On November 9th, I had the pleasure of leading a full day workshop on Financial Literacy for the Performing Arts at the New York Foundation for the Arts’ Boot Camp. In attendance were music, dance, performance and theater artists. We discussed financial literacy topics including managing your art like a business and adopting sound financial management practices and tools.
At the core of the workshop was a key message: performing artists need to start viewing their art work like businesses if they are to thrive financially. When artists first start out as sole proprietors there’s not much of a demarcation between their personal and “business” budgets. But I would argue that it’s never too early to begin viewing your individual art work as a business. If anything, it can be inspirational and motivational to see your entrepreneurial financial progress on paper. If you have aspirations of expanding your art business into a nonprofit or for-profit company, you will have created a basis for analyzing business profitability.
The artist group was quite engaged and asked great questions! During our discussion about the different reasons that one would want to build a budget along with cost identification, one artist asked, “How do I create a budget and estimate the cost of using my phone if I use my personal cell phone for my art “business” too? I thought to myself, this artist was thinking like a business person! She had a genuine interest in representing her art business revenues, expenses and profits on paper!
Beyond allowing artists to evaluate and manage business profitability, the separation of expenses into personal and business “buckets” facilitates:
- The development of a potential art project budget which becomes necessary as part of a grant application and
- The preparation of income taxes
However, it should be noted that the expense estimates indicated on a project budget are not held to the scrutiny and guidelines as imposed by the IRS in the Schedule C Form 1040: Profit or Loss from Business. So for the artist who asked the cell phone question, I refer her to this tax document (and a tax expert) for determining business expenses, deductibility and profits. I would also suggest receiving an itemized phone bill to measure personal and business phone usage and to prove deductibility to the IRS.
Further down the road, if there is a need to build a project budget, one can estimate project cell phone costs based on how much time the phone is used for the project. The same would be true for other communications in your home office like your fax or personal computer internet service provider. As for determining the value of home office space, estimate the square footage of space used only for your office.
Professional development resources are available to artists to develop the entrepreneurial skills necessary to manage their businesses for financial success, if only more artists seized upon these opportunities. Are artists becoming more financially literate?