Reinvesting--a business question for self-employed musicians (teachers, freelancers, etc.)
Just a curiosity, for those more business-wise than I:
Are there any rules of thumb or guidelines for how much you reinvest in your business vs how much you apply to yourself as a "salary"/living income? Or is it just case-by-case whatever works for you?
Sometimes I wish I'd taken that business elective in college... :)
This is a very tough question to answer. FYI I do own my own music education business, and it’s going pretty well. It’s been growing ever year since I started it in 2011 and while it’s not my only source of income, I could actually just live off it if I wanted to.
There are no rules. You have to do what works for you. If you need to reinvest funds, do so. If you don't, then don't.
For 5 years one of my cello students was a 50 year old piano teacher with a studio of 50 -70 weekly students (including my grandson and his father). He invested in real estate while living in (and raising his three sons) and teaching from the two-car garage attached to a "private house" that had been divided into 3 apartments. He subsequently bought that house to add to the several rental properties he owned. In the SF Bay Area these were wise investments.
Thanks for your responses!! I guess i am going a little different direction as i am looking more at investing in myself as a musician and teacher--building my music library, getting some coaching in my weaker areas, some continuing education in areas I'd like to grow in. The tips about advertising are very good though and will come in handy as I'm transitioning my studio from one suburb to another! I think I'm going to just keep doing what I'm doing--getting music and coaching in bits and pieces as able, and be intentional about saving for the bigger stuff :)
My advice would be not to invest anything until you developed a proper business plan and know clearly to what aspect of your plan you are contributing to. Random "investment" is called gambling.
I'm going to go ahead and assume you already have a website?
I think if you're moving your studio, then you should be coldly calculating about how many students you're going to lose and how you're going to gain them back if that's what you want to do. Depending on how you run your teaching business, and your locality, how you advertise could vary a lot. As Denis indicated you can reach a lot of people for small coin in a big hurry on Facebook but a good friend who has done this says that few of the resulting inquiries are serious. That might depend on several factors (starting with what you say in your ad).
Facebook advertising is a total scam, I registered for a reach of 10,000 people, the ad went out to only about 100 people, and judging from the likes I got, some of them were gang members who potentially might rob my business so I discontinued the ad. The best advertising is having a good website and google plus account as well as this site, advertising on violinist.com to list your business, only costs $150 I think.
When you say "reinvesting in the business", but then say, "building my music library, getting some coaching in my weaker areas, some continuing education in areas I'd like to grow in" that sounds like it's not business-building so much as it is professional development.
Lydia's comments are, as usual, rich with insight. I know what she means when she says that "Investments made in professional development have their best payoff early in one's career." But if you want to change direction, then likely you still need it and will benefit from it.
Facebook ads are not a scam but you need to know how to use the target audience, and not only that, I specifically mentioned you have to have a clear idea of what your product is and it needs to be good... For instance, if you are an average violinist trying to advertise your lessons to the entire world , you’re likely to get a lot of strange response. If on the other hand you are Ray Chen, and you do the same ad, you’re likely to get a much more desired response.
I agree with Lydia. I was scratching my head over the concept of "reinvesting in my business" with regard to teaching lessons but that really isn't what you're talking about in this context.
I keep full records of all my purchases subdivided into the categories accepted by the IRS and my sales then at the end of the year it takes my accountant about 15 min to punch in the numbers to her computer and print out my tax returns.