take a moment to view the product – clearly you have a passion for being helpful and it shows in the thoroughness of your program. It won’t be for everyone, but it may be the solution for many. Best wishes to you…Mckenna

  • Jeremy Holt

    I think $50 is a good price for a show. It’s rough selling a piece for hundreds of dollars and realizing you only just covered the cost of the booth fee. I know a lot of artist who are dropping shows because of the losses they are taking. One of the beauties of using scrounged materials to make art with is they are free. I’ve saved tens of thousands of dollars by scrounging materials. I almost always consider the cost in materials, time invested, cost of shipping or delivering what I make but still the main thing for me is to create something that people or at least somebody gets excited about. I’ve made less than a dollar per hour and more than a hundred dollars per hour. I can’t seem to break away from those chaotic earnings.

  • Alyson,
    Bruce Baker advises to take the net and divide by the number of hours (including preparation, packing, etc) to get your hourly rate.

    Thanks for this very useful post. We all forget from time to time.

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