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           Life isn't about finding yourself. Life is about Creating Yourself                         - George Bernard Shaw

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Pricing For Photographers

Pricing For Photographers

 

So far, you have put everything into getting the prospective client into a meeting with you, now what? 

 

They are all excited about what you can do, but here is the BIG question – “What Do You Charge or How much does it cost?” 

 

This is probably one of the most difficult aspects for any business, how you price your art. Yes I said ART. You are not selling just a piece of paper or your time. Anyone can give you time and a piece of paper, but not everyone can create a fabulous photographic piece of art.

 

Most photographers determine pricing totally wrong. All too often it's a hit and miss proposition. Often what people do is check out five other photographers and see what they are charging and either charge a little more or charge a little less than them. If I charge a little less than people will use me. Or, I looked at her pictures and I am better so I should charge a little more.

 

Not the most scientific way of doing things is it? 

 

It starts with deciding how much money you want to make this year. Why not this year? You might as well get going with this right now and follow along with this tutorial. So do you want to make $50 K, $100k, or $150K?

 

  1. Let’s start with Break-Even Analysis. 

 

The basic concept here is that your variable costs and fixed costs are covered by what you charge; hence you break even – you don’t lose money and you don’t make any money. Variable costs are those that change with each sale.  

 

First, we must have a basis from which to operate. Here is a tried and true formula that may just do the trick for you. It provides you with a percentage breakdown of revenue and costs as a guideline to start from. 

 

Typical Business Example 

 

Here is an example of a typical photo business. 

 

Term 

Definition 

Percentage of Income 

Revenue 

The total amount of money that you earn 

100% 

Cost of Sales (variable costs) 

Variable costs are those that increase whenever you increase the use of consumable items. In photography that would be film or memory sticks, prints, folders, files etc. 

20% 

Fixed Costs 

Fixed costs are those costs that you have to pay whether you sell something or not you sell anything. Some of these costs would be rent, telephone, insurance, and wages (including your salary) 

80 

 

To begin with, we must determine exactly what our fixed expenses are. Fixed expenses are those expenses, which no matter what is happening in our business, we still have to pay. Even though there is no money coming in.  Here is a basic list:

 

 

Figure out all of your expenses, here is a possible list:

 

Line Item

Description

Example

Amount

App %

Your figure

Accounting/

Bookkeeping/ Legal

You always need to know your financial picture. It is always important to have the best accountant and lawyer you can find, they will make money for you in the long run.

4000

2

 

Advertising

Advertising is a must. You will have a hard time succeeding without letting people know you are in business.

7000

4

 

Automobile

Varies according to use but it can be estimated

5000

2.5

 

Bank charges and Interest

We will always have bank charges every month but the interest is usually variable and temporary. But we will use OPM (other people’s money) occasionally and when we do we have a good idea of how much the interest charges will be.

2500

1

 

Insurance

My grandfather always said that insurance was a necessary evil. Fire destroyed my studio – I love my insurance agent! Don’t forget health, disability, and car insurance.

3000

1.5

 

Office supplies

There is always a need for letterhead, business cards, pens, forms etc.

1500

.50

 

Owner’s salary

Yes you must budget and pay yourself each and every month. You are worth it and if you don’t, you will suffer – everything suffers.

50,000

25

 

Rent

Location, location, location! I don’t care what I pay for rent as long as it comprises less than 20% of my sales. I would prefer to own my own building and in that case I would still pay rent in some fashion or other.

36,000

18

 

Repairs and Maintenance

It is essential to keep your premises clean as can be and your equipment in tip top shape. My window cleaning bill is h8ge and I like that. It means people are looking through the windows at my work.

3000

1.5

 

Travel and Education

Always, always keep learning. Whether it is about sales, business, or photography I am always learning something new. Notice the order I wrote it in.

5000

2.5

 

Utilities

You can’t get away without water and electricity.

3000

1.5

 

Wages

 

40000

20

 

 

 

 

 

 

 

Total

160,000

80

 

 

 

 

 

 

Note 1

Income

200000

100

 

 

 

 

 

 

Note 2

Variable expense

40000

20

 

 

 

 

 

 

 

  1. Now that we calculated our Total Fixed Expenses it is quite easy to calculate our needed revenue.

What we do is take the figure that we determined as our Total Fixed Expenses, then multiply that figure by 100, finally divide the product by 80, which is the percentage that the Total Fixed Expenses should be. 

 

Looking at our example we have the following: 

 

EXPENSES as $ 160 ,000 X 100 = $ 16,000,000 Then Divide 6,500,000 / 80, which then gives us the product of $ 200,000 representing the total Revenue you need.  See note 1.

 

Let’s do that now with your numbers:

 

Total Fixed EXPENSES _______________ X 100=_______________ (product) Then divide the product _______________ / 80 = _______________ Revenue needed 

 

 

3. Generally speaking, your Cost of Goods or variable expenses, based on the formula should be 20%.

 

Costs of goods are your “variable costs.” Variable costs are those that when you do more work you spend more time on material. These materials are processing, prints, slide copies, frames, albums, or anything that is consumed when you are working. This even goes so far as to include your files, slide holders, and storage boxes. This is important to keep in mind for later. See Note 2.

 

4. Profit – yes there is a profit at the end of the day. 

 

  1. Hourly requirement to break even. 

 

Some studios like to charge by the hour. Once we have figured out our required revenue we can easily determine your hourly requirement to break-even and make a profit.

 

- Figure out how many hours a week you will work i.e. 40 hours a week Your figure = _____

 

- Decide how many weeks you want to work i.e. 48 weeks Your figure = _____ 

 

- Then multiply the hours by the weeks = 40 hours X 48 weeks = 1920 hours Your figures = Hrs. _____ X Weeks _____ =_____ 

 

- Then divide the gross revenue by the hours Thus 100,000/1920 = $ 52.08 per hour or $416.66 per day 

 

Revenue _________/______Hrs. = ________ per Hour 

 

The studio needs to generate this amount every hour that you are working, to break even.

 

NOBODY PHOTOGRAPHS 40 HOURS A WEEK STRAIGHT, 48 WEEKS A YEAR. TRY MAYBE 1/2 OF THIS. THUS WE NEED TO DOUBLE THE RATE TO $ 100.00.

 

If we based our revenue only on an hourly rate, our profit would be enhanced due to reprint prices and how much you charge for them. It is always important to build in a buffer zone and your prints are that buffer zone. 

 

  1. Variable Cost Pricing

 

Variable cost pricing is the second method that we can use to work out our prices. As we already mentioned, variable costs are those that are only incurred if there was an activity of some sort. We usually include: Wedding albums & pages, film, frames, folders, mounts, photofinishing, print charges, finishes and sprays etc. 

 

- From our original illustration we noted that a standard Kodak Photographic Business Guide Formula would be: 

 

Revenue = 100 % Variable Cost = 20 % Fixed Cost = 80 % with the profit being that which we charge up and above our variable price.

 

This being the case, if we take the variable cost and multiplied it by 5 we would then have a figure of how much to charge for our services. That is because Variable Costs should equal 20%, or in other words 1/5. Thus if an 8x 10 would cost us $10.00 we would have to charge 5 x $10. Or $50. 

 

To take it a step farther, let’s look at a wedding. Photographing the home, ceremony, formals, and the reception. (Let’s assume you use one memory card per wedding and you save it in a file and you don’t reuse your cards for safety reasons)

 

Variable cost

Amount

Price per unit

Total cost

Memory card

1

10

10

Previews 4x5

200

.50

100

Preview album

1

24

25

Finished album

1

300

300

 

 

TOTAL Cost

435

 

Multiplier 5

 

2175

 

Multiplier 7

 

3045

 

 

Or if we looked at the basic cost of a portrait sitting: 

 

If we extend this to raw custom print prices, this is what we would be looking at: 

 

Size

Price per unit

5X Multiplier

7X Multiplier

4x5

.65

3.25

4.55

5x7

2.5

12.50

17.50

8x10

10.

50.

70.

11x14

16.95

84.75

118.65

16x20

24.95

123.75

174.65

 

 

Now let's look at your business quickly to see how you stack up in the cost/price/earnings category. 

 

Go through all your wedding packages and add up all the time you spend with your clients from start to finish. Now add up all the variable costs that you have associated with them. Look at what you are charging relative to the time that you spend and see if you break even according to your break even cost analysis. Any new revelations? 

 

Let's look at your portrait sessions. 

 

What are you going to do about it? 

 

Thus if we take the variable cost and multiplied it by 5 we would then satisfy the equation. But I would suggest that you use 7, this would cover hidden expenses. 

 

  1. The third method is a COMBINATION 

 

From our formula you saw that: Revenue 100 % Variable Cost 20 % Fixed Cost 80 %

 

Using the same system for a family portrait session to ensure profitability 

 

You may have been wondering why all of a sudden I started using 7 as the multiplier. It's very simple. When we used 5 as a multiplier it only covered basic costs of the material. If we did any work to it whatsoever, such as retouching, spraying, and mounting; these additional costs are not covered. The costs of the material would be covered, but not the costs of the labor. By increasing the multiplier to 7, the additional labor will be covered.

 

If you priced your portraiture based on the combination method, you would make a profit, provided you did enough sessions to cover your break-even point. The loss can only be eliminated by one of three methods: 

 

  1. Take more photo sessions 2. Sell more photos 3. Increase prices 

 

It is very important to note that by multiplying your costs by 5 it covers just a basic service. Thus, if you want to be in a high volume, low service market - that would be your minimum starting point. 

 

By increasing your multiplier by 7, you start to recoup some of the costs incurred by offering more services. 

 

If you want to have a very high quality studio, offering incredible service you will have to increase your multiplier. In order to figure out exactly what it would be, you must figure out approximately how many sittings and weddings you can effectively photograph and approximately how many portraits will be bought, including the sizes and divide these variables into your required revenue. As one of the top photographers in your area, you can also charge a premium to delineate your expertise. 

 

My good friend Ed Booth CPP, M.Photog.Cr. API, formerly from California and now residing in the sun drenched state of Florida quickly reminded me that most of the truly successful photographers that he knows, and he knows a lot, in fact he taught hundreds, all use digital equipment. He laughed when he said that although you save a ton of money by not buying film, it is all spent constantly upgrading your digital equipment. One other very important comment that he made went along these lines, “Stick to what you make money at. You make money by spending your time marketing, photographing and selling; in that order. Leave the print enhancement and creation to the professionals!”