The creative industry might be the third largest industry after power, oil and gas, worth trillions of dollars. People in this sector range from the full-time workers with a side hustle, full-time freelancers, part-time workers, software developers, designers, entertainers, actors, singers, artists and others in the entertainment and communications sector. For an industry that is worth trillions of dollars, the players in the sector earn quite a lot, especially those in the top percentile.
Unfortunately, quite a number of them do not structure their finances in the course of running their trade within a structure, and inadvertently, this begins to tell on their finances. Uade Ahimie, Co-founder Hiwee’s communication studios, spoke on the need for a financial structure among the creative during the Nairametrics Business Half Hour.
“If you ask some fashion designers to make you a dress, they give you a figure off the top of their head. Some of them get down to the work and realise that the cost they have given you barely covers the cost of making the dress. This is what plays out for a lot of creatives, from graphic designers to show hosts and so on. They hardly have a structure for pricing and delivering their services and it affects their finances,” Ahimie explained.
He noted that even for those that earn large figures, the lack of financial literacy leaves some of them still groping through their finances.
Financial literacy does not stop at earning money. It goes as far as keeping the income regular, saving, investing and growing it. Hiwee’s communication studios is positioning itself to help creatives unlock the enormous economic potentials in the sector, through improved financial literacy which will bring about long-lasting economic sustainability across a variety of interlinking related industries.
As a sector that has people operating in every business, the financial literacy gap among creatives need to be filled and this highlights the vacuum Hiwee’s studios wants to fill. Creatives have huge earning potentials, but according to Ahimie, the questions are, “how do they make money regularly?, how do they save money? how do they grow their money?” By connecting stakeholders in the entertainment and communications sector, Hiwee’s studios hopes to transcend the inefficiencies holding back these sectors in Nigeria and Africa.
Structured pricing and terms of service delivery
Ahimie suggested that creatives could start by having a structured pricing system that they use to transact with their clients so that they do not end up rendering their services at a loss. With this structure, every deal or contract is properly analysed and broken down before a price is given.
“If for instance, you give someone a fee to produce a movie within two weeks, have you factored in extra costs that could come up? If you are on location and it rains for a whole week such that you are unable to shoot any scene, how will the extra costs be catered for? Has the Value Added Tax been factored in as well?
“What service are you selling? How do you cost it? Do you have a list of what you need to be in place? What is the transaction fee? How do you factor in unforeseen occurrences and delays in your costing? Any miscellaneous expenses? How do you manage the processes? These are all things that creatives should necessarily consider in developing a finance structure,” he explained.
He added that verbal agreements should be avoided, and all the terms of service delivery should be stated. “What happens when either party defaults? If your event is for 10am and I show up by 11am as the MC, what should be the next course of action? What if the event is for 10am and I am there and it does not start till 12 noon? These things need to be stated to put in some form of structure. Define what your standards are, and stick to it across board,” he said.
Attracting finance into creative startups can be difficult because investors could get sceptical about putting their money into an abstract idea or talent. Structuring the finances and terms of service delivery is a little way to put some structure into what is generally unstructured. If financiers can get some understanding of how the creative ecosystem works, they might be more inclined to invest.
The legal structure
While creatives may be doing well for themselves by exporting their services and skills and generating income, it does not necessarily reflect on the economy. One way to attract financiers into this sector is by keeping straight records of cashflow and contributing to the economy via taxes.
“Every business or self-employed person needs an accountant and a lawyer to keep financial records straight. It is part of your finance structure, even as you manage the money that comes in. You should be able to understand and explain your money flow to anyone. You don’t have to wait till the law comes after you,” Ahimie said.