- Why your expenses should be factored into your income goals
- Costs you need to consider off the top of your income
- Considerations for your pricing
- When it may be time to shift niches
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Brian's blog post about his first 6-figure year
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[00:00:00] Brian: Hello, and welcome back to another episode of the six Figure Creative Podcast. I am your host, Brian Hood. If this is your first time listening to the show, first of all, welcome, so glad to have you here. This show is for creative freelancers who are trying to earn more money from their creative skills without selling their souls.
[00:00:13] Brian: If that sounds like you, you are in the right place. For my returning listeners, I am fresh home from my trip to Orlando with my wife. She spoke at a conference this past weekend. She is a book influencer. I don't know how else to say it. She's amazing. She spoke at a conference, she did a few different panels at this conference in Orlando, and then we went to Disney World on Monday.
[00:00:33] Brian: And I am feeling refreshed. I am a little sunburned. We've nearly escaped a storm. We got to eat a ton of food cuz we were at Epcot. I cannot recommend it enough. We're there for the flower festival, like Spring Flower Festival or something. So they had a bunch of different, like temporary food booths set up where they'd bring like these fancy chefs in to create these awesome menus with different ethnicity cuisines from all the different countries represented at Epcot.
[00:00:54] Brian: And then we just went around and just ate all day. We were there for like 12 hours. We did a bunch of rides. I rode the best ride I've [00:01:00] ever ridden in my life, which was the Guardians of the Galaxy Ride. For anyone who ever gets a chance to do that, it is insane. I don't wanna spoil it for anyone.
[00:01:08] Brian: So if you were like, I'm going to Epcot soon, I don't want this ride spoiled from me, skip ahead 20, 30 seconds. I don't know, but it's essentially, Similar to the RO rollercoaster you're in like what looks like to be a rollercoaster. You're like, oh, I'm going on a rollercoaster. Awesome. We did front seats both times, which I highly recommend.
[00:01:23] Brian: Just wait the extra two turns like it's five minutes to get the very front seats and. you're in this dark room, there's stars all around, they make you feel like you're flying through space. The seat in rotates left and right, where you're not actually just always facing force.
[00:01:38] Brian: Sometimes you're facing backwards or sideways depending on what's going on in there. There's massive screens. you're circling planets, like you're in orbit of a planet. they have six different songs they play. So you wanna do it multiple times so that you can enjoy each different song.
[00:01:50] Brian: And one of the six songs is September, which is My Wife and I's song. That is our song. because our anniversary or our date anniversary is September 21st. Do you [00:02:00] remember? Anyways, unfortunately we didn't get that song either time. We got the same damn song twice.
[00:02:05] Brian: So we had a lot of fun with that. And I'm back home and I am doing this episode a little late, late in the week later than I wanted to do. And so we're gonna see what we can do today, the topic of the show today, but, which I'm sure you already know, because no one really listens to a episode of a podcast unless they know what they're gonna talk about.
[00:02:19] Brian: The topic is why a hundred thousand dollars is what I believe to be the new minimum wage for freelancers. I'm gonna give you my argument on this. I'm gonna give you some facts to support this. I'm gonna give you some reasons why this needs to be your new belief, and then we're gonna talk about some of the things you probably need to do to get there some steps to look at, to see if it's even reasonable for you to get there.
[00:02:38] Brian: So, I, I hope this episode's valuable, but the biggest thing I want you to take away from this episode is to think bigger for your business. I've been talking to a lot of freelancers recently. Many of them have very, very modest goals for the freelance business. 50 K 60. If I could just make 60 K, it would be the best.
[00:02:54] Brian: And I'm here to tell you that that's probably not enough, like actually minimum wage for those of you who live in bigger cities, in more expensive cities. So [00:03:00] if you live in New York, la, even Nashville, Austin, Toronto, anywhere where cost of living is high, I'm gonna show you why a hundred K should be the minimum wage you shoot for as a freelancer.
[00:03:09] Brian: Because a hundred K as a freelancer is not the same as a hundred thousand dollars salary. It is actually a lot different. And I think most people, Since they come from a day job and they, stumble their way into this creative space. As a freelancer because it's their passion. They never really think through the numbers and look at all of the elements that are involved with what your money goes to as you're a freelancer.
[00:03:26] Brian: So you're not really thinking through this the right way, and I'm hoping to like jar you into consciousness to help you wake up as a freelancer because really you are a business owner. Some people, they just create jobs for themselves and if you never get out of like, I've created a job for myself with a thousand little bosses that are all my clients, you never get outta that.
[00:03:43] Brian: That's fine if that's the way you wanna live your life, which is again, no problem with that, cuz typically you're doing the thing you love as a creative. So that's not a big deal. But you have to think like a business owner, even if you want to act like you've created a job for yourself. Let's chat about why I think a hundred thousand dollars is the new minimum wage for [00:04:00] freelancing.
[00:04:00] Brian: To sum all of these reasons up, it basically comes down to expenses that you have as a freelancer. And I'm gonna skip a lot of the generic ones that I think most people already know about, although I'll, cover some of those. But I was looking through my income and expenses from the first year. I broke six figures, there was a link where I blogged about this back in like 2015, and I went through all my incomes and expenses on that. article, it was a somewhat viral article back in the day when I launched the six Figure Home Studio, which is the previous brand that this morphed into.
[00:04:28] Brian: so the link with that will be at our show email@example.com slash 206 two or 2 6 2. But on that, I pulled some things out that are interesting to talk about because most people, when they look at an income, like a hundred thousand dollars, great. They don't think about what the expenses are going to be that are gonna take away from that.
[00:04:43] Brian: So there are some expenses that you're gonna run into. And I wanna give, this is gonna be probably a math heavy episode, which is like the cardinal sin of podcasting. You do not do that, but I'm gonna try my best to make sure you're understanding why a hundred thousand dollars is the new minimum wage.
[00:04:55] Brian: Here First expense that you are probably not thinking about as a freelancer that's gonna take [00:05:00] off money. I'm gonna reduce that a hundred thousand dollars as we go just to show you what you're gonna end up with. His credit card fees, unless you're being paid in cash or check. Or wire transfer, which can be the case in certain niches, but it's not always, and it shouldn't be something you force your clients into doing because you don't wanna pay the credit card fees.
[00:05:16] Brian: You always wanna make it as easy as possible for your clients to pay some niches naturally, pay by check, naturally pay by cash, or naturally pay you by bank transfers. If that's you, great. This is not something you have to worry about. But for the rest of us that are taking credit card or debit card payments online and PayPal, even in 2023 and beyond.
[00:05:35] Brian: This is just cost of doing business and it adds up. It's usually about 3% of what we make. And the, the reason this hurts so much is because it's 3% of our gross income, not net gross income. So if you make a hundred thousand dollars in a year, $3,000 of that is instantly gone. So now we're down to $97,000.
[00:05:54] Brian: Okay? That's where we're left. Now, already, before the money touches our account, we're already reduced down by [00:06:00] $3,000. Next is health insurance. This is for United States people only, that's our largest listenership. So that should be a lot of people listening right now or watching on YouTube.
[00:06:08] Brian: Sorry, gotta gotta acknowledge your YouTubers. Health insurance. this is gonna wildly vary from person to person. I pay for my wife and I about 6,000 a year for this. Some people pay more. Some people pay less. The larger your family is, the more this can be. But I'm just gonna put in here about $5,000 a year.
[00:06:23] Brian: It can be way more than this, by the way. It can be 10,000 or more for a lot of families and sometimes way more. So I might be shooting on the low end of this, but that's 5,000 more dollars. Subtract it from our bank accounts at the end of the year. Now we're down to $92,000. And that is just I pay for essential, like catastrophic insurance.
[00:06:40] Brian: Like Unless something horrible happens to me, I'm not going to the doctor. And this just covers huge expenses so I don't get wiped out financially in the case of getting cancer or a massive surgery or a big car wreck or something else. If you want like full coverage, good luck. Welcome to America. Here we go.
[00:06:54] Brian: So that's 5,000 gone, right there. Next, most freelancers have to pay for hardware and or [00:07:00] software to run their businesses. I personally pay about $18,000 a year just on recurring software fees for all the things I do in my businesses. $18,000. That's way more than most people. But between investing in new hardware, so for my music producers, studios, master engineers, you probably do more than that for my videographers, even photographers.
[00:07:20] Brian: You might do more than that. For other niches where it's just very much software based, you're probably doing a lot less than that. So maybe my designers, you're not doing a lot of hardware costs, but I'm gonna put this on somewhere around the $10,000 a year range. Could be way higher for you, could be less for you.
[00:07:35] Brian: whatever number it is for you, put that in there. But that brings us down to $82,000 left, and we haven't even really got to the real expenses of running it, but this yet, these are just the things that people really don't think about. Next on the list of expenses that are gonna take money away from you is continuing education.
[00:07:52] Brian: I was talking to someone recently, I'm not gonna name names, who is a younger entrepreneur. They're very talented. They're amazing at what they do, but [00:08:00] they have never bought a course. They've never hired a coach, they've never done anything outside of their college education. Whatever the reason is, they weren't investing anything in that area. And they were struggling because of it. I think it was to their detriment. only hire people or buy courses from people who have already provided value from you.
[00:08:14] Brian: Like, I believe in that. But don't just blanket not invest in yourself. So whether it is genuine continuing education, like some industries have to do, there's like just certain industries where you legally have to. Continuing education every year. That's not, most of the people listening to the show right now are watching us on YouTube because as creatives we don't have required continuing education.
[00:08:32] Brian: But we kind of do have required continuing education because sometimes our industry is moving fast and we have to stay on top of what is changing in the industry. And in order to do that, we have to invest. Into, learning the ropes of those things. Sometimes we also can hire coaches. We can buy courses in areas that we're struggling with.
[00:08:50] Brian: So it may not just be continuing education in our crafts. Sometimes it's in our businesses, and that's obviously what we offer at Six Figure Creative. But beyond that, I have personally spent well over a hundred thousand dollars in my lifetime in continuing [00:09:00] education over the years. So this can vary a lot.
[00:09:02] Brian: It could be anywhere from a thousand a year to 10,000 a year for some of you. meet somewhere in the middle. Just say $3,000 a year that you're spending on learning something new to increase your worth and expand yourself as a creative. If you listen to my episode back on.
[00:09:15] Brian: 235 and 236 called why you Don't Need to Be a Better Creative in 2023. It's the full stack Freelancer series, part one and two. The whole premise of that is as successful entrepreneurs and freelancers, we need to have a full stack of skills and then one deep set of skills.
[00:09:30] Brian: It's a T-shaped freelancer, so we need a lot of broad, general knowledge and a lot of different things. We only need to be amazing at one thing and for, learning some of those broad things like how we do lead generation, lead, nurture, sales, fulfillment, blah systems, processes, automation, all these things are what?
[00:09:45] Brian: Flesh us out as that full stack freelancer. That's what I'm talking about here when it comes to investing yourself as a freelancer. So I'm gonna say, just say $3,000 a year in continuing education that brings our total down to 79,000 US dollars. If we're talking US dollars, it could [00:10:00] be British pounds or euros, whatever your, cup of tea is, Next on my list is for those of you who are at six figures and especially beyond, you're going to start at least dabbling and getting help and getting contractors to take some of those tedious tasks that should not be on your plate, off of your plate. Those things that are non-creative. Very left-brained, step-by-step, systematic processes that are a complete waste of your time as a freelancer, because anyone with a brain and a checklist can do those things.
[00:10:29] Brian: You need to start getting those, off your plate. Once you're above 50 grand, that is a must do, and that's what helps you get to six figures and beyond. To do that, it costs money. this is what's also gonna take away from your income as a freelancer, because the more successful you are, the more help you're gonna need, And it can't just be part-time. It can be contractor, it can be project based, whatever that is. But I'm putting $12,000 on this list to go towards contractors once you get past this point. I spent more than that my first year breaking six figures, but it's worth putting whatever number down there makes the most sense for you.
[00:10:58] Brian: But that brings us down to now [00:11:00] $67,000. left in our bank accounts from the original a hundred thousand dollars that we had. And that's not including things like rent. So if you have an office space, that's a big portion of, or if you had to move into a bigger home to have an actual dedicated space for your office, that's still.
[00:11:14] Brian: going to be accounted for in your business expenses, repairs, and maintenance. So if you have your own dedicated space, there's any repairs and maintenance for that space is going to be on you. Sometimes it can be the landlord, but that just depends. Utilities internet, water, whatever, like any utilities you might have for your dedicated space as an office.
[00:11:31] Brian: Miscellaneous things like getting new headshots or a new website designed or office supplies, like any of these, like miscellaneous expenses can really add up. And then on top of all of this, there is something that people don't really understand about being self-employed in the United States, is that when you are self-employed as a freelancer really any self-employment, but freelancers don't understand this, there's something called self-employment tax.
[00:11:53] Brian: social Security and Medicare. two things that we have to pay into, and the total tax for that is something like [00:12:00] 15.3% of our net income. So at this point, if we have $67,000 left in our bank accounts, We have to pay 15.3% of that towards self-employment taxes.
[00:12:09] Brian: that is $10,251. However, even if you have a day job, I believe, if I'm remembering tax stuff your employer pays for half of it and you pay for half of that as an employee at a company. But whenever you are self-employed, you have to pay both halves, the employer share and the employee's share.
[00:12:26] Brian: So you pay the full 10,000. Instead of just the 5,000, you would be paying at a $67,000 a year salary. So that means you've essentially reduced Your net income by about 5,000 additional dollars that you would've not had to spend if you had a day job. Which means now we're down to and this is before we get into other little knickknack things.
[00:12:46] Brian: So you are barely bringing in $60,000 a year, essentially $62,000, give or take. And if you are in a city like Nashville, la, New York, whatever, the best practice for living expenses is, you want it. Ideally, I [00:13:00] think it's like. One third or one fourth of your income should be going towards living expenses to be able to have a comfortable living.
[00:13:05] Brian: Yeah, $5,000 a month in income. 5,100 and a third of that is about $1,700 to go towards rent or mortgage. it also should be mortgage plus CapEx and maintenance and other expenses that come up like property taxes. I'm not gonna get into all that cuz that's above and beyond into the nerd talk of real estate.
[00:13:22] Brian: But this is really hard to find a good suitable place that you can both live and work in a good neighborhood in somewhere like Nashville, especially la, especially New York. It's impossible. So that is why a hundred thousand dollars is minimum wage. It really is. Now if you're in a tiny city, I grew up in Athens, Alabama.
[00:13:37] Brian: Town of like 20,000 people at the time. Real estate, you could get a really good home for a couple hundred thousand dollars. Your mortgage might be a thousand or something like that. Like you can get by with less than that, but, I'm hoping the numbers are starting to add up and click in your brain that making a hundred thousand dollars is minimum wage keeping.
[00:13:53] Brian: A hundred thousand dollars is completely different. So we've gotta reshift our mind and our thought process around these sorts of [00:14:00] income goals because whatever your goal is for your business is generally going to be the most you'll ever make. And that's why for most people who continually grow in their businesses, every time they, start to approach a goal, they push that new goal up.
[00:14:10] Brian: So you are always going up and growing in some way. Now there's always the argument of like, when is enough enough? I'm not gonna get into that today. That's not really what the purpose of this episode is. Most creatives really just struggle with even having the thought of. What is enough in the first place?
[00:14:24] Brian: What should my goal be? Not thinking big enough. I rarely have to hold people back from having too ambitious of goals. In almost all cases of creatives, I have to push you to have anywhere close to a goal that makes sense to have the lifestyle that you need, deserve, and should have as a creative who is good at what you do.
[00:14:39] Brian: If you suck at what you do, don't listen to the show. You'll get better at what you do. for those of you who are great at what you do, hundred thousand dollars new minimum wage.
[00:14:45] Brian: So let's now shift to how do we actually get you there. Now, there's a ton of stuff on this show, on this podcast. This is the 262nd episode 2 62 of this entire show. So there's plenty in our backlog. If you're brand new, go binge from episode at least one 50. If you wanna go back before that [00:15:00] you'll get into this six-Figure Home Studio days.
[00:15:01] Brian: where we talked mostly for recording studios. But episode 151 and beyond is the six figure creative go binge back through those episodes. And there's tons in there, but I wanna give you some exercises to do so you can see if this is even remotely reasonable for you in your current business model.
[00:15:15] Brian: So I want you to take your income goal, which we're just gonna say is a hundred thousand dollars right now, and we're gonna divide it by the average client that you get. What's the value of the average client or the average project? whatever terminology you wanna use.
[00:15:25] Brian: Sometimes a client comes in for more than one project. I like to just say, how many clients do I need? And for all of you, this is gonna vary. How much is a client worth to you? So if you are a mastering engineer who, the, my punching bags of this podcast, cause you typically have a really low client value.
[00:15:38] Brian: That means that the average client's gonna be around this, let's call it $500 in a year. So if you were trying to make a hundred thousand dollars off a $500 client, that means you need 200 clients a year in order to make that goal happen. Now you take that 200 clients per year number, which sounds insane, and you divide that by 12, and that means we need to have 16 new clients per month to hit that goal.
[00:15:59] Brian: Now, [00:16:00] my question for you is this. Do you reasonably think you have the skillset, the determination, the willpower, the knowledge and education necessary to bring in 16 brand new clients every single month for your business. And if that answer is no, it may be time to shift or rethink how you're pricing your, your services, or whatever services you're even offering.
[00:16:21] Brian: So that's why some of my most successful clients are ones that offer recurring revenue services where you're charging a retainer every single month for your services. Because in that world, a client might be worth 20, 25, $30,000 a year or more.
[00:16:33] Brian: It doesn't take that much to break six figures, but let's go something more reasonable.
[00:16:36] Brian: A lot of people, they're in the three to $5,000 per client or per project range. Some are more than that, which is great, but if you're in that range, let's just say $4,000,
[00:16:44] Brian: That means you need to be bringing in about 25 clients per year, and if you divide that number by 12, amount of months in the year, you need about two clients per month. I dunno about you, but that to me seems more reasonable, more doable. I just need two clients a month.
[00:16:58] Brian: If you're charging $4,000 [00:17:00] per project. Much more doable. now the big question is what can I offer that is valuable enough to charge $4,000 to a client? Not everyone has a clear answer to that. Some niches, it's way easier to do into others. Like If you're working with businesses, you're a B2B freelancer, this is generally much easier and probably on the bottom end of what you should be charging for what you do.
[00:17:17] Brian: But for those of you working with more creative niches, like my music producers out there, and you're working with what you consider broke artists, which isn't always the case, it's sometimes limiting belief. This might be much more difficult. So I'm not here to give every single answer to every single problem, but I'm hoping that you're at least able to do the math to know in your head, is this a reasonable goal to have or is it not?
[00:17:36] Brian: Because if it's not a reasonable goal and you have no clear path to six figures or beyond, six figures being the new minimum wage for you, especially in a big city, You now have to make a decision, and that decision is, am I okay? Scraping by at a lower income? Should I just focus on making this a creative, fulfilling thing, not worrying about the money and go make money somewhere else, like a day job or offering some service or something to someone else that's more valuable that I don't [00:18:00] love as much?
[00:18:00] Brian: Or should I think about shifting into a different niche, different service, different offering of some sort so that I have a more reasonable chance to reach the goals that I have? Income wise, I can tell you from experience working in a niche that you are passionate about. Is incredibly fulfilling, but only if there's money that comes with it.
[00:18:18] Brian: It is really difficult to maintain the daily grind the right frame of mind over a long period of time and maintain that level of creativity if you're constantly beaten down financially. so just broad blanket statements. Generally speaking, you are typically much better off.
[00:18:33] Brian: In the long term, in a field that you are not wholeheartedly, amazingly passionate about and love with, you just are okay with it. It's solid, but you're making enough money to actually make a living so that you can then fill the rest of that creative void doing something that's maybe doesn't pay as well.
[00:18:49] Brian: again, everyone has a different balance that they need between. Things that fill their soul and fill that creativity void and things that make money. And I'm not here to tell you what your balance should be, but I am [00:19:00] here to tell you that for the vast majority of people, six figures is the new minimum wage.
[00:19:03] Brian: And every year inflation goes up, that number's probably gonna keep climbing. So I'm just challenging you and hoping that by the end of all this conversation, your brain is now thinking, how do I at least get to six figures as a freelancer? And if I haven't done that, then I have failed you in my job and I apologize.
[00:19:18] Brian: So I'm gonna leave you with that. Nothing else in this episode to talk about. I do wanna say that I'm more than happy to chat with you about this. If this is something that you were like, how can I reasonably get to this number? Just go to six figure creative.com/coaching. and you can fill out the application there My team will sit down with you, see if this is a good fit, and if it's not, we will send you on your way. And if it is, we'll tell you what it looks like to work together. So that's all I have for you in this episode.
[00:19:40] Brian: Until next time, thank you so much for listening to the six Figure Creative Podcast.
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