One of the harder parts of being a streamer is planning out your future cash flow. By cash flow I mean what you actually have coming in to your bank account and going out over a period of time (usually a month).
Why is it important?
It’s wildly important to project your future cash flows. The first, and most important, reason is that it helps you see if your incoming cash is enough to cover your expenses! Life kinda sucks if you can’t cover your expenses and future dollars can’t cover current expenses.
The second is that it helps you plan out business growth. You may have an awesome idea for your stream that’ll take some extra money to implement. If you don’t have the cash on hand today you can look in to the future to get an idea of when you might be able to do it. Instead of despairing and not being able to do it now you can plan and hype for that future moment when you can pay for it.
Why is it difficult?
If you rely on Twitch for income then one of the biggest reasons it can be difficult to project your cash flow is because of how long it takes Twitch to pay out. If you’re a partner you get paid 45 days after the end of the month in which you earned the income. For an affiliate it’s 60 days. That means that if you do a big subathon to raise money for a big expense you’re not actually going to see that money for quite a while. This is also why if you’re doing a big fundraising drive you might want to look at tips instead of subs!
Beyond just the timing piece you also have to account for the somewhat cyclical nature of Twitch. You get more viewers during certain times of year. A specific release could mean huge things for the channel. Perhaps you had a super beneficial collaboration one month that didn’t carry over to the next. Who knows. The overall concept is that there’s variability which makes projections and planning harder.
How can you make it easier?
You make it easier by planning ahead and doing cash flow projections. Personally, I like to pull stream data from the past couple of months and put it in to Excel. That helps me not only see what has been earned but not yet paid out (last month’s revenue) but also some trending info. Does it look like you’re pulling in a similar amount each month? Are different times of year better? Do you expect to take some time off that might lead to a sub drop and missed tip revenue?
I’m writing this in the second half of May, 2018. That means my clients have been paid for March, won’t see April’s income from Twitch until June 15th, and won’t see this month’s income until July 15th. So what we’ll work on doing is entering in their approximate average tip revenue for a month, their normal business expenses + the known costs of any events, and
Say they earned $5k from Twitch in April, usually get about $1k total in tips per month, and have other revenue sources like merch accounting for another $1k/month. They put aside a third of what they make for taxes and expect to spend $3k on the business. Here’s what their June cash flow would look like:
Notice that in this example the client’s business savings account actually decreased. We’d want to dig in to why that is. Are they spending more than normal? Earning less?
It’s hard to know to ask these questions if you don’t look at the numbers.
Multiple Scenarios
Finally, you want to create multiple scenarios for your cash flow projections. Since we’re working with uncertain data it’s better to analyze a range of possibilities and plan for them than it is to hope that the one you happened to choose is correct.
Personally, I like doing an expected, high, and low projection. The low projection would be for things like a sub drop due to unexpected downtime, a new release not doing as well as I hope, or potential sponsored deals not coming through. High would be the opposite and the expected case would be the middle ground.
Conclusion
Cash flow projections can be a pain but they’re also vital to knowing the health of your business and planning ahead. They can help you plan for potential lean months where you might need to pull more than normal. They can also help you spot good months that you can use to pad your cash reserves or take on extra projects for the business. Spend the time to do this and get the reward of knowledge about your business.
You don’t have to figure this out alone. This is what we do- help streamers make great money decisions. If that’s something that sounds interesting to you reach out me or schedule some time for a free consult. You can check out what I do here.
