By Lisa Sinclair on | No Comments
How do you know how to price your photography or if your photography business is even profitable? To determine the answers to these questions, it VERY IMPORTANT to first identify what your costs are. It is worth taking a look at a your total costs as you may be underestimating your time you spend on your photography business as well as your total photography expenses.
It is easy to lose track of the amount of time you invest in a portrait session. Let's look at an example of the amount of time involved for a typical family portrait session. (Keeping in mind the time investment may be much larger for a newborn session, wedding, or special event)
You can see how a two-hour portrait session easily turns into more than ten hours of work from start to finish.
But this is not only the time you are spending on your business. You also have to include your operating time. Operating time includes any time outside of the actual client session work and may include:
As a professional photographer you may take seminars and training from some of the best names in the business. You probably follow photographers that you admire, participate in online forums, and read blogs such as this one to help you improve your photography and business skills. You may continuously learn new techniques and remain up to date on the latest equipment, creative products, and photography trends.
All of this additional operating time could average anywhere from an additional 5 to 20 hours each week.
Your photography expenses can be broken up into two main categories:
Quite simply, costs of goods sold are the costs associated with each of your photography sessions. This can include:
Operating expenses (otherwise known as overhead expenses) are the costs associated with operating your photography business. These expenses may exist regardless of whether you have income. Most operating expenses remain reasonably fixed regardless of changes in sales volume, but some operating expenses, like utilities, may vary with the time of year.
Examples of fixed operating expenses include:
Examples of variable operating expenses include:
Finally, consider the costs associated with investing and updating your professional equipment. This can include:
To determine if you are profitable, you will have to calculate your income and true expenses.
Let’s see an example by taking a look at a year-end Net Income statement for a family portrait photographer who has no employees. To determine the Net Income we have accounted for the Costs of Goods Sold and all of the Operating Expenses.
Now that we have determined the Net Income we can look at profitability in another way, which is the time invested in our business. Remember that the time includes the average time for each shoot AND the time you spend operating your business.
This chart below takes into account the average time per session and average time spent on business operations each week. By determining the total number of hours spent on your business in a year you are able to see the hourly rate and the average number of hours worked per week.
In this example, the photographer estimates that each session required 10 hours of work and that the weekly operating time was approximately 12 hours. The photographer had 65 sessions for the year. By dividing the Net Income by the total hours worked during the year, the photographer's hourly rate was determined to be approximately $30 per hour.
In addition, by taking the Annual Income divided by the number of sessions per year, this photographer can calculate that they are making an average of $886 per sale.
Ultimately, this analysis brings us to a critical question: How will you know what to charge to ensure you are making money?
First you must determine all of your costs and determine how many sessions you would like to do each year and at what hourly rate you are comfortable with.
Consider your product, your competition, and your target market as well when determining your markup. Remember to regularly update your pricing to reflect the growth of your business and inflation, and keep in mind that you will be paying taxes on the income you receive. Most importantly, be confident in your pricing and your business.
If you need help with your profitability model I encourage you to seek a professional accountant. Additionally, the Professional Photographers of America (PPA) offers their members online information in their “Benchmarking Resources” that can help you learn more about profitability. The PPA also offers a program for members called “Square One” that uses standard cost of sales and overhead percentages to determine what your sales average must be and/or how many sessions you will need to meet your net income goals.
Do you have any questions or comments about Photography Pricing? Leave us a comment below - we would LOVE to hear from you! And PLEASE SHARE our tutorial using the social sharing buttons (we really appreciate it)!
Lisa Sinclair is a part-time photographer specializing in newborns, children, and family portraits and is located in Leesburg, VA. Lisa has an accounting degree from Virginia Tech and a background in management consulting. When Lisa is not taking pictures for other families she is caring for her three young boys. You can visit Lisa here: Facebook