I’m going to interrupt my regularly scheduled blog posts full of pretty images to hop on a (tiny) internet soapbox for a moment.
As a creative entrepreneur, the actual business side of owning a business isn’t always the fun part. That’s one reason why I belong to several online forums for photographers and other creatives. These groups are often a glorious mix of seasoned and brand new entrepreneurs. So for feedback on most things (for instance recommendations on a great heirloom album company), they’re a wonderful resource. But when it comes to feedback on pricing…eh, not so much. Unless one is willing to lay out their personal expenses, business expenses, savings goals, how many weddings he or she has/wants booked, etc. in full detail, you cannot rely on “oh yeah, that looks good” from the peanut gallery.
STAY WITH ME, I promise this will be eye-opening to some of you.
Oh hai, it’s me! In my office. Happy because I’ve crunched my numbers already! 😉 Photo by the fab Christina Pugh
I celebrated 6 years in the wedding photography industry on January 16th, yet I’m STILL learning and growing. Although I’ve managed to beat the scary self-employment statistics, I am now focused on not only a “successful” business, but also an above comfortable salary in order to afford the life I both want and deserve. In other words, I no longer want to scrape by in life merely getting bills paid. I also want the ability to SAVE money while also enjoy little luxuries most of the working force’s paychecks allow: taking vacations, traveling, maybe even buying a luxury item or two as a gift to myself along the way (without crippling guilty and a last minute return). Despite studying business in college, it took literal YEARS for me to reach the “Ah-hah!” moment on how to price myself in my own business.
So here’s a (crude) example of the process EACH of us should take to reach those types of goals and how to price your business accordingly. Let me take this time to state I’m not an accountant and I’m certainly not YOUR accountant. Please use this as a place to get started, then take all your findings to a CPA who can help you work out a detailed business plan tailored to you.
SPOILER ALERT: You NEVER look to your competitors, clients, or the “market” to determine your pricing. You look inward to yourself and your own cost of living/doing business. That should be the ONLY thing dictating what you charge for the service and/or products you provide.
—THE NITTY GRITTY—
I’m a photographer living in Atlanta, so that is the logical place for me to start with this exercise. Everything you see below is based off extremely conservative figures for Atlanta’s cost of living for a SINGLE person. These are easily searchable through Google. Keep in mind, Atlanta’s median household income is $57,062.
To LIVE in Atlanta on the bare minimum you need $1819/mo. We’re talking food, shelter, and transportation. And the internet of course. Google tells me the monthly averages are:
Car + gas: $250
TOTAL: $1819 monthly cost of living // $21,828 annually
*includes internet because you need it to run a business these days
Again, all super conservative numbers and none of this takes into account ANY extras like health insurance, personal care (clothing, gym membership, etc.), social/entertainment, children, pets, etc.
Insert all your costs of doing business for each month/wedding. If you rent a studio, that expense goes here. Pay monthly for Adobe CC’s Lightroom and Photoshop, your online image hosting galleries, and ShootQ? They go here. Don’t forget those pesky yearly costs like business license renewals and insurance. Divide by 12 and plug them in!
Like the rest of this exercise, this number will also be different for each person/business. For me, I have the added expense of shooting film that most other photographers do not have. In fact, my business expenses are typically MORE than my personal expenses half the year! But for the sake of simplicity in this example, we’re going to pretend your business expenses are $0. (HAH, don’t we all wish?!)
SAVINGS + GOALS “EXPENSES”
This is where your retirement + savings, emergency funds, kids’ college funds, that pair of Louboutins you’ve been eyeing, a family vacation, etc. would go. Again, for simplicity’s sake, we’ll set this at $0.
Add ’em all up! PERSONAL + BUSINESS + GOALS EXPENSES = $XXXX. In this example, the sum is a ridiculously underestimated total of $1819. This is your total monthly expense number.
For this example, we’ll assume you need to pay a total of 30% for taxes. Every state and local area will be different. This is why it’s important to consult an accountant for your business. However, this is a solid start to get you thinking about how much of your income will go right back out the door to Uncle Sam.
TOTAL EXPENSES x 1.3 = $YYYY. That is the number the person in our hypothetical situation would need to make every single month to cover their cost of living ONLY.
In this example, that number is $2,364.70 a month OR $28,376.40 annually to simply cover your expenses!
Remember, Atlanta’s median income is $57,062. Why should we as creatives entrepreneurs settle for the low end of that statistic when we’re working just as hard if not harder than everyone else?
A handful of my business expenses: albums, film, client gifts, office supplies, and presentation boxes.
For an Atlanta wedding photographer, using this example, one would need to book AT LEAST 1 wedding AND charge $2364.70 for that wedding to even hope to break even every month. Of course, you’ll remember we didn’t factor in any business expenses or savings or health insurance or even a social life for that matter.
I hope this gives a little insight into how to price yourself correctly. Pricing is not some big mystery the way we creatives seem to make it out to be. It’s literally an easy “plug-n-play” formula! I encourage EVERYONE to work through their numbers and quit relying on the outside world to tell you what to charge. Of course, I could write numerous follow up articles on subjects such as how to present your pricing (3 packages – good, better, best VS 1 package or all a la carte, etc.) and what your hourly rate would be based on your numbers and goals, but the foundation of knowing HOW MUCH to price your work remains the same.
*** IMPORTANT NOTE***
If you aren’t reaching your goal number of bookings at the price point this formula tells you, consider picking up a part-time job to fill in the gaps VERSUS discounting your work and/or undercutting the market. This not only trains you to continuously charge what you are worth, but educates potential clients on the true cost of professional photography. Bonus points for landing a PT job that teaches something valuable you may be missing in your own business (E.G. a job in sales if you aren’t good at selling). It’s like paid on the job training!
Also, if you’re not yet full time as a small business owner, don’t rush the process! You have the luxury of a safety net with your other job. USE IT TO YOUR ADVANTAGE. The same goes for having a significant other who is contributing to the bills. Don’t factor in their income as part of your own, but feel free to divide your applicable personal living expenses like rent/mortgage by their contribution. This will help you run a profitable business versus a glorified hobby being sustained by your significant other!
IN SUMMARY // FORMULA RECAP
- Personal expenses + Business expenses + Savings expenses = $XXXX
- Multiply that number by at least 1.3 for taxes (30%) = $YYYY
- $YYYY represents the base amount of income you need for a month to cover your bills
- Figure out your true expenses by tracking them for the past 3 months and finding the average. Some expenses will be constant while others will be variable. Doing this will help you cover all your bases, but it’s best to consult an accountant to make sure your numbers are rock solid for YOU.
Now, go create a goal of what you want to make this year, factor that into your formula above, set your prices accordingly, and create a business that is WORTH those numbers so people will hire you! Quit using the excuse of “my market won’t support these numbers” or “all the other photographers charge so little I can’t compete”. If that is your mindset, you might as well hang it up when it comes to being a small business owner. Entrepreneurship isn’t cut out for everyone and that’s okay. But if you’re determined to succeed, do the groundwork on a solid BUSINESS foundation and the rest will come naturally.
*Picks up megaphone and pom poms to cheer you on!*