Break Even Analysis & Budgets

  1. Please see below for directions on Break Even Analysis. Please revisit the Pricing Your Work post.
  2.  See below for Directions on Budgets

Do your best. This might seem like complicated math, but it is not. The hardest part is organizing the information. I strongly recommend using Excel or Numbers to make these lists. If you don’t know how to use these pieces of software- learn! These are vital tools- and once you catch on to a few tricks, your life will be so much easier. Never in my life did I think I would say these words- but I love Excel. Here’s a great excel tutorial on YouTube – there are thousands of these.

 1. Break Even Analysis

Please conduct a break even analysis to discover what you should be charging at minimum for your work. Now at this stage, it is likely your work is varied. Some of you make things which can be reproduced (photos and prints), multiples of different sizes (photos and pottery). This is a general exercise. You will find your average cost- and the average price you should charge per piece. From there, you can divide that number accordingly.

Therefore, instead of trying to figuring this out per piece, start by looking at a section of time- in this case- per year.  The number you will arrive at will give you a sense of how much you spend. As it is early January, it is likely you will either be gathering information to do taxes, or your parents will be. If you do not keep receipts at this point, take a look at your bank account statements for the past year and figure out about how much you spend on art per year. This does not have to be exact at this point as it is just an exercise. Really read the pricing your work post and see how much you can include in your costs.

If you are a painter for example, you likely don’t use entire tubes of paint in even quantities per painting. Instead, estimate how much of a material you use per year, then divide that by the number of pieces you make.

example: $300 paint per year divided by 12 paintings = $25 per painting

Now– at this stage, it is likely that your fixed costs are pretty low- while you do have variable costs. You are not paying for rent, utilities, equipment or many other things you will encounter when you get out of school.

So what do you do first?

Step 1: 

Make a list of your expenses: materials,  overhead and labor.

Step 2:

(Cost of Materials + Overhead + Labor) = Total Cost

*I suggest that you multiply your total cost by 2 no matter what- before you factor in your desired profit. If you are selling through a gallery at all- the gallery will take on average a 50% commission. This is your baseline cost.

Step 3: Divide Total Cost by the number of pieces you make per year.

$3000 divided by 15 paintings = costs $200 per painting

Step 4: Total Cost (per painting) + desired profit (suggest adding 30-40% to cost) = Required sale price

Step 5:  Find your break even quantity (how many pieces you should make and sell per year) to break even.

Break even quantity = Fixed costs divided by (Sales price per unit – Variable cost per unit)

*figuring out labor: how many hours do you estimate you spend making your work, or working toward your work? Find that average number of hours per week- or per piece, then figure out how much you would like to be paid hourly for your labor. I strongly recommend you AT LEAST pay yourself minimum wage. ie: worked 60 hours on one sculpture: 60 x $12/hr = $720

*Overhead: Overhead costs, often referred to as overhead or operating expenses, refer to those expenses associated with running a business that can’t be linked to creating or producing a product or service. They are the expenses the business incurs to stay in business, regardless of its success level.

Overhead costs are all of the costs on the company’s income statement except for those that are directly related to manufacturing or selling a product, or providing a service. A potter’s clay and potting wheel are not overhead costs because they are directly related to the products made. The rent for the facility where the potter creates is an overhead cost because the potter pays rent whether she’s creating products or not.

2. Budget, create a budget for your project.

I recommend doing this in Excel or numbers.

Most applications which call for budgets will ask for budgets in a specific format. Often, they will even supply a template to use. For example, the ARGUS application for on campus research funding outlines exactly what they would like to see (and what they do not want to see) in a budget for their application:

  1. Budget — detailed; list all items (permanent equipment and consumable supplies) that you expect to purchase and realistic cost estimates (catalog prices); also provide for travel, software, and all other aspects of your project related to doing the project itself. You may request partial support for travel to professional meetings to present your project, however, this cannot be the only funds you request from ARGUS. Our mission is to support campus research rather than fund travel. If your primary purpose is to obtain travel funds, there are other funding sources at the University for those purposes.

Taxes Budget & Finances

Creating a budget  and Example Budget for Artists . I highly recommend you download the forms available on the GY*T site. They are so useful and as they are geared specifically for artists, they are a heck of a lot easier to use than many of the templates available online.

For example, here’s a simple budget I did for a recent craft show. This does not include the cost of my materials, rent etc, just the cost of the event and the income I generated.

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