Risky Business

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Art by Li Xin

Business involves risk -- daring greatly always comes with a chance of failure and loss. Artists and illustrators often avoid risk whenever possible, but in order to succeed as an entrepreneur and as a creator, you need to take risk. How do you decide if a risk is worth taking? How do you assess your options before starting an illustration project or new work? And how do you prepare yourself for failure and success? Jake Parker, Lee White, and Will Terry do a deep dive into the nuances of business risk from an illustrator’s perspective, and outline several key steps to making sure your business moves pay off.

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NOTE: We were having some technical difficulties with the audio edition of this podcast! Thanks for bearing with us.


INTRO

This podcast episode was recorded mid-March, 2020. Thanks for visiting us from the future!

What’s it like being quarantined as an artist? For a lot of us, this is normal -- except the kids are home now. Lee opened an art gallery before the virus but has closed it indefinitely while the quarantine is in place. This leads us into our topic for today -- risk.


RISK

How do you deal with risk? We’re weighing all kinds of different risks right now, and throughout our career as artists. Scenario: When Lee was opening his gallery, the business model was based around creating a big art-fair/comic convention style space, where you keep all the money you make and just hire a space to show your work. It’s a great idea and win-win for everyone. When Lee first got the space, he contacted people he thought would be a great fit for that model.

Hypothetical: if an artist that Lee contacted said they typically showed 20 paintings, and they only sell half of them, and each sale is $5,000, then they make $50,000. The gallery takes half of that, and subtracting framing and shipping costs, the artist leaves with $20,000 give or take. Lee was charging $250 - $550 per month for a space, and Lee had a 6 month lease. The maximum amount that an artist would spend would be about $3,000. If they average selling $50,000 of stuff, they walk away with $47,000. But every artist Lee contacted said “no”. They were worried -- “what if I don’t sell anything?” That’s the problem, people are not trained to think like entrepreneurs, they are afraid of losing money and taking a risk.

How little can I lose, vs. how much can I make? Businessmen think in terms of potential gains, whereas artists think in terms of potential losses. The odds are good and the return could be astronomical, but a lot of the artists Lee spoke to were not willing to take on that risk. Most artists are even worse -- they go to traditional schools and get their Master’s degree, and are willing to throw away up to $150k+ on an undergrad degree with no guarantee of return.

How do you take on risk and succeed as an artist? The following mistakes show up in the careers of artists from every background, both experienced and inexperienced.

1. Not Understanding Startup Costs

If you make any change, it will involve an early cost. This cost will not recur over time. Going to college, trying to be a professional artist, all of these things have upfront costs. It costs money to be in business. But artists are the only ones who don’t want to acknowledge those costs.

Writers, musicians, comedians -- people who perform -- are usually more entrepreneurial than artists, because they make their product without any kind of contract, and with no guarantee that they will get paid (gallery artists are more like this, though). Some authors have a ratio of 10:1 in terms of written works and sold works. Rick Walton published around 100 books and had written over 1,000. There’s no guarantee that you’ll make money at the end of the day. The same is true for songwriters.

When you shift into something tangential to illustration, like photography, you become much more entrepreneurial. Photographers have to market themselves, create portfolios, have business plans, learn about image rights and reproductions, etc.


2. No Proof of Concept

This is one of the best ways to evaluate risk. When you make the minimum viable product of a project, and test it to see if it works, you can see if the project is worth pursuing. Imagine you have an idea for a three part graphic novel. Instead of killing yourself for the next 5 years trying to make this and sell it to a publisher, instead make a 10 page short about your main character and throw it into the world to see if people respond to it. If people are interested or bored, you have your answer as to whether or not you should pursue the project.

Another way to look at the proof of concept is to scale-up. Lee started at art conventions with $50 table fees, and sold some work and didn’t sell other work. He modified and iterated on what sold and what didn’t. Then he moved up to bigger art fairs, and sold originals and examined the feedback from customers. Then he scaled up to a gallery in Portland, which had only one busy month in the year -- there was not enough foot traffic. He paid attention to that and scaled up again to his current gallery. He knows what sells, what the ingredients are to pieces that sell, and how to sell. He built up from a small idea to a bigger project each time.

Software developers have an analogy that lines up with this: if you’re designing a car, instead of starting by inventing wheels, first make a skateboard. If it works, and people like it, then add handlebars and turn it into a scooter, then upgrade it into a bike, and then add an engine, and add another set of wheels, and so on -- create a viable product that does the job it needs to and iterate on it over time, don’t try and build a complex product from the ground up, component by component.


3. Not Running Cost and Income Projections

This is a huge deal. Lee’s Kickstarter, for his book The Art of Lee White, was a great project for him to learn this principle on. He made three columns, which he labeled “worst case scenario”, “probable scenario”, and “best case scenario”. He did research on this based on other Kickstarter projects and looked at the cost and income/return that other Kickstarters generated. A lot of the artists Lee reached out to to populate his gallery were only looking at the cost side of things, not the potential gains.

Will used to advertise in source books (an old phonebook style catalog of different artist’s work, for clients to browse). A page would cost about $3,000. Will would make his money back two or three times over. His friend, a well known illustrator who was earning much more than Will, could not justify spending the money to get his work in the books. Will made 8x his cost from a two-page spread. He told his friend the numbers, but his friend was unwilling to risk the money down. Sometimes it’s valuable to look at the risk of what you won’t make, as opposed to what you have to spend.

How many projects have you done before your big one? Have you worked your way up from smaller risks to bigger risks? If you’re starting a project, and you have no idea what to expect, start really small and do little projects. See what happens and if you have a good response.

Jake’s early Kickstarters were pre order only, as a way for him to take smaller risks while still expanding his work. He was outside of his comfort zone but not too far from it -- the risks were not enough to ruin his career but were enough for him to grow. Kickstarter also made him way more accountable for the project, and motivated him to be entrepreneurial. Jake learned a lot from his first projects.

Kickstarter is a unique environment, because it lowers the amount of risk you need to take on. If it doesn’t fund, you’re off the hook. It’s a proof of concept in and of itself. It removes the need for startup costs, and includes income and cost projections. It’s a great business model because of this.


4. Not Having a Stop Limit

It’s like gambling in Vegas -- you have to have a limit to stop at. You need to have a maximum cap of money lost on your project before you walk away. Lee hit his stop limit for his gallery with the virus, so he had to pull out -- the variables were higher than the knowns so it made sense. 

What are some practical examples of stop limits? Lee wanted to go to Artcenter, but it was way too expensive -- it was $100k, and he wasn’t comfortable with taking that out in loans. He scaled up by starting in community college, then transitioned to a cheaper school in Laguna Beach with a scholarship. This was his proof of concept, essentially. He wanted to get the Cal Grant, and a scholarship into Artcenter. He got the Cal Grant and a half scholarship to Artcenter. At this point he had a lot of the financial advantages he needed but was still uncomfortable with the risk -- he decided that if he didn’t get a full scholarship within two terms, he would drop out. And he got his scholarship the next term. That’s how he ended up with zero student debt after graduating, by applying the stop limit and proof of concept principles.


5. Not Understanding Opportunity Costs

Will discussed this with his source book advertisement -- he was looking at spending thousands for an ad but it paid off well. Buying two pages was better than buying one, so he got a higher ROI. The cost of not advertising was $35,000 -- that was his opportunity cost.

Jake uses Adobe Creative Cloud for everything, and he uses it for almost every project with clients. So many artists are reluctant to shell out the money for the software, though, even though it would pay for itself over time. His brother in law recently entered the vending machine business, and realized he couldn’t do it without a moving van -- he bought one because he needed it for his business. It cost a lot but he needed it. Some artists are entirely unwilling to spend anything on their business even when they need it or it would pay for itself -- Jake bought an expensive large format scanner because he was spending so much time stitching together smaller images in Photoshop. Going by his day rate, the time he spent in Photoshop cost more than the price of the scanner, so he bought it -- even though it cost a lot of money. Sometimes if you want to make money, you need to spend money.

Definition of Opportunity Cost: What opportunity am I saying NO to when I say YES to this project? When Lee prepares for a show, bagging up prints takes a lot of time and is a low-level job whereas painting is a much higher level job. It’s better for him to pay an assistant to bag the risks as opposed to painting -- whenever you say yes to something, you say no to something else. You don’t want to be overly cheap and cost yourself a lot of time and money when you could spend a small amount of money to make your life easier and streamline your costs.


6. You Must Be Willing to Lose

In order to go into business, you must be willing to lose. You need to be willing to put money into business expenses. Lee was okay with losing money in the short term with his gallery due to the virus, because he had done the due diligence and knew it would make money eventually.

Growing up, Will had a paper route and worked at McDonalds. He looked at money as “what  can this buy for fun?” This chunk of money was a stereo, or a bicycle, or tires for his car, or money to go out to eat with, video game money, etc. We get conditioned to look at money this way, but when we become adults we have expenses like rent and insurance. It becomes a disconnect when we look at our money in this way, and so a lot of artists shut down and say “I won’t lose any money”. You must train your brain to see money differently, and see it as a tool. Becoming more entrepreneurial means you must see your money in terms of what it can do to work for you.

Will, when graduating, was told that in order to get work as a freelance artist he needed to send out postcard mailers. Will only sent 50. The whole time he was buying the prints and envelopes, he felt like he was throwing money away. It was the hardest purchase he ever made, because he had no proof of concept, no faith that he would make his money back. But then he got a huge ROI from it, and the voice that told him he was throwing his money away got quieter and quieter when he realized it would work.

It’s about thinking in terms of value. Is the value of this project high or low? If it costs money, will the value it produces be worth the investment? Art students will pay for a semester, and take 6 classes as well as have a job to finish early. When they burn through their classes, they don’t have time to focus on their work and can’t produce good portfolio pieces. They focus on quantity rather than value, and they lose out in the end.

Jake once added up all the money he spent on shipping in one year. It was five figures. It took him time to get used to the idea of spending that much but it was a part of everything he sold, and so it became a marker for how much work he produced as an artist. It is a part of doing business. Lee just ordered a ton of paper and inks and it feels bad, but slowly and surely he goes through it and sells his work. Be smart about what you’re doing, but have faith in your abilities. Be smart enough to avoid dumb decisions but be dumb enough to take on risk.

We aren’t built like entrepreneurs. It’s something you train yourself for over time. Growing up, Jake loved the idea of entrepreneurship but felt like he wasn’t smart or experienced enough to do it. If he showed himself 10 years ago what he has managed to accomplish, he would be amazed. He hopes he can continue to figure things out and continue building -- if there is anything you feel is out of reach for you, you are smarter than you expect and can accomplish anything that anyone else can accomplish if you educate yourself and you are willing to take a risk and hope luck is on your side. Don’t let YOU be the stumbling block for your project, you can do it.

Will built up his entrepreneurial spirit over time. It was hard at the beginning but it has gotten easier over time. He had to delay his Kickstarter which he had spent a lot of money on, but he still feels confident that there will be demand for it when the time comes. When he committed to Lee’s gallery, there were a lot of costs for him to take, but in order to play the game of business, you have to look at money as a tool. You have to spend less than you make and keep your money aside in order to take on good opportunities. Will has had no money, he has lost two houses, he has been bankrupt -- he knows what it’s like to have nothing, and it sucks. But he worked his way back and made a lot of sacrifices in order to have reserves so that he can have more options.

DAVE RAMSEY

Lee has always had a high level of entrepreneurship, but hasn’t always had the resources to move on it. He somehow managed to get wholesale prices for art supplies in college from an art store -- he bought a case of pencils from a company that was going out of business, and was somehow listed as a store. He got everything Artcenter students needed for half the price, so he started a business and sold supplies out of his car. He got shut down by the Artcenter store.

ASARO HEAD

Lee once sculpted a small sized Asaro Head set and wanted to sell them to other students but didn’t have the money to start the project. When Jake was in Junior High, he drew a tattoo on his friend’s arm and started charging 50c for them, and even had a sheet of designs with prices. If you’re in the position to have kids or if you have kids now, you can teach them from a young age how to use the resources they have to make money. Jake’s daughter sold her saved Easter candy and sold it to students for a profit, and she made over $100 in a semester from selling candy. Will’s son sold slices of Lil Caesar’s pizza and made a lot of money too. Kids hate spending money on business, because people learn from a young age to avoid spending money. Lee’s son used to make a lot of money selling lemonade but lost interest when Lee asked him to start paying for the materials.

Have you ever gambled on a project and lost money, or had a flop? Will: Yes, but it’s too painful to talk about. Will traded futures on the S&P, but his system didn’t work. It didn’t work and was too stressful. Will tried another system that sort of worked. He met a guy who was an expert at trading who told him that there was no chance for him to succeed in trading without investing the same amount of time as a true professional trader, who then advised him to focus on illustration. Will made three ebooks for Amazon right when ebooks started, and he spent barely any time on the three books. He made around $40,000 over the next few years from royalties. He then decided to make apps for iPad, with the same concept, with an animator, a VO actor, a writer, and his own work, with great reviews, and didn’t sell anything. People don’t spend money on story apps. He had a lot of downloads when he made the app free, but then none afterwards.

Jake’s last Inktober involved a failure. Each Inktober, he makes a large mural-styled sheet of different characters from a theme, and sold lots of them the last few years. In 2019, he did one with his SkyHeart characters, but it didn’t sell. He doesn’t know what happened, but he barely broke even with the SkyHeart mural. He still made some money but not enough. Moving forward, Jake is going to focus his prints on things that look good on a wall, that will look good in a kid’s room or a living room.

Business is often a roll of the dice, it’s never guaranteed. The failures make the successes sweeter, and make the game a lot more fun. You learn a great deal with each failure, even though it sucks. The biggest show Lee got into early on was the Sausalito Art Fair. It cost him over $5k to get involved. He was terrified he was going to lose money if any small thing went wrong, but he still ended up making a lot of money. The fear never really goes away but the risks are necessary.

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SUMMARY

  • Understand that to start a business, you need to invest some early costs in order to eventually turn a profit.

  • Start small with a proof of concept then work your way up.

  • Run cost and income projections, worst, medium, and best case scenarios.

  • Have a limit where you withdraw when it’s not worth it.

  • Understand opportunity costs and spend on high value items.

  • Be willing to lose money in order to make more money over time.

  • Keep your expenses as low as you can, by sharing when you can.


LINKS

Svslearn.com

Jake Parker: mrjakeparker.com. Instagram: @jakeparker, Youtube: JakeParker44

Will Terry: willterry.com. Instagram: @willterryart, Youtube: WillTerryArt

Lee White: leewhiteillustration.com. Instagram: @leewhiteillo 

Alex Sugg: alexsugg.com

Aaron Painter: painterdraws.com. Instagram: @painterdraws

Daniel Tu: danieltu.co.


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