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NJJ
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How do other full time pros manage their cash flow? How do you make sure you have enough money through the quiet times?

I keep two database books, one for expenses/income I have incurred already and one for gigs I am yet to perform and upcoming expense. The second database shows me when my money will run out!
Bill Palmer
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Of the two, the only one that is really significant is the first one. Until you actually have the money in your bank account, it really doesn't exist.

I learned this the hard way. My system used to be like yours. Then I developed a second system that was much more certain.

You take all of your fixed expenses and decide how much you need to have to cover them. Then you set up your budget based on what you already have to cover it. You have to build a "cushion" that will carry you through the lean times. And I'm sure there are lean times down there, just as there are up here.

I have a friend in Germany who built up a steady flow of shows, including one that took place every spring. Last year, they didn't finish paying him. This year, they went bankrupt, owing him a sizeable chunk of change.

Now he has completely restructured his business.
"The Swatter"

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Bob Sanders
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Magicians sell fantasy. They have to live with reality.

I like your approach to the question. Often the problem is cash flow and not the balance sheet. But until you know which is the number one problem, play it safe. Don't spend what you don't have.

It is not that difficult to determine what expense you would have with zero income. Put it down in black and white. (It's too early for red!) Now determine what it would require in pretaxed income to pay that plus the costs of getting that income. Do the best you can to book that by dark! (Tomorrow, you will wake up and realize that some of that won't make it to bank either.)

A measure used at our house is that our first 60 days a year will pay for the whole year of those costs. Then we have a little (too little) breathing room. Plan to spend only 25% of the net income over that for the first quarter. The same applies to the second quarter but there is a built in bonus. There are 60 more days in that quarter that don't pay for the fixed costs paid in the first quarter. (You already have that in the bank!)

Third quarter, there should be no question that there is money in the bank to finish the year. Forth quarter is our best quarter. Make through the cycle once, behave yourself and have next year's money in the bank and life gets much better. Be very careful about increasing fixed cost at all and don't ever put off paying all variable costs immediately.

We have one credit card. It is zeroed every month. We simply don't do much credit business. We pay cash for any unusual purchases like cars, house repairs, furniture, new horses, major appliances, etc. We enjoy traveling but have the cash first. It does not sound easy. Actually, once in place, it is not that hard to wait until you can pay cash. One of the nicest benefits is that you learn that because of the broader options available for cash purchases, that you really get much better deals than consumers who use credit. You will shock yourself at how many purchases put off until you get the cash, get totally eliminated by that time because you have realized how little you ever needed it at all. After Ivan, everything in the freezer was ruined. Now our freezer is empty and unplugged. We have three refrigerators in this house. We really didn’t need the freezer! The power bill has gone down too! (We store less frozen garbage.)

The first year won’t be easy. From there on, forth quarter from the year before should be sitting in the bank to get you through whatever in the new year. (You may find that your best quarter is some other quarter. That’s even better.) Don’t slow down, but do enjoy yourself. You’re in charge!

Good Luck!

Bob
Magic By Sander
Bob Sanders

Magic By Sander / The Amazed Wiz

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MrHyde
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Nicholas

2 techniques employed by some
and useful if you have built credibility in your marketplace (as you have)

Offer a 10% discount if they pay full fee up front at time of booking.
this can result in the money sitting in your account months before the show
instead of possibly months after the show.

If you negotiate a cut price show (for whatever reason is valid for you)
as part of that deal insist on full payment upfront.

Make the client feel happy and safe with good paperwork
and a good reputation.

These two techniques can certainly help move the money along

Timothy Hyde
MagicalPirate
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Hi Timothy:

Glad to see Magic Coach is back in production.

Martin Smile
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Tom Stevens
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The first XXX amount of income every week is put away, the third week of the month that XXX amount goes to special purchases. (white goods, electronics, furniture)

I only use the credit card that gives me award points. And I only use it for things I was going to use cash for anyway: bills, groceries. I pay off the amount that will incur interest every month. The annual fee is $49, and the rewards we get is about $200 or more per year. I've not had to pay any interest since starting this method 2 years ago. Before that I had an interest free card but paid about $20 of interest a year.
SteveReel
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I agree with Bob Sanders. It takes a long time, but once you get ahead of the curve, your life has much less stress. We use cash for everything. Transfer what we need to pay bills from the business to the personal account at the beginning of the month. Don't use a credit card at all, but a debit card for road expenses or Internet purchases.

Also, having some passive income is essential. We sell some of our music through distributors and Apple Itunes, etc. None of these checks are large, but they all add up. Think of writing books or releasing your own effects.

And a final note is learn to invest. Real estate is good in some areas. I've done some in the past, but it can be too time consuming. If anyone is interested in stocks though, check out "How to make Money In Stocks" by William J O'Neil. Last year we made more on the stock market than through our performances and once you learn what you are doing you only need to put in a few hours a week.

Also check the Motley Fool website http://www.fool.com. Great advice on the fool about everything from stocks to car loans, insurance etc.
World music and magic
NJJ
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Bill, the second one contains all of my fixed expenses and helps me predict what will happen if gigs don't pay off. The idea is that when I come to do the books that I don't have those surprises.

I HATE credit cards. Never had one, never will.
Lee Darrow
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Nicholas, how do you get a hotel room without a credit card? Most hotels will no longer take debit cards and insist on credit cards, so I would imagine that going on the road would be a challenge to you for that reason.

Also, carrying around large amounts of cash, Traveler's Checks, etc. puts you in much more jeopardy on the road than plastic seems to as plastic can be cancelled in a moment, but cash is gone forever and Traveler's checks also take some time to stop and are often easy to mess up when logging in the numbers you have spent.

Just curious about how you handle road expenses.

Lee Darrow, C.H.
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<BR>"Because NICE Matters!"
SteveReel
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I've got a Visa debit card issued by my bank here in Florida. Never had a problem with anyone accepting it. Just put it through like a credit card.
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NJJ
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Ditto

Never had a problem here OR when paying for things overseas.

As far as the hotel is concerned I'm just as likely to have no money in my account as I am to have a maxed out credit limit.

Interesting fact, the average Australian spends 3.6% more then they make in income each year.
Tom Stevens
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I must admit, though that in lean times (like NOW) I do a lot more cold calling and advertising.

I sent 600 emails last week and have already gotten three jobs from it.

I've also offered free 20 minute shows to day care centres in exchange for them sending my promotional letter to the parents.

Of all the kindergartens I called only 20% accepted the offer, but hopefully it will make someone notice me.
Review King
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Quote:
On 2005-02-10 04:02, Tom Stevens wrote:
I must admit, though that in lean times (like NOW) I do a lot more cold calling and advertising.

I sent 600 emails last week and have already gotten three jobs from it.

I've also offered free 20 minute shows to day care centres in exchange for them sending my promotional letter to the parents.

Of all the kindergartens I called only 20% accepted the offer, but hopefully it will make someone notice me.


be proud: you're doing the steps!!! Great job getting out there!!!!
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the saddest are, "It might have been"

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Chrystal
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Hi Nicholas,

You may also consider a line of credit at the bank which will always give you necessarily cash flow during the lean times. The interest rate is usually prime and no where near credit card interest. Mine has fluctuated between 1% -4%. It gives me a better sense of security that I have the money always available on hand to pay for my morgage or other essentials should I need it during slow periods.

During the busy season I pay back the amount I used and am vigilant about it. I prefer the line of credit as although it is a bank loan you don't have to return to the bank and ask each time you need money, as it always exist in your portfolio and you only pay interest on the amount you've used. You could possibly think of discussing this with your bank and having a line of credit established for either your business or personal account.



Chrystal
NJJ
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Chrystal - overdrafts and lines of credit are really just like credit cards. Its spending money that I don't have.

I prefer to plan for the lean time.
Paddy
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Nicholas, I, like you plan for the bad times, however, sometimes trhings happen that we don't plan for and you have to spend money that you don't have. i.e. Last August 17th I had Congestive Heart Failure which resulted in a 4 way bypass plus being unable to perform for two months. If it wasn't for my friendly banker and their line of credit that they gave me I would have been in REAL trouble.

Thank whatever you believe in, that I got back to work and have paid off the debt to the bank already, still owe the hospital about a quarter of a million U.S. dollars but we are working with them on that, at least my business kept going and my wife took over some of the performances so we didn't need a hugh amount of money from the line of credit.

Peter
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NJJ
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Wow! I'm glad I don't live the US!

We have a better (but not great) health system. If you have private health insurance you have much better coverage then in the states!

It is always nice to have the option of lines of credit if you need them. But I see them as almost like a type of welfare: excellent and vital for those who NEED them but otherwise best avoided if possible.

Its about knowing the difference between good and bad debt.
Chrystal
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Hi Nicholas,

While I understand your concern regarding credit cards as I too have an aversion to them. Like Steve Reel mentioned in his post. I really loved my Visa debit card as unlike a "real" credit card it's actually your own money you are withdrawing, yet you could use it like a cc. Making overseas purchases, booking flights, that sort of thing. If you didn't have the balance in your account it won't go through, simple as that. Unfortunately my newest bank does not have this option or I'd continue to have one.

The only thing that none of us are able to predict is a set of unforseen circumstances that may prevent one from working. An act of nature, a serious illness to you or someone in your immediate family or it may be your car which you use for work breaks down and needs to be fixed asap. The thing to do is not to spend it at will but to save for emergencies. like I mentioned. Lean times are totally different than emergencies. What if you are unable to work for several months? Insurance covers only so much. I prefer having the security that no matter what I have that $ available at all times.

I find the anology of equating a line of credit to welfare a bit harsh. It's your money afterall. Say you had a 10,000 line of credit, and you need 1000 this weekend to fix the engine on your car. You withdraw the necessary amount and your new balance would show up as 9000 on your bank statement. You then can make it to your show(s) and make perhaps 1200 and deposit the money in your account the - would then be cancelled, showing the new figure of 10,200.

Anyway I'm rambling, but everyone deals with finances differently. No matter how each of us handle expenses the most important thing is not to get heavily into debt and not spend our money before we have it unless it's an emergency.

Chrystal
NJJ
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Welfare is your money too!

;)

I tend to define good debt as debt which, when paid off, leaves me with something that is equal in value or more valuable then the total payments made. E.g. I pay off a $10,000 car of three years and end up paying $13,000. By the time the car is paid off its probably only worth $7000. I'd rather buy a cheaper car and spend the three years saving up the money before buying a better car!

Of course, paying off unavoidable hospital bills (SOME bills can be avoided through good insurance, savings and looking after yourself) is an excellent investment. When you finally pay off the debt your left with an asset worth more then the money paid: Your life!

Think about what you said here about credit....

Quote:
The only thing that none of us are able to predict is a set of unforseen circumstances that may prevent one from working. An act of nature, a serious illness to you or someone in your immediate family or it may be your car which you use for work breaks down and needs to be fixed asap. The thing to do is not to spend it at will but to save for emergencies. like I mentioned. Lean times are totally different than emergencies. What if you are unable to work for several months? Insurance covers only so much. I prefer having the security that no matter what I have that $ available at all times.


Now apply the same description to Welfare. The same could apply...

Can't work for several months? That's what welfare is for! And with a good system you have "the security that no matter what I have that $ available at all times."

One major difference is that western society tends to discourage people getting welfare but encourage getting credit cards!

I'd never say we should BAN credit but it should be avoided unless TOTALLY needed.
Tom Stevens
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I agree with you Nicholas: Credit can make things worse.
I only use the credit card when I have the cash in my savings account and I transfer it before I have to pay any interest.

I set aside a certain dollar amount every week that I consider is my salary.

Increased income usually means increased expenditures. It has not been easy to stick to my savings plan, but I somehow feel that it would not have made much difference if I had spent the money. When I think of how many times I've spent money on useless things I'm certain that having a little less to spend makes one think twice before buying something and you tend to look for bargains.

Having six kids though means that there is always some money coming in, so when I have no work at least we can eke by. And if we have an emergency we can dip into the savings. (It's amazing what my wife will consider an emergency, though.)
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