11 Personal Investment Insights for the Professional Photographer
1. Photographers become professionals because few things in life are more rewarding than taking pictures. Many also become professionals because they want to be entrepreneurs, to operate their own businesses, instead of being an employee. If this describes you, then an essential component of being your own boss is preparing for the future, for your retirement.
2. One of the secrets of entrepreneurship is your business doesn’t need to be big to make it big. In fact, an average business that operates profitably for many years, even decades, should generate the additional net profits necessary to fund your personal investments and to realize all your dreams.
3. Trying to grow and operate a “super-sized” photography business, with multiple locations and a stable of photographers, may actually hinder you from reaching your investment goals. A big photography business may attract plenty of dollars, in the form of gross revenues, but the important measurement of success is net profits. These are the dollars remaining after all salaries (including yours), taxes and expenses have been paid. A super-sized business may provide you with an excellent salary, but not the net profits needed to fund a serious and vigorous personal investment plan.
4. The other downside of a super-sized business is that you won’t have to grow much before you are spending more of your time managing the business than shooting photos. Managing your business instead of “doing” your business is certainly a legitimate choice, but it’s unlikely this is the reason you went pro, and started a business.
5. Operating an average-sized photography business doesn’t mean your business is “average.” Being smaller may allow you to do a better job of serving your customers, which could result in a higher percentage of referrals and repeat business than a huge customer base that is more difficult to serve at a high level.
6. Pay yourself a livable salary, and then invest your business’ net profits. Your goal is to select and use other wealth-building methods to make as much income as possible from your business. You’re more likely to become a millionaire, or financially secure, from investments, not shooting photos at an hourly rate. Even the photographer with the largest hourly rate in the world can still only generate a finite amount of revenue because he or she can only work a limited number of hours daily, weekly, monthly or annually.
7. Too many old photographers retire with no income or assets, and their businesses disappear. Having an exit strategy from your business is crucial. Most small businesses are not worth much when or if they are sold, so that is not a reliable retirement resource.
8. Your business can be a retirement resource if you structure it to continue to operate, even after you retire, providing you with some income. Find a young photographer, who dreams of operating a photography business much like yours. Teach him or her your business, make him or her a partner after a few years, and then provide a path toward majority ownership, with a piece for you during retirement.
9. Your first investment opportunity is the IRA or 401(k) for a small business owner that you chose with the guidance of your attorney and/or accountant. You should contribute a regular amount from the salary your business pays you, just as an employee at a company would do from his or her paycheck. These plans are generally easy to manage and relatively safe. Once your individual retirement plan is working, then you can consider building a bigger portfolio through individual investments.
10. To take this step does require some education on your part. You can’t rely solely on others to invest and manage your money. You must be a big part of the process, which means you must learn about investing. You may find an older small-business owner that is willing to serve as a mentor. Your attorney, accountant and investment advisors are, of course, excellent sources of information and knowledge, but they will charge you for their time.
11. Once you know enough of the ropes not to be choked by them, the next step is to choose an investment vehicle. Every financial expert or counselor seems to recommend a different strategy for where you should invest your money. The choices you make are a combination of your education, the risks you’re willing to take and the advice of those you trust.
The stock market may be attractive because the big companies traded there continue to grow, despite the recent recession, or any other downturns in the economy. Most big companies’ pension plans are in the stock market, which is a good indication of where those high-powered plan managers think is the best place to invest money.
Some small-business experts recommend that one of your investment goals should be to own the commercial property where your photography business is located. This allows you to buy additional properties that you can still own, and will generate income for you after you retire.
The subject of this PhotographyTalk.com article is general in nature, and PhotographyTalk.com does not imply or advise any financial or investment strategies for photography business owners. They should seek such advice from qualified professionals.
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