How I Did It - Carla Nelms
Carla Nelms felt her business was on autopilot
By Jeff Kent
Carla Nelms felt her business was on autopilot. The successful child portrait studio in Midlothian, Va., now almost ran itself. For two decades Nelms had maintained a following based on her reputation and word of mouth referrals. She didn’t advertise beyond placing displays in doctors’ offices and upscale businesses, and donating portrait sessions for charity auctions. With a session average of about $1,700, the business made a healthy profit every year and grew consistently.
In January 2007, the construction of Nelms’ 5,000-square-foot commercial building was completed. She had designed it to house her studio and one tenant. The construction costs and the purchase of new equipment and furnishings left her $50,000 in debt. “I’m not a debt person,” says Nelms. “It was eating at me. I was not comfortable with it at all.”
Seeking solutions, Nelms attended a PPA Studio Management Services (SMS) class in October 2007. She submitted her books for SMS analysis and was pleased to learn hers was the highest performing retail studio in the class. The typical problem of a disparity between cost of sales and gross income wasn’t an issue in her case. But the planning element was completely absent.
Nelms had never formulated a budget, set per-session sales goals, or written down concrete financial objectives for the studio. She realized that the business that seemed to be on autopilot was actually a vessel without a captain at the helm. “I felt like I had no control over the business or when clients would call me,” she says. “It was as if the studio was a big yacht floating down the river with no one at the controls. It was time to get that control and steer in the direction I wanted to go.”
Nelms signed up for SMS services. Her consultant, Bridget Jackson, opened her eyes to planning and managerial accounting. Jackson helped her set up a detailed budget and explained how per-session sales goals work. By establishing a target amount for each session, Nelms knows how many sessions she needs to book per month to reach her overall sales goals, pay herself a salary, and realize a net profit for the year. She can predict and prepare for the slow times, and use that time to plan and implement strategies for developing new business.
Every day, Nelms and her assistant review the studio’s monthly and annual session goals. They have a running tally posted in the work room. If the studio is falling short of projections, they brainstorm ways to fill the session count. With the help of her SMS mentor, Lori Nordstrom, Nelms has planned new promotions, updated her logo, and redesigned her website. She uses her new promos and marketing materials to launchtargeted niche-marketing campaigns to help fill the schedule during slow downs. Nelms’ assistant works under a two-tier bonus system that pays her when the studio meets the month’s session number goal and again when it meets the month’s financial target.
These measures enabled Nelms to increase her gross revenue from $233,000 in 2007 to $289,000 in 2008, without a significant increase in expenses. She paid off the entire $50,000 debt in 2008, and set aside $15,000 in a rainy day fund. The increased net profit provided $45,000 of those funds. Nelms also refinanced her building loan and took out $20,000 of the equity.
The additional profit also went toward the cost of a part-time retoucher to free Nelms’ time for shooting, selling and marketing. Even after paying off her debt and paying the additional salary, she achieved a 2008 bottomline profit—owner’s compensation plus net profits—of $92,000.
This year the studio has kept pace with her 2008 profits and remained debt-free. Nelms covers operating expenses with cash (through debit cards) and uses credit cards only for purchases she can pay off within a month. In a time of economic uncertainty, her business has maintained its growth and profitability, a feat Nelms feels wouldn’t have been possible without a firm plan to guide its course.
Most important, Nelms Photographic Artistry has a captain at the helm. Nelms rests easier knowing there’s a support system in place if the numbers get out of whack. “There’s a wonderful peace of mind knowing I have somebody watching my back,” says Nelms. “I know that Bridget and SMS are not going to let me fail. I’ve been able to manage my schedule so I work only four days a week, from 8 a.m. to 5 p.m., never at night or on weekends. You can make a great living and have a life if you manage your numbers correctly.”