Class 4 of Artist Inc. focused on Business & Finance topics for artists taught by Neil Mackenzie from Metro State in Denver.
Neil MacKenzie is a Visiting Professor at the Center for Innovation (MSCD), where he has developed the course “Artrepreneurship.” Neil condensed his class content into a 4-hour session for the Artist Inc. students.
Here are few insights learned during the class:
Artists should have a strong “elevator speak.” It’s 30-seconds of “this is who I am and what I do.” Avoid using the word “unique” to describe yourself, it has become meaningless. Answer the questions: What do I do? What would the public get out of it? What’s your “secret sauce?” Why would I want to buy from you? Try to pique someone’s interest so they want to know more.
Neil shared with the class information about the Colorado: State-of-the-Art study conducted by the Colorado Council on the Arts. The “Creative Industry” is the 5th largest sector in the state, and Colorado has the 5th largest concentration of artists/creatives in the U.S. Click here to read the full study.
He also discussed the National Endowment for the Arts’ Public Participation in the Arts study which describes how tastes are changing and that audiences for traditional arts events are declining. There is evidence to show that more people are participating in the arts themselves – making things, creating movies. blogs, etc. online, etc. Click here to read the full report.
Next, Neil talked in depth about business structures:
To determine the best business structure for you:
1. Think about your liabilities.
2. Think about the work involved and time needed to maintain your business.
3. Do you have need to raise additional funds now or in the future?
A. Sole Proprietorship – you are the sole owner. There is low cost to open business, but higher risk as you are personally responsible for the business and all your personal goods (house, car, inventory, etc) are at risk. Ways of raising money is limited. Can create an “LLC” through the Secretary of State office to help lower your financial risks.
B. Partnership – has more than one owner. Should have a partnership agreement in place to spell out responsibilities as they often end poorly, and can be harder to dissolve if necessary. It is easier to raise funds since you have multiple people involved. Can have a “limited partnership” to divide up ownership into different parcels. Should create an “LLC” so that you are only liable for your assets into the partnership.
C. Corporation – more formalized, has a board of directors, must have annual meetings and follow the tax rules. Higher cost to incorporate, but lower personal risk. Many more ways to raise funds. You file separate business taxes and there is a lot of paperwork. An “S-Corp” is similar but has less paperwork involved.
If you have a product that you sell (i.e. works of art that are tangible), you need to pay sales tax. If you sell a service (i.e. web design, graphic design, etc.) no sales tax is due.
A wholesale tax license allows you to purchase materials for your artwork and not pay tax on them.
Make sure you know what paperwork is involved, follow the schedules, and be sure to investigate both city and state tax licenses.
Useful Tax & Business Formation Links:
Colorado’s Secretary of State Office
Colorado Dept of Revenue business tax information.
City of Denver Treasury Division.
Nine Steps to Starting A Business in Denver
Online Forms (sales tax licenses, tax returns, etc.) – City of Denver Treasury Division
Special Event Tax Information (for participating in art festivals, etc.
US Small Business Administration
Financial Statements “101”:
– Income Statements – covers your activity for a period of time (what came in/went out, what sold/spent)
– Cash Flow Statement – Covers where you are each month
– Balance Sheet – Your financial condition at a point in time including your assets & liabilities and your balance/equity
Use a budget spreadsheet to help you plot out your month-to-month expenses, and to detail your expenses both fixed (don’t change monthly) and variable (varies month to month)
Other ideas to keep in mind regarding your business:
– A business plan is a good way to identify your goals, organize your ideas and create a timeline for action.
– Identify your “opportunities and threats” – these are external things you can’t control (such as a changing marketplace, an aging audience, etc.)
– A mission statement helps you focus in a specific direction, and can help you craft your 30-second elevator speech.
– Learn from your competition – what are they doing well or poorly? What can you copy or improve?
– Be inquisitive with your customers – engage them about what they like, why they bought from you, get referrals from them!