Jason Aten is a photographer and the author of Starting Out Right: Building a Profitable and Sustainable Photography Business. In addition, he is the CEO of NinetyNine Beans, which provides Full-Service Accounting for Photographers. You can read more posts like this on his blog: www.startingoutright.net
Some of the most common questions asked by photographers are: how much should I charge? How do I set up packages? Should I do packages or a la Carte pricing? These are all great questions. They are important questions. Often, though, the problem is that this is the first question a photographer is asking – before they ask some other, very important questions.
The first question I encourage people to ask themselves is this: how much does it cost you to be in business? I know it’s not necessarily as sexy a question – and it’s a hard one to answer – but it’s impossible to really start figuring out things like pricing and packages, without a good grasp on the answer.
Do you know how much it costs you to be in business? Do you have a system in place to track your expenses? Surprisingly, even though they are running a small business, many photographers don’t have a good system in place. In my business, I TRACK EVERYTHING. I want to know where my money is coming from, how I spend it, and whether or not it helps – or hinders – the business.
Start by tracking your expenses. Start with the expenses you have, whether you photograph anything or not. These Fixed Expenses include things like Administrative Expenses (insurance, supplies, training and education, etc), Capital Expenses (new gear, large purchases that you depreciate, real estate, etc), Advertising Expenses (website, business cards, marketing materials, bridal shows, etc), Overhead Expenses (utilities and expenses related to a physical space like electricity, gas, etc), and Employee Expenses (wages and benefits for all non-sales related employees).
Next, track all of the expenses that go into the products and services you offer. In addition to what the lab charges you for an 8×10, this includes all of the expenses that go into SELLING and PRODUCING a product. These are your Cost of Sales Expenses, and include things like the wholesale cost from your lab, design charges, editing and processing expenses, shipping, sales related labor, retouching and travel.
Understanding these two types of expenses will give you a good idea of what it will cost you to be in business – which gives you a good idea of where to start when thinking about pricing for a profit. It seems like a lot of work, and it is, but its worth it.
Second, develop a system to help you keep track of revenue and expenses on an ongoing basis. Even if it’s just a simple spreadsheet – that’s better than nothing. There are some great tools available, including Quickbooks (and their online version). My personal favorite is Kashoo, which makes it super easy to input transactions, track expenses and generate really useful reports you can use to make decisions about your business. Many of the photographer-specific Customer Relationship Management tools (like ShootQ and others) have features that make it easy to keep track of your revenue and expenses.
Whatever system you choose, using it will only be as useful as the effort you put in. Make a commitment to understanding the financial health of your business by getting a grip on your numbers. Understanding what it takes to be profitable and sustainable means that you can make decisions that help your business grow – and add value to your life.
By the way, once you’re using a system to track your expenses, it becomes easier to measure your performance. The Professional Photographers of America publishes benchmarks to help you measure the financial health of your business. Those benchmarks are designed to help every photographer take home 35% of their gross revenue as owners compensation and profit, and can help you evaluate where you may need to make changes in your expenses.
Finally, it’s worth it to hire a good accountant that understands your needs. Someone who knows small businesses and can help you set up a plan – and stick to it. Accountants aren’t just for saving money at tax time! A good accountant can make you money all year long by helping you know exactly where you stand. Having an accountant can mean having a trusted financial advisor on your team, helping you make the right financial decisions for your business.
Want to know more? We’re hosting a free webinar this Wednesday designed to help photographers “GET A GRIP ON THE NUMBERS: Bookkeeping Basics for Photographers.” Simply visit www.ninetyninebeans.com/webinars to sign up for FREE.