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Something that the article glosses over that I often ask about these kinds of businesses is _how exactly_ one finds and documents their costs. The author gives

by jnovek 5y ago

Something that the article glosses over that I often ask about these kinds of businesses is _how exactly_ one finds and documents their costs. The author gives examples —- keep track of your time, keep receipts, etc -- but often a creative process is so organic that it just doesn’t feel as straightforward as that. In startups it’s popular to use accrual accounting methods and, if you’ve ever had an opportunity to look at a startup’s books, it can get complicated. Several years ago, I worked on an enterprise product that had a bunch of variables and a long sales cycle. Without good accounting practices it would’ve been easy for us to screw up pricing and take a loss. Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer.

dazc 5y ago
> Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer. This may be true but a 'creator' only needs to make enough money to pay him/her self and to buy materials. Once this has been achieved then it's simply a case of increasing the selling price to whatever the market will bear.
mdorazio 5y ago
On the financial cost side, use a credit card that is only for the side business. Then you can easily use that card whenever you buy something and look at the end of month totals. For time, I personally divide days into quarters instead of hours and think back to how many quarter days I spent on the activity. “That was two afternoons” = 4-5 hours.
- jnovek 5y ago
  The credit card is a good idea. Thank you! Honestly, I think I’m just a bad time estimator. It’s definitely something I miss from working together with people — I know I’m a bad time estimator and I can ask for help. Maybe this is just a “learning to work solo” thing.
  - ghaff 5y ago
    A lot of it is experience in a space. Some things are less predictable than others but, over time, you develop heuristics that often work pretty well--at least for simpler tasks. Invariably you'll need to add some time for aspects of the business not directly connected to the output. Also learn to add some padding when you can if you're doing a job for someone. I really learned this when I was a consultant. Way better to underpromise and then come in early than the other way around.
  - CharlesW 5y ago
    > The credit card is a good idea. As an alternative to a separate card, you can use a service like privacy.com to create one or more "virtual" cards.
atrus 5y ago
I make and sell handcrafted goods. I essentially split my costs into two categories, manufacturing and research. The research budget covers the 'organic creative process' but isn't tied into the manufacturing costs. Once I've got the basic idea down, then I can start to purchase items to build X amount of something, and it's much easier to specify costs of a known item.
- jnovek 5y ago
  This probably covers most of my time that I put into a thing. Do you try to budget time for research when you start? E.g. “I want to try to get to my first prototype within 80 hours.” I think when I went into this I didn’t think it would be very hard. I have experience pricing and selling software and experience pricing and selling my time as a consultant. What I’m finding in reality is that, although aspects of my experience apply, overall it’s a new kind of thing for me.
analog31 5y ago
I make a little audio gadget. Something like a guitar pedal. My first product, I rather arbitrarily priced it at 4x my cost of materials. Then I began keeping records. I use PayPal for everything. It comes with a Visa card. At the end of the year, I download the entire year's transactions as a CSV and work out my numbers in a spreadsheet. I keep procrastinating on doing it in Python. Money in, minus money out, is my profit. Next, I have a decent estimate of my hours. I've tried to price my goods, so I can pay myself somewhere between $50 and $100/hour. I try to make very sure that I'm not robbing my family by spending time on a "business" that's not actually a business.

by jnovek 5y ago

dazc 5y ago

> Maybe it’s just me, but it seems like the variables that go into a creative process are nearly as complex but the scale is smaller and documentation slimmer. This may be true but a 'creator' only needs to make enough money to pay him/her self and to buy materials. Once this has been achieved then it's simply a case of increasing the selling price to whatever the market will bear.

mdorazio 5y ago

On the financial cost side, use a credit card that is only for the side business. Then you can easily use that card whenever you buy something and look at the end of month totals. For time, I personally divide days into quarters instead of hours and think back to how many quarter days I spent on the activity. “That was two afternoons” = 4-5 hours.

jnovek 5y ago
The credit card is a good idea. Thank you! Honestly, I think I’m just a bad time estimator. It’s definitely something I miss from working together with people — I know I’m a bad time estimator and I can ask for help. Maybe this is just a “learning to work solo” thing.
- ghaff 5y ago
  A lot of it is experience in a space. Some things are less predictable than others but, over time, you develop heuristics that often work pretty well--at least for simpler tasks. Invariably you'll need to add some time for aspects of the business not directly connected to the output. Also learn to add some padding when you can if you're doing a job for someone. I really learned this when I was a consultant. Way better to underpromise and then come in early than the other way around.
- CharlesW 5y ago
  > The credit card is a good idea. As an alternative to a separate card, you can use a service like privacy.com to create one or more "virtual" cards.

atrus 5y ago

I make and sell handcrafted goods. I essentially split my costs into two categories, manufacturing and research. The research budget covers the 'organic creative process' but isn't tied into the manufacturing costs. Once I've got the basic idea down, then I can start to purchase items to build X amount of something, and it's much easier to specify costs of a known item.

jnovek 5y ago
This probably covers most of my time that I put into a thing. Do you try to budget time for research when you start? E.g. “I want to try to get to my first prototype within 80 hours.” I think when I went into this I didn’t think it would be very hard. I have experience pricing and selling software and experience pricing and selling my time as a consultant. What I’m finding in reality is that, although aspects of my experience apply, overall it’s a new kind of thing for me.

analog31 5y ago

I make a little audio gadget. Something like a guitar pedal. My first product, I rather arbitrarily priced it at 4x my cost of materials. Then I began keeping records. I use PayPal for everything. It comes with a Visa card. At the end of the year, I download the entire year's transactions as a CSV and work out my numbers in a spreadsheet. I keep procrastinating on doing it in Python. Money in, minus money out, is my profit. Next, I have a decent estimate of my hours. I've tried to price my goods, so I can pay myself somewhere between $50 and $100/hour. I try to make very sure that I'm not robbing my family by spending time on a "business" that's not actually a business.