The Cost of Doing Business (CDB)

[cyclohexane]

Do you know how much it costs you to do business as a photographer?

How else are you supposed to know what to charge?

"Uh, I guess I can sell this 8x10" print for $10, right? It only cost me $1.50 to print it at Costco."

If only it were that easy.

The National Press Photographer's Association (NPPA) has a great utility called the Cost of Doing Business Calculator that they offer on their website absolutely FREE OF CHARGE to help photographers start to figure out how to price their products and services:

NPPA: Cost of Doing Business Calculator

Also, here is their explanation of the utility, which goes into more detail than I did here.

Granted, there are some exceptions to the rule, such as clients looking for editorial images who can only afford a fixed rate (e.g., $100-150 game rate for small schools and sports photography), but you should turn down any and all work on which you would lose money, no matter what grand and amazing promise of "exposure", good karma, an improved sex life, or whatever else someone might do to convince you to work on the cheap, or worse, for free.

[trapman]

With the advent of digital image making, and todays cameras that are increasingly sophisticated, it's no wonder that photography, as a business...and a way of supporting one's livelihood has caused many (in the business) to panic! And, I might add, a good many photographers to find another line of work!
Folks that find digital photography fascinating, and have invested in their "hobby", sometimes are unaware that others are engaged in supporting themselves through their photographic efforts. Many of those folks have full-time occupations, and don't necessarily require a secondary income through photography! However, their enthusiasm to contribute their efforts sometimes will "interfere" with others engaged in making a living through photography.
This phenomenon is not news! But those that "give away" their efforts are indeed "undercutting" those that have chosen to be professionals in the photo business.
Wedding photographers turn to capture a group image, and find no limit to others taking in their effort with P&S, iphone and sometimes more sophisticated cameras! Very frustrating, to say the least! (I no longer take wedding jobs, for this and other reasons.)
Professional image making has now evolved to eliminating others that can copy one's efforts at the point of capture and design. And copyrights delineating one's "intellectual" efforts are becoming a point of litigation!
I find it's a fine line between what folks will pay for an image, and accepting what they can get for free...either through piracy...or a neighbor's efforts...or by other means!
I know...if my efforts don't measure up...then something that's worth nothing in someone's reasoning shouldn't have any value. But if someone approaches you with an interest in something that you've captured, then that is a commodity...and is worth compensation!
Others may disagree, but I've chosen a path to charge a fee for my photography. It's not the world's best, nor is it worthless! Just my .02!

[Steven G Webb]

One of the causes for small business failure is under capitalization. An individual decides to launch an endeavor not knowing what it will cost, both in terms initial investment and in that thing known as the cost of doing business. Business beginners who do not understand the importance of counting on the costs and being able to pay them generally get swallowed up by them.

[Bobby Deal]

I have broken my overhead costs for the studio down all the way to what it costs me per hour based on a 10 hour day 6 days a week. $42.72 per hour is the cost to open the doors, keep the lights and other utilities, insurance and maintainace. So when I rent the space including listing at $75 an hour and someone wants to tell me that the guy down the street only charges $50 I tell him he should go to the guy down the street because he won't be there long. I have watched no less then a dozen guys down the street come and go in the past 4 years in my market.

Obviously studio rental is only one revenue stream within our overall business plan but it does account for an average of 20-30% of our annual sales so it is important to know what it costs me to offer the service. It also is the category that we charge with the covering of 75% of the hard overhead on a monthly basis.

[Ed Shapiro]

Going into business arbitrarily without a complete business plan is tantamount to committing business suicide in advance of opening or expanding your business. The information you need to devise your business plan is derived from your own research and calculations into many aspects of planning, running, and maintaining a successful enterprise. You must have a clear idea of what and where your market is via research, what your per-operational investment is going to be and every financial detail regarding you overhead (fixed) expenses and your cost of sales which are the out of pocket costs of the merchandise you must by for goods and services that you are going to hand over to your clients. You must also have a marketing plan, a price list and projections as to how much business you can do within a certain time frame and the profits you expect to earn. This is not an easy task and it could require me to write a long tutorial to cover this process. I will probably do this as we progress with this new sub-forum.

A present I can tell you that to determine you overhead fixed costs you must examine your proposed or existing business and include EVERYTHING from office expenses, rents, accounting services, insurances, equipment depreciation, security costs, monthly auto expenses or leases, salaries including YOUR OWN dependent on what you need to maintain your household and personal expenses. You need to know every penny you spend to turn the key in the door every single day. EVERYTHING- telephone, Internet, janitorial services and supplies- you name it! You also need to know the cost of all your supplies and services you need to purchase on behalf of each client’s contract.

The importance of this plan is to firstly assess the feasibility of your starting a business, to help plan location, rental or purchase of commercial space, and beginning to set budgets for each requirement. This plan will help you make decisions such as whether you are going to work from you residence, from a business park, a business condo or a storefront operation. It is virtually endless, that is, the decision making you must do when you are planning a new business or trying to expand a small existing business.

If you “take the plunge” into a full time business you must realize that from day one there is no more day job and paycheck, no more “just a hobby or a part time gig for some extra pocket money- THIS WILL NOW BE YPUR LIVELYHOOD! No more casual shoots- you will have to get into time management and money management while keeping the quality up there in you photography. No business can survive without a superior desirable product. You also have to keep your sales promotion up there as well- not enough clients=not enough cash flow.

Obviously you must make a decent profit on every job that you undertake but there are trade offs and exceptions. Especially when I started out on my own- I had to give away lots of photography before the big paid jobs started to roll in. This was not based on the idea proposed by any potential clients on the basis of “if you do my job for cheap or nothing; I will bring in all my friends etc”. My rule of thumb is if I am going to speculate or give away any work, I have to initiate the idea and speculate where I feel any promotional activity will benefit my business and the person, organization or, governmental body I am speculating. I used to photograph each mayor of my city and provide an official executive portrait for city hall and for the Mayors publicity usages- NO CHARGE! NO PROFIT! After a wile however, I received many paying jobs and large portrait commissions for other city officials such as the incoming chiefs of police. I could never buy advertising and public relations like that so my time money in doing those jobs was time and money well spent. I have at leas 50 promotions like that and I hope to write about them in articles to come.

As much as we may hate it- there is a certain amount of politics, PR, and pavement pounding to establish and maintain a photography business.

One more tip- NEVER depend or use anyone else’s price and adopt it as your own. You must create you own based on YOUR business plan and lifestyle. Remember that the photographer up the street may have been in business for 40 years, has been successful and does fine work. Perhaps he has 3 kids in college, a large home and drives a BMW. The photographers down the street, however, is satisfied to sleep in a closet at the back of his studio and lives on cat food- well neither of their price list reflect your situation. There are many factors in determining your rates and it is essential that you do the market research and crunch the numbers that reflect your situation.

Another reason to have a solid and accurate business plan is that up the road, if you need lines of credit or business loans no banker will even entertain the though of lending you money without a business plan in hand.

Some of the most well spent money you will invest in your business is to consult with an experienced accountant or professional business advisor especially if you do not have enough business experience or savvy to do all of theses preparations all by yourself. Even of you have already created a business plan I always advice new business people to run their plan past their accountant. He or she can advise you about the possibility of incorporating you business or other important is sues that will help you achieve success and serve as an advantage at tax time.

Ed