Hi,

I am just wondering what are your thoughts on revenue allocation that goes back to the business. I read somewhere that it is good to put aside a certain % of business revenue per annum so that it doesn't get mixed into personal finances etc...
10%? 30%?

I am looking for some guidelines and best practice perspective.

thanks.

We have a lot of right offs. Which definitely helps. We drive a lot. That helps. We document every little bit of food we buy, mileage we drive, and money we spend. Everything helps. Uncle Sam wants his piece. I do my part to keep what's mine.

We allocate about 25% to income taxes. It's usually not that high, but I figure better safe than sorry. Another 10% for keeping the business running (SmugMug, BigFolio, dinners/coffee with clients). Another 10% for equipment (new equipment, repairs, batteries, etc.). Another 5% we tithe with our church because that's what we do. I can expand on this if you really care.

In other words, about 45% we set aside for taxes and business expenses. 55% we keep. I expect this to change drastically in 2013 as our business expenses have leveled off, we don't need any equipment, etc.

We collect sales tax as well on all shoots that have sales tax as applicable, and pay quarterly in California.

Once taxes are paid my recommendations are:

Administrative expenses (legal/accounting, education, office supplies, telephone/internet/etc) - 10% or less
Marketing expense - 5% or less
Depreciation - 5% or less
Overhead (rent, utilities, insurance) 3% or less
Cost-of-goods-sold - 10-20%

The remaining as owner's compensation + net profit (including owner's insurance and what not).

- trr

I achieve all those; except depreciation. Thanks Canon.

100% of my net revenue goes back into the business. Between new gear, overhead and marketing I don't keep a penny of it right now. That'll change after the first of the year.

Don't think I'm crazy, I've just used what would have been my profits to buy nicer, newer and more gear than I absolutely needed to survive. After I buy the D800 or D3S, I don't think my wife will tolerate that anymore. Lol

TRReichman wrote:
Overhead (rent, utilities, insurance) 3% or less

If you're renting or owning/mortgaging a separate studio space it's gonna go way over 3%.

For commercial you can go up to 10%, but that percentage has to come from somewhere else. Probably not a great idea for many in our situation. This is coming from someone that used to have a commercial space.

-trr

You really should get a couple of books or take a class on small business ownership. On forums you will get tons of answers that vary; some from experience, some from education, others from what they read on other forums. A class or business book(s) can help you think about the things not mentioned here.

Thanks for your input. Looks like it varies from different folks. I don't know how you can allocate 100% unless this is your part time business.

I am doing this part time too but I cannot imagine allocation 100% back into the business.

Will look into some books on this as well.

Ghost wrote:
I don't know how you can allocate 100% unless this is your part time business.

Or his wife has a good job.