A hobby in art is not the same as an artist who has a creative practice along side another career. For some artists, authentic heART-work requires a multitude of outlets to both be with their work and separate themselves from the challenge of creating authentic work. Therefore, artist’s, more often than not, have a variety of interests and activities outside of making art. These activities feed the artist, both literally and figuratively. What I’ve noticed is that artists can relegate their creative endeavors to “hobby” status either by refusing to do the heart-work required to make compelling art, or by allowing themselves to believe that making art part-time while working at another job precludes them from being a true artist.
In my opinion, the amount of time an artist dedicates to making art does not define the quality of the work. Part-time, full-time, or as the mood strikes as long as the work is deep and authentic. My job as an arts business consultant is not to help you make quality work, but to help you learn how to support your work with income. Worthwhile Studio will help you set goals that define your vision, discover and learn about the people who support your work with purchases, and understand how to manage the financial aspects of being an artist.
If this sounds like something you would like to have under girding your creative practice, then send me an email! I will keep you up to date with my progress in developing this service for artists.
Seasonal Cash Issues in Small Business
The majority of small businesses have some measure of seasonality. When it comes to weathering the ups and downs of the seasons, adequate cash flow is imperative. Thorough planning, forecasting, and consistent review of financial reports can help managers mitigate the effects of seasonal sales and better prepare the business for future growth in lean times.
Seasonality in small business has two sides. There are issues with a seasonal increase in sales, such as how to manage a large inflow of cash, or how to fund the creation of goods and services before a busy season. On the flip side, there are issues with a seasonal decrease in sales, such as how to make payroll or sustain the business while sales are slow. In areas where travel and tourism make up a large part of the local economy, many small businesses will have an influx of cash during the peak season, and then sales will fall off as the tourist season wanes. The weather also has a strong impact on sales, especially in businesses that rely on a particular kind of weather for robust sales. The increase in demand for goods and services around the holidays can also pose challenges in labor and production.
Small businesses, especially new start ups, may have considerable challenges in managing cash flow. Cash flow refers to the company’s inflow and outflow of cash, and whether or not the company is seeing a profit from its activities. Ray Thompson’s article Understanding Cash Flow: A System Dynamics Analysis (1986), states that the “ ‘rules of the game’ are distinctly different for the small business.” Being under capitalized, “they depend on various sorts of short-term financing such as accounts payable, accruals, and lines of credit (Thompson, 1986).” Established, large corporations, while not immune to cash flow issues, tend to have adequate internal capabilities to manage cash flow during lean times.
The bottom line for any kind of business that experiences inconsistent sales is that cash flow management is imperative to the success of the company.
Planning for a slow season can be easier said than done, but there are a variety of financial statements a business creates that can help managers forecast cash flow issues. Forecasting helps a business decide what options are available to the company to remedy cash flow issues due to seasonality. One of the best things a manager can do is develop monthly sales, spending, and cash flow forecasts. Monthly reviews of these reports can help the manager understand the seasonal peaks and valleys, consider borrowing options, and help forecast and plan future profits.
So where does a small business look for cash flow in lean times or as a busy season approaches? There are a number of tried and true techniques for accessing cash.
- Internal Accounts
- Savings and Investments
- Lines of Credit/ Borrowing
- Alternative Revenue
- Lay off and Close
The first and easiest place to look is in accounts payable and receivable. Most businesses operate by hoping their clients will pay as soon as possible, while simultaneously trying to pay their own bills as late as possible without incurring overdue costs. If the business demands payment from accounts receivable, they can quickly increase cash flow just by calling in profits that have already been made. A business manager can also develop vendor relationships with flexibility to pay later, allowing the business to keep cash on hand a little longer. The second place to look for increasing cash flow is the business’s savings and investments. A manager who understands the peaks and valleys of the business can make an effort to save for seasonal cash needs, and liquidation of investments can often free up cash, although there may be penalties involved with this solution. A third option is to borrow money. A business may already have lines of credit available. If not, developing strong relationships with banks and other lenders throughout the year can help ensure cash when needed. A fourth option is to look for alternative operations/products for the slower seasons, creating an offseason demand that brings in a new source of revenue. And finally, a seasonal business may simply decide to hire during their busy season, then lay off employees as the season ends, perhaps even closing the business until the next busy season.
All of these options require knowledge and understanding of the business’s cash flow needs. Through monthly review of cash flow statements, managers can plan and prepare for the cash needs from season to season.
It is important to understand that these kinds of reports are living documents. A cash flow statement is simply a snapshot of the company’s cash at a given point in time. However, with multiple years of statements showing the inflow and outflow of cash, a manager can begin to forecast the lean and fat times of the business.
Reviewing the reports on a monthly basis can help a manager foresee a cash flow issue and address it before it becomes a problem. In essence, keeping an eye on financial reports allows managers to plan, forecast, review, and adjust for cash flow throughout the year. The point is to keep a positive cash flow in the slow season and not mismanage cash during times of increased profit.
Soto, A. (2017, March). How to Balance Cash Flow in a Seasonal Business. [Blog Post]. Retrieved from https://articles.bplans.com/how-to-balance-cash-flow-in-a-seasonal-business/
Thompson, R. (April 1986). Understanding Cash Flow: A System Dynamic Analysis. Journal of Small Business Management. (Vo. 24, Issue 2), pp. 23-30.
Dear Worthwhile Studio Mate,
Hello! I would love to squeeze a little valuable information out of you to better serve your creative business needs, offer fun and exciting workshops, and find ways to support you in your creative journey. Please take a few minutes to answer these five questions. I look forward to hearing from you!
Deep and wide, deep and wide
There’s a fountain flowing deep and wide.
The Sunday school song lyrics pretty much sum up the next two personas in Tom Kelley’s book The Ten Faces of Innovation. Last week I talked about Kelley’s favorite persona, The Anthropologist. This week I would like to introduce you to The Experimenter and The Cross-Pollinator. These two personas seem very different from one another at first, but they do have some interesting commonalities.
The Experimenter persona reflects someone who loves to prototype. This persona is optimistic, unafraid of failure, and not particularly invested in a single idea because they are interested in breaking new ground. Failure is simply a step in the process of creating a better idea than the one that failed. Therefore, every failure is a chance to learn something and move forward. And IDEO has learned that the most important part about success is that you must fail many times to reach an innovative goalIt is easy to see how The Experimenter can be a very valuable asset when trying to make a breakthrough on a daunting project.
Because failure is built into the process, The Experimenter has an uncanny ability to maintain optimism in the face of failure.
One of Kelley’s keen insights gleaned from The Experimenter persona is the courage it takes to not invest in a prototype until you have the very best one. The Experimenter persona doesn’t take the time and resources to fully tackle a so-so idea, only to see it fail. Instead, the persona will “pull a MacGyver,” if you will. (If not, here is a link to who the heck McGyver is and how he pulls things!) In essence, MacGyver solved problems with scavenged items, and he had a huge breadth of knowledge from various disciplines that allowed him to prototype quick inventions to get out of tight situations. The Experimenter does just that for the innovation team.
Speaking of huge depth of knowledge, the next persona also has a wide breadth of many subjects.
The Cross-Pollinator persona draws from their knowledge base to connect seemingly unrelated subjects in order to create or improve upon an idea.
The Cross-Pollinator is what Kelley calls a T-shaped person. They have a wide breadth of knowledge supported by deep knowledge of a particular subject. If you think of the lovable qualities of the bumble bee, then you have a pretty accurate description of the aptly name Cross-Pollinator. Usually, they have travelled widely and seen many variety of places and ways of being. They are willing to witness a place with a fresh outlook in order to spy beautiful ideas. They take these ideas back to their group and used them to inform the project. As Kelley describes them, The Cross-Pollinator “tirelessly spreads the seeds of innovation (89).
Like The Experimenter persona, having a Cross-Pollinator on your team can help the group maintain their optimism in the face of a difficult innovation task. Perhaps you’ve perused the Reddit subcategory, “Explain it Like I’m Five?” Well, first of all, that sub-reddit is chock-full of simplified profound thoughts, and second, The Cross-Pollinator persona has the ability to break down difficult tasks and information into something understandable. Similar to The Anthropologist, they are students of humanity and teachers as well.
At IDEO, their innovation groups are made up of these kind of resilient, deep thinkers. The Experimenter and The Cross-Pollinator personas come from all sorts of eclectic backgrounds, often within the same person! In fact, IDEO seeks out unusual applicants, with deep knowledge in one area and wide free-flowing facts in many areas. From this diverse group, flows fountains of innovative ideas.
The last twenty years have ushered in a wave of entrepreneurship focused on the creative industries. Advances in technology and the Internet have affected almost every aspect of today’s culture. Before the internet, social media, and the ubiquitousness of the smartphone, creative entrepreneurs brought attention to their products through word of mouth and traditional forms of advertising, such as print and television. Creative entrepreneurs are cutting out these traditional “middle men” to access their consumers directly through technology such as Instagram, facebook, and online handmade sites such as etsy.com.
Creative entrepreneurs differ from a more traditional entrepreneur in the sense that they invest in their own intellectual capital or that of others, rather than a business concept or idea. Creative entrepreneurs are visual artists, crafters, and creators of handmade goods, which covers anything from artisanal cheese and hand-dyed yarn to jewelry and leather bags. There is a growing population of creative entrepreneurs who also call themselves “makers.” In essence, makers are artisans who craft things by hand, usually with high-quality materials and a skilled level of workmanship. Two hundred years ago, every town had a baker, a clock-maker, a seamstress, and other workers who made items by hand to sell to their local market. Today, this revival of handmade items is referred to as the Artisanal Movement. This movement, and the handmade products produced and sold within, fall under the umbrella of what is internationally considered the creative industries. This broad term is still being defined, and is often disputed as to what “creative” endeavors should be included in the definition.
In 1998, the British Council released a report aimed at measuring the value of the creative industries, because “there was evidence that the skills and work styles of the creative sector were beginning to impact on other areas of the economy, especially in the use of digital technologies” (Newbigin, 2014). What made this report stand out was when the 2001 follow-up “revealed that this arbitrarily defined creative sector was generating jobs at twice the underlying rate of the UK economy as a whole” (Newbigin, 2014). Today, almost every government in the world is researching the economic impact of the creative industries in their country. The study by the British Council concludes that small businesses “at the cutting edge of creativity, may not only be of growing economic significance, but in some sense, are a harbinger of a whole new economic order “ (Newbigin, 2014).
At first, one might think of movies, theater, or pop music as the main areas for growth in the creative industries. But, in fact, the growth of the creative economy is rooted in a return to the creative entrepreneur as artisan. This is a direct result of consumer demands and relatively low job security in the last couple of decades. Consumers have turned their interest away from corporate giants and are focusing their purchases on the small business. Cultural anthropologist Grant McCracken has defined this growing sector of consumers and their preferences in his blog “The artisanal movement, and ten things that define it.”
In essence, this new breed of consumer desires products that are handmade, local, and made in small batches, all natural or simplified, and stripped of corporate branding. However, the product is personalized by the maker, who is believed to be more transparent and authentic than the corporate counterpoint. In fact, the consumer’s belief in these principles creates a feeling of connoisseurship to the product (McCracken, 2006).
Consumers of the artisanal movement want a personal story from the products they buy. They want to know where it comes from, who made it, how and why it was made, and to feel that their purchase financially supports the person behind the story they are buying.
A visit to your local farmers market will reveal both the creative entrepreneur and the artisanal consumer in their habitat. Here you will find farmers selling local beef, jewelry makers and crafters, artisan cheeses, small batch baked goods, and even a local string band panning their latest self-made album. These artisans and makers are all creative entrepreneurs, and their “micro-businesses” have websites, social media presence, branding, and even marketing tactics. Loyal customers “follow” their favorite vendors on social media and make a point to attend the farmers market to support local, handmade goods. Every Saturday they arrive to buy eggs from a neighbor’s farm, a handmade gift for their friend’s birthday, or fresh cut flowers for their dinner party.
As the artisanal movement becomes more prevalent, it seems everyone is making and selling crafted goods. Handmade market places such as etsy.com have exploded, enabling artists, craftsmen, and even stay at home moms to own and operate a small business. And yet, some of the well-known challenges of small business can utterly overwhelm a micro-business, which is too small to be equipped with ceos, marketing professionals, or financial consultants. In particular, these micro businesses have trouble with the demands of growth, internet marketing, copycats, and competition. So, how does a small batch, local, handmade creative entrepreneur compete in a global, corporate world? The answer to this question is still unraveling.
The artisanal movement is a return to connection through consumerism, and creative entrepreneurs have captured the attention of a new kind of consumer. This surprising evolution in demand has placed corporations in a challenging position. In Grant McCracken’s (2017) blog about the cultural expansion of the artisanal movement, he explains, “that [the] object on the shelf of Wal-mart doesn’t have a story. It was made by a stranger in a factory in Chengdu, shipped across an ocean, and banged around in the distribution system until it just happened to roll to a stop here on a shelf. It doesn’t mean very much because capitalism was so busy giving it value, it forgot to give it meaning.”
Creative entrepreneurs are in a powerful position to essentially change the marketplace. Corporations are not blind to this power. Because micro-businesses lack substantial resources, they are creating innovative ways to reach their consumers through social media and new marketing ideas. More and more, corporations are becoming interested in fostering these small businesses to gain insight about the changing market, and to examine the creativity and innovation the micro-businesses are utilizing to attract a growing consumer population. Large businesses are scrutinizing how creative entrepreneurs are using technology (such as social media) and community (such as farmers markets) to access consumers who are looking for meaning in their purchasing habits. Perhaps an alliance between the corporation’s resources, and the creative entrepreneur’s innovation will be the answer to how micro-businesses can compete in a global market. As the artisanal movement expands, the challenge for creative entrepreneurs will be how to create opportunities to grow and compete in this internet-savvy, world market without losing their beloved artisanal qualities.
McCracken, Grant (2017). The Artisanal Economies, Entry # 1: The Sofi interview. Retrieved from http://cultureby.com/2017/04/the-artisanal-economies-entry-1-the-sofi-interview.html
McCracken, Grant (2006). The artisanal movement, and 10 things that define it. Retrieved from http://cultureby.com/2006/11/the_artisanal_m.html
Newbigin, John (2014). What is the Creative Economy? British Council. Retrieved from https://creativeconomy.britishcouncil.org/guide/what-creative-economy/
What is the corporate veil?
There are many benefits to becoming a corporation. From credibility and access to capital, to corporate tax advantages and the protection of limited liability, the advantages of incorporating a business typically outweigh the disadvantages. The lure of limited liability for shareholders and owners is one of the most touted of these advantages. Limited liability through incorporation creates a fictional shield between the assets of the owners and the corporation. This shield is often called the corporate veil.
What does “piercing the corporate veil” mean?
Usually, through limited liability, a corporation is treated as a separate person in legal situations, which means the corporation is held responsible for its actions, but the shareholders are not personally liable for these actions. They are protected by the corporate veil. However, if a court of law is given reason to investigate the liability of a corporation’s owners or shareholders, then it is considered “piercing the corporate veil”. The owners and/or shareholders no longer have the protection of the corporate shield and can be found personally liable in a court of law.
Reasons to Pierce the Corporate Veil
There are many reason to pierce the corporate veil and expose owners, shareholders, or board members to personal liability of the corporation’s activities. In the article, The Five Most Common Ways to Pierce the Corporate Veil and Impose Personal Liability for Corporate Debts Debts, there are particular factors that raise red flags more than others:
- The existence of fraud, wrongdoing, or injustice to third parties.
- Failure to maintain the separate entities of the companies.
- Failure to maintain separate identities of the company and its owners or shareholders.
- Failure to adequately capitalize the company.
- Failure to follow corporate formalities (Jimmerson & Snell, 2016)
These presenting factors, among many others, could induce the court to pierce the corporate veil. However, there are strict rules for doing so, but the ruling is based on common law precedents in the jurisdiction of the corporation’s home state (Lahm & Geho, 2007).
Preventing Issues with the Corporate Veil in Small Business
According to Robert B. Thompson (1991) in Piercing the Corporate Veil: An Empirical Study “corporate veil piercing is the most litigated issue in corporate law” and yet, Wikipedia claims (without reference) that “there is no record of a successful piercing of the corporate veil for a publicly traded corporation” (Piercing the Corporate Veil, n.d.). Most large corporations will settle before they risk piercing their corporate veil. Given this information is accurate, it would be safe to assume that the majority of litigation involving corporate veil piercing occurs at the small business level.
In Lahm and Geho’s paper (2007), Holes in the Corporate Veil: Confronting the Myth of Reduced Liability for Small Business and Entrepreneurs Under Corporate Forms, the authors address the paucity of academic literature on corporate veil piercing and the failure to convey to students of entrepreneurship and small business owners that there are already holes in the corporate veil.
“Using a corporate form ordinarily will insulate the owners from direct liability for the company’s obligations, because the corporation is considered to be a separate legal identity, independent of its owners” (Peckinpaugh, 2000). However, and this is a significant “however” often omitted in form or substantive discussions within textbooks, the scholarly literature of entrepreneurship, and in popular press outlets: this shield can only be effective if certain conditions are met. These conditions vary somewhat from state to state, and courts have interpreted cases based on what typically entails extensive examination of whether or not veil piercing is a justifiable remedy” (Lahm & Geho, 2007).
It is important for the small business owners to take steps to ensure the strength of their corporate veil. They should not give the courts a reason to pierce the veil. “Taking the proper steps to insulate personal liability could make the difference between the effective creation of a corporate structure versus the daunting effects of personal liability” (Jimmerson & Snell, 2016).
Based on, The Five Most Common Ways to Pierce the Corporate Veil and Impose Personal Liability for Corporate Debts, a small business should pay attention to the rules of the corporate structure that upholds the veil.
1.Practice transparency. Operate your business with integrity, both in finances and in customer relations. If your company’s activity “appears to be fraudulent or even just questionable, the company should consult legal counsel to guide it through its decision-making process (Jimmerson & Snell, 2016).
2. Maintaining the identity of your company from that of its subsidiaries or affiliates is imperative to keeping a strong corporate veil. If your parent company has the same contact information, officers, or tax filing as the subsidiary, the court will consider it an “alter ego” of the parent company rather than a separate entity.
3. The owner and/ or shareholders must also maintain a separate identity from the company. For example, don’t use the company credit card to fund your family vacation, or borrow money for the business with your home as collateral.
4. Make sure your company has adequate capital to account for business operations in its own separate bank account. “Courts will look to the assets of the company to determine if the company’s level of assets to creditors is fair” (Jimmerson & Snell, 2016).
5. Follow the formalities required of the corporate structure. Each type of business structure has formal rules and regulations that must be followed. Stay on top of state and federal filings, keep stockholders updated on their investments, keep accurate records, and generally maintain a tight ship.
And finally, when in doubt seek professional counsel from a corporate attorney. Entrepreneurs and small business owners may not be guilty of breaking laws by deceit, but by lack of information or resources to maintain proper boundaries between themselves and their corporation.
Jimmerson, Charles B. & Snell, Brittany N. (2016, March). The Five Most Common Ways to Pierce the Corporate Veil and Impose Personal Liability for Corporate Debts. [Jimmerson & Cobb P.A.] Retrieved from https://www.lexology.com/library/detail.aspx?g=4ff8ebf0-4bca-426e-8273-758140f6d0eb
Lahm, Robert J. & Geho, Patrick R. (2007). Holes in the Corporate Veil: Confronting the Myth of Reduced Liability for Small Businesses and Entrepreneurs Under Corporate Forms. The Entrepreneurial Executive, Volume 12.65-81.
Peckinpaugh, C. (2000). Behind the corporate veil. Federal Computer Week, 14(23), 78.
Piercing the Corporate Veil (n.d.) Retrieved From https://en.wikipedia.org/wiki/Piercing_the_corporate_veil
Thompson, Robert B. (1991). Piercing the Corporate Veil: An Empirical Study. Cornell Law Review, 76: 1036–1074.
Excellence is not a synonym for perfection. Standing in awe of a masterpiece can make an artist feel like perfection is the goal, when in reality the best we will ever do is excellence. I think the same can be said for building a business from the ground up. It is the aspiration for perfection that drives excellence.
“Perfection is not attainable, but if we chase perfection we can catch excellence.”
While learning to draw, I studied with several modern day masters, including Jim Ostlund and Michelle Mitchell Ostlund at the Art Atelier and Ben Long at the Fine Arts League. Studying with the masters is an age old path to understanding and excellence. These teachers would not allow mediocrity in their students. They required excellence even in the details, because realism, when first learning to draw, is the ultimate goal. What I learned was that for every detail I adjusted, the drawing became stronger, and all of the details I noted while searching for a perfect drawing improved my knowledge of the work I was doing.
In Steven Schussler’s book Its a Jungle In There, he alludes to entrepreneurship as an art form. As an entrepreneur, he ponders that maybe the term starving artist is about “‘being willing to forego normal creature comforts in search of perfection in one’s work (30).” As an artist and an entrepreneur, one must never be satisfied to rest on prior accomplishments. A look back at older work will quickly show you your shortcomings in excellence. This is not because you previously failed, but because you grew more adept at seeing excellence.
“Today’s excellence, tomorrow’s mediocrity.”
Schussler talks about missing the whisp of smoke from a model train in his Winter Wonderland restaurant concept. This detail, while ephemeral at most, was exceedingly important to executing his concept, and a hallmark of his attention to detail in pursuit of excellence. He felt this oversight on his part, was “a step backward from excellence; it compromised the quality of what we were trying to create (61).”
“Excellence is the unlimited ability to improve the quality of what you have to offer.”
When endeavoring to create a product, an entrepreneur can look at the masters of entrepreneurship as role models for quality. Steve Jobs, so often considered a master in business, says, “Be a yardstick of quality. Some people aren’t used to an environment where excellence is expected.” Just like drawing, attention to detail is a learned habit. The more you look, the more you see. In drawing, learning to see is of the utmost importance beacuse you cannot draw what you don’t see. In entrepreneurship, one must learn to see the whole picture, the dream of the business, and then work back from there searching for the details that will make your vision successful.
“Excellence is a better teacher than mediocrity. The lessons of the ordinary are everywhere.Truly profound and original insights are to be found only in studying the exemplary.”