Are you Charging Enough?
We all know the simple formula for profitability: Revenue - Expense = Profit
But if success was that easy, why is it that most new small businesses fail? What should you be thinking about when starting your new photography business?
Think it through
Where will your revenue come from? For photographers this is typically from one of two sources:
• Through the sale of goods: charge for prints, digital files, video
• Through the sale of your service: sitting/booking fee
Where will your profit come from? There are many, many pricing models available to photographers, including:
• Cost-plus: add a markup to your calculated cost of goods
• Value based: based on the value of your service as perceived by your customer
What does it cost to do what you do?
Whether you decide to use a cost-plus pricing model or to use a strategic pricing model based on the value of your service, you need to have a good understanding of your actual costs of doing business. This is more than an hourly rate or the cost of the products you will provide. Consider the following:
• What is your time worth?
Make sure you consider all of the time involved in the shoot - contact with customers before the shoot, travel, shoot time, edit time, delivery time: it all adds up.
• Wear and tear on your equipment.
Shutter count, dust and grime, not to mention upgrading to keep current with ever improving technology.
• Business expenses
Electricity, insurance, marketing, software, web site, child care.
• Who do you want your customers to be?
The NPPA has a handy cost calculator that might help you figure out your cost of doing business.
Why you should never be cheap
The value of your photography is much greater than the cost of paper and ink. If the customer could take the photo themselves they wouldn't be hiring you. They are hiring you because of your skill with the camera, your creative vision, your editing skill, your style.
Every business owner will battle pricing pressure at some point. It can come from price wars with a competitor, or a persistent customer who won't buy anything without a discount. However, using a ‘cheap’ starting point is bad for business. Don't do it!
"Cheap” sets bad expectations for your clients. If you’re a cheap photographer, clients wonder how you’re cutting costs so much, and if it’s worth it for them to take the risk. They question your ability to manage expectations and communicate with them. Will you effectively guide them through an important experience, or will you simply fire a few snaps, hand over a CD and call it a day?
"Cheap” makes you look as though you don’t think you’re any good. Any business owner who doesn’t think their brand’s the best is probably in the wrong business.
Most importantly, being “cheap” means you can't use more effective marketing strategies like coupons and special sales. These tools are invaluable for creating urgency and closing sales.
Counterintuitive lesson #1:
placing a fair (high) monetary value on your work does not decrease profit per se. "Moms and young kids out of college are opening up shop down the street. The new freelancer charging $50 per session has taken some of my clientele," Sidoriak says. '"Yet I have raised my prices throughout the recession, and the economy hasn’t really hit my business." Sidoriak actually got a little pushback when she fairly upped prices on 4×6 and 5×7 holiday photos last fall—but, instructively, not one customer jumped ship.'
Use SmugMug Pricing Tools to set a fair price
SmugMug's pricing tool allows you to create different Pricelists for different products: wedding price list vs senior price list, Limited Edition Print vs. stock photo, etc. You can then apply each Pricelist to galleries or individual photos with a click.
The first thing every new SmugMug Pro should do is set up pricing. You’ll have some decisions to make:
• SmugMug offers four great print labs. Which one is right for you?
• The labs offer color correction services. Should you use it?
• SmugMug offers over 300 print, merchandise and download products. How many will you offer?
• How much profit do you want to make?
Offer clients discounts to sweeten the deal. We all love a sale, even if we are only saving the cost of shipping! Incentivize your customers to make their purchase quickly by setting expiration dates on every Coupon.
This is a popular tool for school and sport photographers. With it, you can bundle a set of prints together at a single price, creating more value for your customer... and a simpler buying experience.
This allows you to 'sign' prints and photo downloads. It can be used as an artist's signature, to add value to a print product OR as advertising, which then allows you to offer the product at a reduced price compared to the non-Printmarked version. Pick the strategy that makes the most sense for your business!