Pricing and Profit

I realize in order to stay in business, I must make at least enough

money to cover the expenses. I have a price sheet, and it provides

me about $50.00 an hour over and above cost.

 

I have struggled with pricing for about 2 years now. Thankfully I

have found you!

 

In your pricing, what do you charge for your time? In other words,

what do you expect to profit?

 

From the many different events we photograph?

 

Any help is appreciated.

"I realize in order to stay in business, I must make at least enough money to cover the

expenses."

 

That is a formula for going out of business.

 

After materials cost, paying assistants (if any), gear amortization, travel expenses, taxes

and insurance, promotional/advertising expenses ... there should be a profit margin for

your time and effort including meetings with clients that makes it worthwhile. Only you

can determine what that amount should be. But consider this: if you made $40K annual in

profit margin, you'd have to do 40 weddings with $1,000. left over from each ... after you

subtracted all the expenses listed.

The National Press Photographers Association has a great tool on their website - The Cost of Doing Business Calculator. You can plug in your estimated yearly business expenses, how many days you want to shoot, and then how much salary you want to make. It will figure out the minimum you should charge.

 

<a href="http://www.nppa.org/professional_development/business_practices/cdb/">http://www.nppa.org/professional_development/business_practices/cdb/ </a>

A 17c 4X6 we sell for $10 ---thats the profit we need to produce in our market...We expect to have a cost of $60 >> every $600 gross, per hour.

That CDB calculator pretty much confirms my suspicions: To earn a living rather than pay for the privelege of being a pro photographer it's necessary to charge double your actual expenses (not including salary) as a rock bottom minimum.

 

According to the publications I read for small businesses the first priority should be "Pay yourself first." Makes sense. If you can't do that *and* cover your expenses, it's not a business - it's a charity.

 

Apparently I'm a very charitable person; i.e., a lousy businessman.

I was at a business photography seminar, and this is how they said to figure your price.

 

Figure out how much all your expenses are: film, developing, proof books, bateries, packaging to put the final product in, every actual $ cost for everything that goes into the wedding. Then figure out to pay your self for time to shoot the wedding, edit the wedding, put the proofs together to give them, drive to the lab, what ever your time is. You have to figure out what it would cost you to pay someone else to do the job if you were sick. Example is don't figure $10 to shoot the wedding when it will cost you $50 to hire someone else. You wouldn't pay someone $50 to put your proof book together. Then, when you have a total $ amount, times that by 3.33. This will give you your price. The rest of the money goes to pay for vehicle expense, insurance, office supplies, continuing education, time spent with clients who don't book, your P.net subscription :), everything else!

Yes Kari, that has always been a rule of thumb for business: 1/3rd for overhead, 1/3rd for

actual expenses per job, 1/3rd for profit.

Marc has hit the truth of it.

 

I find it easier to understand if you consider yourself a paid employee of your own company. Most of us have been employees of some other company at some time, so most of us know how much we needed to make per hour to meet our personal expenses. If you were an employee, how much would you need to make per hour working for your photography company? That's your salary, which is a "business expense" for the company. Let's say you can live on $25 an hour, given a 40-hour work week, or say $200 per day. Poke that amount into memory for a few moments.

 

Now, what about benefits like medical insurance, a retirement plan, paid vacation, et cetera that you expect? Then there is also Social Security withholding. Those are additional business expenses for the company that will add from $500 up to $1000 or more per month per employee (ie, you). So let's break $500 per month down to a day cost of $25. Peek into memory at the daily employee salary from before ($200), add it to the employee daily benefit/tax expense($25), and poke the result of total daily employee cost ($225) into memory.

 

Figure out the company overhead--what it costs just to open the studio doors every day--rent of space, utilities, business insurance, advertising, cost of employee transportation, cost of annual CPA audits, et cetera, everything beyond the normal living costs of the employee and break it down to a daily amount. Let's say it's another $25 per day. Peek, add, poke the resultant daily figure, now at $250 per day. Multiply that by 20 work days per month, and you see that the company has to earn a minimum of $5000 per month--$31.50 per hour--just to meet operating expenses...and that's presuming you could actually bill 40 hours per week every week.

 

Even if you're only doing photography part time, a figure in this range still represents a realistic estimate of what you need to make per hour--all the same expenses are still in there whether you work part time or full time--you just won't expect to have as many total hours per month. So what if you're depending on a "day" job for those bennies like medical insurance? Please do your professional colleages who do have to meet those expenses a favor and keep them in your calculations anyway.

 

Now, consider the cost of production. For a given package, exactly what does it cost in materials and outsourced services to produce that package, including breakdowns of such things as printer ink per print and gasoline to and from the shoot? I've got some portrait packages that cost as much as $1000 just to get the finished prints into my hands and packaged for delivery. Say it will cost you $200 to provide a given package to a client.

 

Now, estimate the hours it takes to produce that package, say an hour in consultation, an hour in travel time, two hours of shooting, two hours in post-processing, an hour of "administrative" time doing packaing/mailing/et cetera. Seven hours at $31.50 per hour equals $220. Add that to the production cost of $200, and you get a cost TO THE COMPANY for the package of $420.

 

Now can consider "profit." Profit for the company is NOT your salary--your salary is a business expense. Profit is what the company will use for future expansion--like buying a better camera or making improvements to the studio. Profit is the "markup" on the cost of production. Don't make this any less than 20% of the production cost of the package. So if the production cost is $420, then with a 20% profit margin (which is pretty slim), the price of the package that you will present to the client is $504. Now, sales tax. Let's say in your area the required sales tax is 7 percent. That's $35.28.

 

Total cost of the package charged to the client is $539.28.

KIRK ==exac ta mundo..except that $$539.28 is what is required ~ per hour~ in our neighborhood. There are a few, of my colleagues, who demand more than that..just to eat. Many clients > are now bringing a photographer, from their home town...to compete.

Poke? Peek? Jeez, Kirk, tell me you're not an old Atari programmer.

$50 an hour when you shoot or do you include your traveling time,lab time, numbering time if you still shoot film, or digital dark room time, you get my point, too low

>>Poke? Peek? Jeez, Kirk, tell me you're not an old Atari programmer.

<<

 

My past discovered!

>>KIRK ==exac ta mundo..except that $$539.28 is what is required ~ per hour~ in our neighborhood. There are a few, of my colleagues, who demand more than that..just to eat. <<

 

Of course you would have to plug in the actual cost values applicable to your own area...but my point was to illustrate some (not an exhaustive list) of the factors so many photographers appear to neglect.