Photography Service Pricing Pt 2

Pricing Your Photography Services, Part 2: Estimating Your Revenue and Expenses

Photography Service Pricing Pt 2Welcome to Part 2 of our 4-Part Pricing Your Photography Services for Success series! If you missed Part 1, you’ll want to start there and come back once you’ve finished.

In Part 1, you determined who your ideal client for your photography business will be, and you’ve begun to think about your goals for how this business is going to look.

Today, we’re moving on from the foundational big picture steps and getting into the numbers!

But we’re not ready to figure out your actual pricing just yet…

First, we need to figure out the numbers that your prices will be based off of…

…Revenue, expenses, and desired salary!

Just like in any pirate movie, the crew never sets sail without a map to the buried treasure. You must also have a treasure map before you set course for your own riches.

The good news is we’ve already created this map for you! You can download it in worksheet form for free by clicking here – it’s called the Photography Service Pricing Worksheet.

Please note that I am not an accountant, but this outline will provide you with a basis to get started with. Remember to keep your ideal client and business goals that you created in Part 1 in mind as you fill out your map.

Before we get too far, let’s quickly go over some definitions that you’ll need to know in order to fill in the worksheet:

Definitions:

  • Gross Sales: This is the total amount of money that you bring in from all of your products and services over a specified period of time.
  • Cost of Goods Sold: This is the cost for supplies and labor that goes into the products and services you offer. For example; framing and retouching.
  • Fixed Costs: These are business costs that do not change each month. For example; rent and insurance.
  • Variable Costs: These are business costs that DO change from month to month. For example; marketing costs, cost of goods sold.

Now, on to plotting out your “treasure map!” Before you get started, you’ll want to download your free Photography Service Pricing Worksheet here, as this post will guide you through filling it out.

Step 1: Determine Your Desired Salary

Desired Salary: This is the biggie! This is the amount that you pay yourself. How much do you want to make per year? It’s okay to dream big!

As you fill out the rest of the worksheet, you will get a sense of whether this number is realistic – but remember, it’s always better to aim high and miss than to underestimate yourself and not reach your potential.

Step 2: Estimate Your Yearly Expenses

When writing down your expenses, be sure to write in the total for the year for each category. However, it may be helpful to determine the cost per month first, and to then multiply by 12 to get these estimates.

Note for those that have started their business already:

If you are up and running already, write in your actual expenses for this step. With those numbers known, you can move on to Step 3 to calculate what your sales should be to break even.

Here’s each category that you’ll find on the map:

  • Costs of Goods Sold: This covers all of the costs of products and services that you offer your clients (retouching of images, prints, albums, books, frames, etc.) This also includes any employee labor costs used to produce items, if performed in house.
  • Equipment: This would include computers, memory cards, cameras, lights, backgrounds, props, etc. It may be a good idea to make a list of what you need to start your business. Try to keep it to what you actually need and not splurge on the latest gadgets if they are not essential especially in the early stages of your business.
  • Studio: This will include the amount you pay monthly if renting a space or storefront. You can also include heat, water and electric as well as office supplies.
  • Education: It’s a good idea to include a budget to cover any classes, seminars, courses or books that you want to invest in to further your photographic and business skills.
  • Taxes: The business entity type (S Corporation and Sole Proprietorship being the two most likely for a photography business) that you choose to file your business under will determine your tax situation.
    • Hint: A report by Quantria Strategies determined an average 31.6% tax rate for S Corporations, and a 15.1% average rate for Sole Proprietorships.
    • Please keep in mind that there are other factors, including protection of your personal assets, that should be considered when determining which option is best for you.
    • Note: Taxes are a complicated subject and we are not here to provide legal or tax advice. You should seek counsel from a qualified adviser familiar with the laws of your state!
    • Try not to spend too much time or money worrying about filing as a business until you are able to bring in your first clients.)
  • Insurance: This will include insurances such as health, disability, equipment and company auto.
  • Marketing: Think of marketing as the cost of acquiring clients. This could include printing of postcards and brochures, mailing cost, website, samples for display at partner locations, Facebook ads, etc. A typical rate is between 5 to 10 percent of gross sales.

Step 3: Calculate Breakeven

For this step, simply add your total expenses to your desired salary. This will give you the amount of sales dollars your business must bring in (total revenue) in order to breakeven.

Of course, we are in business to do more than just break even, so any sales above the break even number will be profit for your business!

Step 4: Calculate Revenue Projections

Photography Revenue Table Now, determine the percentage of work you’d like your business to bring in for each service category. Here you will determine the percentage of work that you’d like to do for each category; from your main specialty, which you will perform the most sessions under, down to the categories that you will do periodically.

We’ve included most of the major photography categories in the Step 4 table in the free worksheet (Seniors, children, pets, weddings, etc.) This will help you determine how much time you will need to put in for each area of work.

Finally, multiply these percentages to calculate the total sales (revenue) you must bring in per service category, in order to pay off your expenses and reach your salary goal for the year. (Multiply your revenue number by the percentage in each category. For example, if you plan on spending 40% of your time on Senior Portraits, multiply your revenue by 0.40).

Keep in mind that this is just your breakeven number. This is just the minimum amount of money you’ll want to aim for.

Guidelines to Follow:

In the January 2015 issue of the Professional Photographer magazine, the PPA’s (Professional Photographers of America) Financial Benchmark Survey is sited. The following stats from the survey can be used to give you an idea of where you should stand.

  • Salary or Owner’s Compensation: In the survey, this includes owner’s salary as well as any profit that can be reinvested in the business. PPA recommended benchmark: 45% of gross sales for a home studio and 35% of gross sales for a retail studio. You don’t want to go too far below these numbers; higher percentage = higher salary.
  • Cost of Goods Sold: PPA recommended benchmark: 25% of gross sales. The less, the better.
  • Fixed Costs: PPA recommended benchmark: 30% of gross sales for a home studio and 40% of gross sales for a retail studio. Remember, less expenses means more money in your pocket!

By filling out this Revenue Map, You’ve just created a pretty clear outline of how much money you can expect to spend in a year, and how much money you need to bring in in order to reach your goals.

Next Steps:

In the next post, Part 3, you will decide how you want to position yourself as a photography studio. (Hint: As you go through these steps, you will begin to see that it will be much easier to charge premium prices and take on less clients, than to charge value prices and to constantly bring in new customers!)

That decision, along with the numbers you’ve just created, will determine how you price your services, as well as how many clients you’ll actually need to bring in order to reach your goals.

Here’s the links for the rest of the series & resources:

I want to hear your thoughts!

In the comments below, please write: what are your thoughts on creating a revenue goal for your upcoming business? Would you prefer a high volume/ low sale model, or a low volume/high sale model? Leave any questions on this in the comments!

I’ll be here to write back to each of your comments. 🙂

Want a shortcut?

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