From the course: Launching Your Creative Business

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Defining your overhead costs and infrastructure

Defining your overhead costs and infrastructure

From the course: Launching Your Creative Business

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Defining your overhead costs and infrastructure

- Let's talk about finance. I know that's not why you got into a creative business. It's certainly not why I did either, but it's very important. And there are four key areas to consider for the financial health of your new company. These are overhead, bidding, billing, which is really all about cashflow, and planning ahead. Let's break those down. It's important to understand overhead in order to be sure you can make a profit on every job. Your costs should be divided into two categories, indirect and direct. Now indirect costs are what you pay even if no work comes through the door. Basically, whatever it takes to keep the lights on, rent, utilities, basic supplies, and any salaries that are purely administrative. Direct costs are the labor and materials it takes to produce your specific work, whether that's a product or a service. To calculate your overhead rate, you take your indirect costs, divide them by direct…

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