As I wrap the year up (and no, I still haven't the heart to look at my books and do year-end accounting), I thought I'd try to share with you what it's like financially to do the sort of thing I do.
You may have a good job with an employer that's covered under wage and hour laws. You may even have benefits as part of your job. You may have your own business in another field and are doing well. How can creatives be in such deep poo do? It's their fault, right? Some independent creative workers are doing great. They're talented. They've worked their tails off for years and deserve every bit of success. What about people like me? I used to write white hat SEO web copy and design sites (along with .Net programming) for a decent amount per hour. I used to write copy for ad agencies for a decent amount per hour. What happened?
In short: market shifts took out many professionals in these fields. Like many, I'm scrambling to find other streams of income. I'm very fortunate that my husband makes decent money and we can pay the bills and have a home to call our own. My money took care of some of the extras, and was supposed to help pay college tuition. (Don't get me started on bills that practically tripled on us thanks to "deregulation.")
So, allow me to turn the tables a bit. Let's say you're a construction contractor. You have a small business pouring concrete. You do sidewalks and patios and a few other projects, and you do a good job. You do a decent business. One day a prospective client approaches you.
"We have a new way of doing business," he says. "It's big." Your "spidey sense" tingles. This isn't gonna be good. "I'm going to put a sidewalk up in a high traffic area. The sidewalk will be lined with ads. I get paid by the advertising company and you get 10% of the revenue, just for putting in the sidewalk. I'll even put up a sign saying you built the magnificent sidewalk and people will call you with more business."
"Wait a minute," you say. "I charge 50% up front and 50% on completion."
The prospective client shakes his head. "You stand to make much more than that, and the revenue keeps coming in! Look at this." He shows you some figures from similar projects. The look good, but something's still tingling in the back of your head.
The prospective client informs you that there are ten contracting startups willing to take this job just to get their name "out there." You turn the job down and indeed, one of the startups steps in and takes the job. You wonder how much money they're losing on the deal and go about your merry way doing business as usual.
Then another prospective client contacts you. The deal with this is that you do the work and you get a cut of the rent on the property once the money starts rolling in. You politely decline. And sure enough, there's a start-up contractor willing to take a risk on this job.
Suddenly, this is the deal virtually every prospective client offers you. It's either that or get a low fee up front that may barely cover your materials costs with no prospect of money later.
Finally, you decide to bite on a deal for an ad-based sidewalk. You look at the contract. 10% of the revenue, payable every 30 days. Sounds good. You take the contract to your attorney and your accountant, who think it's a good deal, if you can stand to wait 30 days after the project is completed. You sign the contract and build the sidewalk.
30 days later, no check.
You go to the client and ask what's going on. "Oh," he explains." The ad company pays us for the revenues for the first 30 days 30 days after THAT when they've finalized their accounting. Then it takes us another 30 days to issue checks. You're not the only contractor we deal with, you know." You do the math. 90 days. Well, some large clients pay on a 90 day cycle, and that's part of doing business. In the meantime, you go watch the sidewalk. Man, there's a LOT of traffic, at least during certain times of the day. This could be good.
You wait 60 more days. Your first check arrives a week later, and it's enough to cover a ream of paper for the office. Whisky Tango Foxtrot? You call the client and discover that your definition of "revenue" is gross receipts. In that industry, the definition of "revenue" is net receipts, and they've been charging all sorts of things to your account, like three-martini lunches where your company may get mentioned in passing. You have a great attorney and accountant, but they're not experts in the middleman industry, and now you're screwed. *
The next check arrives. It's a little better, but you're still not sure you're getting paid correctly. You grab the contract. It allows for an audit, at your expense at the company headquarters halfway across the country. With a 30 day notice.
One day a letter from the client arrives in the mail. The ad agency has changed the formula for calculating payment, and will pay less for peak hours.
Boy, have you been screwed. But the client just bought a new boat.
And guess what? More and more companies are going to this payment model. And lots of scrappy startups are hoping to cash in on laying concrete for ad-based sidewalks. They're willing to pay illegal aliens next to nothing for their work while you pay a living wage and benefits.
Be glad the construction industry doesn't work this way. But what if it did? How would you survive?
This is exactly what many creatives are facing. Instead of getting paid up front (or on completion of the job), it's a cut of revenue. And that revenue is almost always defined as the net rather than the gross. Or take a copywriting job that used to pay me a few hundred bucks. There's a line of people willing to take it on for five bucks just to get their names "out there." And more and more people approach me with the "I'll gladly pay you Tuesday" line. But Tuesday never comes.
Now I'm going to go finish my books for the year so I can drown my sorrows in the profits. Don't worry about my liver. At the rate I expect to make money this year I might be able to afford a bottle of light beer that's past it's sell by date.
*ETA: Yes, I vet offers, check contracts, do online searches, the whole bit. But that doesn't help when a publisher or client goes broke or suddenly decides to stop paying. Sue? Over a few hundred or less?