How to Price Photography – Part 2 – Total Workshop in Six Steps
Again, no one can tell you how to price (Read How to Price Photography Part 1). This is YOUR decision – but you have to have reason why you are pricing the way you are and it can’t be simply “to get more clients”. To come up with a reason, you have to analyze. Guess what? Analyzing is work. I’m sorry to tell you, but it is work. There is no easy way, no magic button, no magic beans….
I have only two guidelines.
- Be brutally honest with yourself. Don’t lie and tell yourself that you need that one more prop and everyone will love your work so much they just have to book with you. Don’t lie and tell yourself that answering emails shouldn’t be included as a paid position, that you are just answering them on your phone during a doctors appointment.
- Don’t be cheap and great. This is not a sustainable model as I will demonstrate below. Being great means that you are going to spend hours on your shooting, editing, customer service, and perfecting everything. Being cheap and great means that you are not paying yourself a salary. However, being good enough for cheap can be a sustainable business model. If your prices are inexpensive, you have to cut corners or you are not turning a profit.
I will use example answers in purple throughout these steps to illustrate a realistic business structure.
Want to skip all the steps? There’s a shortcut – Spreadsheet Here
Step One – What is Your Brand?
Ask yourself these questions. You MUST find balance with all of these.
- Who Am I? What face do you want to put on for the world? What is or what do you want your photography to be known for? This is your brand. Match this answer up with the next question.
- Who is my target market? Am I after the low to middle market? Am I after the high end market?
- How can I be realistic? You cannot be everything to every market.
- How much do I want to make?
You must come back to these questions as you are developing your pricing structure with the tools below. You must have the answers fully balance together. You may want to be known as the greatest photographer in the world, but you cannot balance that with cheap prices and long hours.
- You may want to target the middle market or even the lower end market because your heart yearns to be affordable to everyone, but you cannot balance that with long hours. This is a model that must be a mass production. You CAN be good enough for cheap and cater to that market. This is a viable option. All it takes is mass production and cutting corners. You can churn out nice work quickly and not spend 4 hours on a newborn shoot and then 2 hours on editing.
- Maybe you cannot bear the thought of mass production and cutting corners and must not compromise your vision, so you want to only market to the elite. That’s a fine business model as well – but that means you will get less clients because the pool of elite clients is much smaller, so you need to price high and appropriate because now you may only get two of that target client per month, and that client expects hand holding which means many more hours catering to their needs.
Example Answer: I want to target middle to high end market. I want my work to be known and have perceived value. However, I don’t want to do In-Person Sales because my market cannot handle it. They would be spending hours in traffic. I tried it, I can say that my clients are turned off by it. I still want to offer it as a possible option, but right now, no one is taking it.
Step Two – The Salary Decision
Decide your salary. Don’t go to the PPA or other photographers to figure out how much money you wish to make. That is the last thing you should do. You are not simply a photographer. Stop thinking that you are a photographer or an employee. Treat yourself like what you are. You are A BUSINESS OWNER. Look around at what other business owners make in your area. Stop relying on other photographers to find this information.
Strop Groveling! Don’t cut yourself short.
Have you seen Monty Python and the Holy Grail? One of my all time favorite class movies. Every time I have taught business, I think of THIS part.
GOD: Arthur! Arthur, King of the Britons! Oh, don’t grovel! One thing I can’t stand, it’s people groveling.
GOD: And don’t apologize. Every time I try to talk to someone it’s ‘sorry this’ and ‘forgive me that’ and ‘I’m not worthy’.
If you are doing the hard work operating a business on your own, you are just as worthy as the next business owner to make a similar salary. Don’t apologize for your salary needs. For instance, the Baltimore/DC/NoVA area, no one would be operating a business without bringing at LEAST $50,000 per year in (as a salary, not sales revenue) but most business owners are bringing in around $100,000 give or take as a salary. And I’m going to tell you a little secret. You can make six figures by being good enough for cheap and not marketing to the elite. You have to analyze your numbers and make decisions for reasons.
Is this your first experience at business ownership and you have only been in business for a few months? That doesn’t give you the right to only pay yourself minimum wage or under minimum wage. There are laws that prevent companies from running sweat shops (long hours and little payment), don’t treat yourself like that. Be kind to yourself. You work hard, and running businesses is not for the faint of heart or the weak.
Example Answer: I want to make $60,000 per year to start and raise that later. I want to work 48 weeks per year.
Step Three – Hours per Client, Clients per Week
Tally up the amount of hours you spend per client. BE HONEST. Later on, you can adjust this if you want to modify your structure, so start out being brutally honest. How long do you spend per item? (include 5-15 minute increments if necessary, leave blank if you do not offer this service) If you have employees that do these things instead, don’t count that time. The employee salaries go into your expenses and will be accounted for another way.
- Scheduling (email/phone calls, etc.) 0.25
- Drive time to/from pre-session consult in person
- Pre-session consultation in person (small talk, planning)
- Pre-Session consultation by phone, Skype, or by email 0.25
- Drive time to/from session 1.0
- Session time 2.5 (newborn)
- Setup/breakdown if on location .25
- Tidying up the studio
- Washing props, backdrops, etc. 0.5
- Upload/organization of photos 0.25
- Session editing time 2.0
- Uploading/ordering physical prints for in-person ordering or preparing slideshow or gallery
- Uploading to/preparing on-line ordering platform 0.25
- Drive time to/from In-person ordering
- In-person ordering – small talk, ordering, and design consultation
- Post-session ordering by phone or Skype
- Emails/phone calls answering ordering questions (after ordering session) 0.25
- Custom design time (books, assembling albums, etc.) 1.0
- Ordering time (final edits, upload to lab) 1.0
- Packaging time
- Shipping time (i.e., drive to the post office)
- In-person delivery (drive to/from and small talk)
- Bookkeeping/filing 0.25
- Add one hour per client of admin time* 1.0
*Add at least one hour additional admin time (I always add an extra hour per client). This will cover you for other admin activities that you perform on a weekly basis like marketing, web maintenance, blogging, social networking, and anything else involved in the basic running of your business – one hour per client barely covers this for myself as my hands are in all aspects of the business).
Now take the number of hours you plan to work and divide by the number of hours per client. This results in the amount of clients you can take per week.
Example Answer: 11 hours per client. 40 hours per week divided by 11 hours per client = approximately 4 clients. I can take 4 clients per week. I plan to work 48 weeks per year.
Step Four – What are My Operating Expenses?
This is where you need to tally up your operating expenses. EVERYTHING. I know you may not use your cell phone exclusively for your business, but this will be a partial tax deduction. I know you love props and want the latest specialty lens, but these are business expenses, not gifts to yourself. Do not count them as your salary. You must tally up all business expenses.
If you have purchased the Tax Spreadsheet for Photographers, you will have easy figures to pull from. If you have not tallied this up but had someone do your taxes last year, look at the expenses they itemized on your tax forms. If you have nothing to pull from, please be honest with yourself and estimate approximate expenses. We are concerning ourselves with operating expenses which are fixed expenses that are yearly and are not directly attached with number of clients. Include things like:
- Office Equipment
- Adverting Fees, Brochures, Business Cards
- Website Related Expenses Hosting, Online Ordering Platform, Online Storage
- Ongoing Education
- Association Fees, Legal Fees, Accounting Fees
- Communications – phone/internet
- Maintenance (of cameras, building, computers, cleaning supplies)
- Studio/On Location and Office Supplies (baby wipes, ink, paper)
- Utilities (portion for your home office/home studio, all for physical studio)
- Studio Supplies (coffee, toilet paper, paper towels, hand soap)
- Studio Furniture/Decor
and much more….. add it all up.
Cost of Goods Sold – Do not include your cost of goods sold in the above. Cost of Goods sold are prints, albums, flash drives, and anything that is associated with the delivery of a physical product (flash drives are considered a physical product, downloadable links are not) COGS are a good portion of your expenses but we will address that later.
Example Answer – $25,000. Are you kidding me? I didn’t realize it was $25,000 in expenses! I’m going to need to quit buying props or something! It does add up and this is an area you can cut back later on if need be. Right now, let’s open our eyes to reality and plan well. We can only come up with a good plan if we are honest with ourselves.
Step Five – Variable Expenses & Guaranteed Sale
Your variable expenses are the cost of goods sold. However, before you can estimate your COGS, you must figure out your guaranteed sale.
This is where you reach into the minds of your target client and figure out what they want. Whether it is digital files or print collections, you must figure out what type of sale you can guarantee with each client.
Figure out your COGS for that guaranteed sale.
Prints/Products? Add up the lab costs of what is included and don’t forget to include shipping costs as well as any boutique packaging, etc.
How do you guarantee a sale? You can’t guarantee a sale 100% but you can make sure that you are doing everything in your power to point the client in the direction you want them to purchase. One way that is tried and true to guarantee a sale is to price your a la carte products much higher and then price your packages much lower. Why would anyone buy a la carte if they can get the same items but at a discount within a package? Exactly! Or, price the digital files very high but include them with the package you want to sell every time. You need to evaluate your market and figure out what they are looking for and give it to them at the price you need to turn a good profit.
Digital Files Only? If you sell digital files only, you need to put a cost value (YOUR cost just like you put the lab cost for prints) on them in order to price. I suggest considering an “adjusted digital file loss cost”. If you attach a cost (to you) of at the very least $20 per file (not the selling price, but your cost for these equations), you can account for any additional prints or products that will not be purchased because you sold them the file. I thoroughly support selling digital files, don’t get me wrong, but you have to assign a cost to them (when formulating your pricing) or you are giving them away for free.
Example Answer – I want my guaranteed sale to be products. My lab and shipping costs come to $335.62 for that package.
Step Six – Put it All Together with Equations
Equations using example answers above:
- Salary desired: $60,000
- Hours per week that you plan to work: 40
- Hours per client: 10.75
- Number of work weeks per year: 48
- Number of clients per week: 4
- Number of clients per year: 179 (number of work weeks times number of clients per week)
- Total operating expenses: $25,000
- Operating expenses per client: $139.97 (total operating expenses divided by number of clients per year)
- COGS per client: $335.62 (this is the lab/adjusted cost of the guaranteed sale)
- Total COGS per year: $59,943.29 (COGS per client times number of clients per year)
- Total Expenses per year: $84,943.29 (total COGS plus operating expenses)
- Necessary yearly sales: $144,943.29 (this is all expenses plus your salary)
- Necessary price for guaranteed sale per client: $811.53
Bottom Line: In order to give myself a full-time salary of $60,000 per year based on this particular business structure, I need to price my guaranteed sale package at $811.53. Every client must spend $811.53 in order for me to reach my goal.
Wow…. that was a process, wasn’t it?
There are so many variables in business structures and the fun part is playing with the numbers to figure out what you need in order to get what you are seeking.
If I make one adjustment, such as – well, I can only guarantee myself 2 clients per week. I can’t book 4 clients per week. Well that changes things. If I want the same salary but can only take 2 clients, I will have to charge $1,287.44 per guaranteed sale. What if I want to make $100,000 per year but leave everything else the same? 4 clients per week at guaranteed sales of $1,035.49 per client will allow me to achieve this.
These are a lot of numbers huh? I do have a spreadsheet that automatically calculates all of this for you when you plug in your numbers. This is a spreadsheet I used many years ago teaching pricing for profit. I decided to put this here at a nominal price to cover the labor involved, just so that anyone can have these numbers at their fingertips and guess what? You don’t have to buy a pricing workshop to figure this out. In other words, you can purchase an entire pricing workshop customized for YOUR business structure, condensed down to a $15 spreadsheet. Yeah…. You don’t have to purchase it, however – you can just do the math I give above.
Maryland Newborn & Baby PhotographerJodie was the first visible specialized newborn photographer in the Greater Baltimore area. She has been a newborn photographer for over 15 years and has been a big voice thorughout the photography industry regarding best business practices and baby safet. Fine her newborn portfolio here and full bio here.