As an influencer, you’re uniquely positioned to enjoy a rewarding career and considerable earnings. However, you must go beyond the finance basics to create a sustainable career and maximize your financial health.
Most industries have pretty clear-cut rules governing their finances. For instance, the restaurant industry involves suppliers, employees, and customers, along with the property owner if the restaurant doesn’t own the location. While complex, the accounting is pretty well-established.
That’s not the case with some industries, though. Take social media influencers as an example. The industry has a unique financial landscape and accounting best practices aren’t all that well established. That doesn’t mean you can afford to act like it’s the Wild West, however.
It’s crucial to have good accounting practices in place to ensure that your business is financially stable and continues to grow. Of course, chances are good that you’re not a CPA and don’t have much background in accounting, so what should you do? We’re glad you asked. This post will highlight important considerations you should make that go beyond the basics.
Diversifying Revenue Streams
You cannot rely on a single stream of income as an influencer. That way lies financial failure. Fame is fickle and social media followers ebb and flow. By diversifying your revenue streams, you ensure that you’re protected from the industry’s variable nature.
Brand Partnerships & Sponsored Content: Brand partnerships can be life-sustaining for influencers and sponsored content allows you to feature products you love from brands you trust while helping your audience. But you need to ensure that you’re comfortable navigating these contracts. You also need to value your worth accurately (not too high or too low) and ensure that your partners provide timely payments. That’s a lot to do while also managing your business, so we definitely recommend working with an accounting partner who has deep experience in the influencer industry.
Affiliate Marketing: Affiliate marketing has been around for a long time and influencers can use it to generate a reliable stream of income. You’ll need to partner with the right companies – retailers, manufacturers, or affiliate networks. It’s also critical to manage those partnerships over time and understand the different payout structures in the industry (pay per click, pay per purchase, percentage of purchase earned, etc.).
Merchandising & Product Sales: Who says influencers can only model products or clothing? With the rise of e-commerce platforms and modern logistics, you can become your own retail brand and sell the very products you recommend directly to your followers. However, doing that successfully requires a deep understanding of how to manage your profit margins and your inventory. It also means knowing the e-commerce platform fees you must pay and how they affect your profitability.
In addition to diversifying your income streams, you can also ensure financial stability by minimizing your tax liabilities.
Advanced Deductions: Dive deep into all your available deductions. Go beyond the basics, like equipment needed for filming or photo shoots and what you’re deducting for home office space. For instance, clothing can be tax deductible under the right situations.
Tax Shelters: Put some of your income into one of the many tax shelters available. That includes IRAs, SEP-IRAs, and other retirement accounts. Not only will that help you avoid paying taxes on that money, but you’ll be able to build a comfortable nest egg for your golden years.
S Corps: Business formation affects your tax liabilities. In some cases, being taxed as an S Corp makes much more sense than using a different formation type, such as an LLC. Our post here explains what you need to know.
Estimated Taxes: As an influencer, you likely fall under the IRS’s rules for self-employed professionals. That means filing your income taxes annually but paying estimated taxes every quarter. If you’re entirely self-employed, this also reduces your annual gross income for calculating your tax liability.
Protecting Your Financial Assets
Another important consideration for influencers is protecting your financial assets in the case of an emergency. You can do this in several ways.
Incorporation: One of the most important considerations is whether to incorporate as an LLC, S Corp, or other business entity to put a divider between your personal assets and the business.
Emergency Funds: If there’s one thing you can count on, it’s the unpredictability of your income as an influencer. Take advantage of good times and put some money into an emergency fund to protect you against income fluctuations or unexpected expenses.
Insurance: Liability insurance is essential for all self-employed professionals, including influencers. If you’re hurt on the job (or someone else is injured during production), your liability insurance will pay for it.
Investing as an Influencer
Beyond what we’ve discussed, you must also plan for the future by investing. However, you must do so intelligently.
Real Estate: Real estate can be a smart asset to invest in. Use your income to invest in properties for personal use, as well as for the rental income they can generate, either as single-family homes, multi-family homes, or on the Airbnb/vacation home markets.
Stocks and Bonds: Both stocks and bonds have their place in your investment strategy. You want a mix of assets in your portfolio, but it’s essential to understand how to create a diversified portfolio in the first place.
Passive Income Streams: Make sure you set up passive income streams that will generate cash flow with minimal effort from you. Digital products, online courses, and even investing in promising startups can all provide you with ongoing streams of income.
Should I consider hiring a full-time accountant or financial advisor?
Depending on the complexity and scale of your financial landscape, having access to dedicated professionals can be invaluable. Evaluate your needs based on your earnings, future financial goals, and the time you spend on accounting tasks.
How do I approach brands for more favorable payment terms?
Building a strong portfolio and understanding your market value is key. Be clear about your terms, provide justifications, and maintain open communication.
As an influencer, you’re uniquely positioned to enjoy a rewarding career and considerable earning potential. However, you must go beyond the basics and use advanced accounting practices to create a sustainable career and maximize your financial health. You must strike a balance between earning, saving, investing, and spending. The key here is to invest in your financial education, so you fully understand these tactics and strategies. You should also seek expert advice when necessary and continually refine your strategies to deal with the ebb and flow of your industry, as well as your personal growth.