This is a guest post courtesy of Allie Cline of Allie Cline Photography
Many people start their photography business without the slightest clue what they should charge for their work, so they do the natural thing – they research! This research can be frustrating and lead them in different directions, depending on how they conduct their research. The truth is, no one type of research will provide you with the answer you need, and this is why large companies spend thousands on market research and product research before introducing something into the market. However, your business is not a large company, so I am here to explain some of the pitfalls to avoid when conducting your own research, and tips to help you achieve a profitable price point for your work by calculating your costs of doing business (CODB).
Researching local photographers
This is probably the most common way new photography businesses will try to price themselves. An incredible part of marketing research comes from identifying who is in your market, the products they offer, who their customers are, and the prices they charge. The problem with this method is that many photographers do not list their prices, so often the ones who do are not always priced for profit. This can harm you if you believe most photographers in your area are charging a few hundred dollars for several images, and they have decent work or get a lot of customers. This examination of other photographers can also lead you to the pitfall of comparing their work to your own, which may give you an elevated view of their work and leave you feeling like you cannot charge what they charge. That distorted view prices you below them, and if they were not priced for profit in the first place, you definitely would not be profitable. The solution to this is to gather as much information as you can about these other businesses to help you decide the direction you will go and not solely determine your pricing.
Researching demographics in your area
This is an integral part of conducting market research and will help you identify your clients. Many times, photographers are asked who their ideal clients are, and beyond generic answers like mothers, teens, or couples, etc., it can be challenging to pinpoint who exactly your clients are. Finding demographic information can help determine how many people reside in and around your area, what the median age, income, education level, and even homeownership is, what the most common professions are, and how much is spent in each industry. All of this information will help you establish a baseline of what potential clients in your area may be willing to pay for your services. Common pitfalls in this method are assuming that if your area is small or the medium income is just above minimum wage in the state, you cannot charge very much. There is a perceived value with photography, meaning that it is subjective to everyone, so you will want to do some introspection on what you believe your work is worth. If you believe it, you will sell it; they will buy it.
Finding your niche
What do you like to shoot? Weddings, newborns, families, food and products? The type of service you provide will often determine your pricing. A general photographer that shoots all of the above will have to price out their services differently, as you would not charge the same amount for a wedding as you would for a product shoot. Photographers who narrow down to a specific niche are likely to gain more clients for that niche and price themselves as specialists versus a generalist. This niche will also help determine how long your sessions will typically last and help you determine a price per hour for the services you provide. The problem with considering how long the session lasts for a price is that you might only be considering shooting time and nothing else before or after the session. You will want to consider other intricacies of your niche to help determine your price fully.
Determining your costs of goods and services (COGS)
So far, you have gathered information and collected data to help you get a price point, but you will also want to consider how much it costs you to produce an item for your clients. Do you want to sell digital photos? There should be an associated price with that, the same as there are associated prices with tangible physical items. This is where each business will start to vary and why some of those other photographers might not be priced for profit. We’ve gathered that your niche will help determine how many hours you may spend shooting, but how many hours are you going to put into editing and consulting with your client before and after the shoot? How much does it cost you to produce a print? Is it different for canvas than a framed print or even an album? Once you determine how much it costs you to produce these items you wish to sell, it will help you establish a price for these items. Some mistakes made when pricing your items is that the profit margin is shallow, and if you have to replace something because of an error, you are now taking a loss. You will want to price yourself for any possible issues you may encounter. Another mistake people make when pricing their goods is they list everything they could sell at different prices for each. This often overwhelms clients because there is so much to choose from. Narrow items down into categories with straightforward pricing for a range of items all priced the same, even if the margin is higher for some items. For example, price your framed prints and canvases the same, price any 8×10 or smaller the same, price albums with all upgrades the same as you would without based on your costs of the most expensive options. This simple pricing will allow you to have a better relationship with your prices and helping clients make decisions. Be sure to include the cost of sales tax on those items at the price you intend to sell them for, as it will make a significant difference in how much you will want to charge. Calculating your COGS will help you determine if you want to build packages around your products or sell them individually. These COGS will also help establish what your CODB is so that you may fully price your business for profit.
Determining your costs of doing business (CODB)
You’ve finally made it to the most critical part of pricing for profit. None of the rest of the information or research you collected will mean anything without this portion. If you have ever asked in a forum how much you should charge, many answers probably ring out something like, “Have you ever calculated your CODB?” You may have been explained to or left confused about how exactly to do that. The pitfall in calculating your CODB is that you may be unaware of everything that goes into your business, which would cause you to lose money. The best way to do this is to list everything you spend or will spend money on monthly, then go through that list and cross off items that would never be used for your photography. Remember, there are things like cleaning supplies and gas that are often overlooked. Once you have your list of everything you spend money on, separate those items into categories: equipment expenses, studio expenses, props and supplies, vehicle expenses, legal expenses, taxes, shipping expenses, insurance, education and membership fees, technology fees, and your COGS. You can find most of this information online through research, including how much you can charge for things such as mileage or how much employment tax is.
Once you have your separated categories and your estimated monthly expenses, you can calculate how much it all will add up to annually. Now you will need to add those expenses to the salary you wish to have annually. Remember what that median salary was in your area? This is where you determine where you want to fall in that range. Once those are added together, you will get the amount you will need to earn annually to be profitable. Then you divide that annual CODB by the number of sessions you wish to have per year, depending on the volume of clients you can handle. Remember there are 52 weeks in a year, and many business places offer two weeks of vacation. That answer will determine how much each client will need to spend to make you profitable. EXAMPLE: (CODB = 40,000 + Salary = 60,000) = (100,000 per year / 50 clients per year) = $2,000 per client
You’re probably thinking, “Woah! $2,000 per client, that’s more than any photographer in my area charges,” or, “People in my area don’t make that much, they’d never spend that,” or, “I’m not that good, I can’t charge that much.” Remember, this is just an estimation; yours may be lower or even higher, which you need to consider. These are what we call limiting beliefs, perceptions we have that prevent us from achieving our goals and needs. Review what was discussed in each section of this article to prove why those beliefs are incorrect. Every photographer deserves to be profitable, and every photographer should do their research and determine their CODB to be profitable.
Your CODB will likely change over time, too, as your services and offerings change. The best thing to do is to create a spreadsheet with your categories and keep it updated at least quarterly with your actual expenses and earnings so you can see if you are on target, behind, or ahead. Lastly, how much you eventually charge will be up to you. You may hit rough patches that reinforce those limiting beliefs, but do not fall back on those. Those rough patches mean something else in your business is not functioning correctly, and it has nothing to do with your prices.
What pricing your business comes down to is a lot of external research and even more introspection. It is a constant evolution, but you are more than capable.