Pricing How do you Value Yourself

Pricing How do you Value Yourself

So far you have put everything into getting the prospective client into a meeting with you.

Now what?

They are all excited about what you can do, but here is the BIG question – “What Do You Charge?”

How do you charge?

Now that we have determined what we want out of life, how much money we would like to make, how much time we are going to devote to it, and finally the direction we want our studio to go in; pricing is the next step in the marketing process. The biggest difficulty most photographers have is that of determining what price to charge for his/her services.

All too often it's a hit and miss proposition. Often what they do is phone five other studios and see what these other photographers are charging and either charge a little more or charge a little less than them.

Not the most scientific way of doing things is it?

First we must have a basis from which to operate. Here is a tried and true formula that may just do the trick for you. It provides you with a percentage breakdown of revenue and costs as a guideline to start from.

Break-even Cost Analysis, let’s take a closer look at these.

1. To begin with, we must determine exactly what our fixed expenses are. Fixed expenses are those expenses, which no matter what is happening in our business, we still have to pay Even though there is no money coming in.

Figure out all of your expenses

2. Now that we calculated our Total Fixed Expenses it is quite easy to calculate our needed revenue. What we do is take the figure that we determined as our Total Fixed Expenses, then multiply that figure by 100, finally divide the product by 65, which is the percentage that the Total Fixed Expenses should be.

Looking at our example we have the following:

EXPENSES as $ 65,000 X 100 = $ 6,500,000 Then Divide 6, 500,000 / 65, which then gives us the product of $ 100,000 representing the total Revenue you need.

Let’s do that now with your numbers

Total Fixed EXPENSES _______________ X 100=_______________ (product) Then divide the product _______________ / 65= _______________ Revenue needed

3. Generally speaking, your Cost of Goods or variable expenses, based on the formula should be...

Costs of goods are your “variable costs.” Variable costs are those that when you do more work you spend more time on material. These materials are film, processing, prints, slide copies, frames, albums, or anything that is consumed when you are working. This even goes so far as to include your negative bags, slide holders, and storage boxes. This is important to keep in mind for later.

4. Profit – yes there is a profit at the end of the day.

A. Hourly requirement to break even.

Some studios like to charge by the hour. Once we have figured out our required revenue we can easily determine your hourly requirement to break-even.

- Figure out how many hours a week you will work i.e. 40 hours a week Your figure = ____________________

- Decide how many weeks you want to work i.e. 48 weeks Your figure = ___________________

- Then multiply the hours by the weeks = 40 hours X 48 weeks = 1920 hours Your figures = Hrs. _____ X Weeks ____ = _______

- Then divide the gross revenue by the hours Thus 100,000/1920 = $ 52.08 per hour or $416.66 per day

Revenue _________/______Hrs. = ________ per Hour

The studio needs to generate this amount every hour that you are working, to break even. NOBODY PHOTOGRAPHS 40 HOURS A WEEK STRAIGHT, 48 WEEKS A YEAR. TRY MAYBE 1/2 OF THIS. THUS WE NEED TO DOUBLE THE RATE TO $ 100.00. If we based our revenue only on an hourly rate, our profit would be enhanced due to reprint prices and how much you charge for them. It is always important to build in a buffer zone and your prints are that buffer zone.

B. Variable Cost Pricing

Variable cost pricing is the second method that we can use to work out our prices. As we already mentioned, variable costs are those that are only incurred if there was an activity of some sort. We usually include: Wedding albums & pages, film, frames, folders, mounts, photofinishing, print charges, finishes and sprays etc.

- From our original illustration we noted that a standard Kodak Photographic Business Guide Formula would be:

Revenue = 100 % Variable Cost = 20 % Fixed Cost = 65 % Profit = 15 %

This being the case, if we take the variable cost and multiplied it by 5 we would then have a figure of how much to charge for our services. That is because Varia¬ble Costs should equal 20%, or in other words 1/5. Thus if an 8x 10 would cost us $10.00 we would have to charge 5 x $10. Or $50.

To take it a step farther, let’s look at a wedding. Photographing the home, ceremony, formals, and the reception.

Or if we looked at the basic cost of a portrait sitting:

If we extend this to raw custom print prices, this is what we would be looking at:

Now let's look at your business quickly to see how you stack up in the cost/price/earnings category.

Go through all your wedding packages and add up all the time you spend with your clients from start to finish. Now add up all the variable costs that you have associated with them. Look at what you are charging relative to the time that you spend and see if you break even according to your break even cost analysis. Any new revelations?

Let's look at your portrait sessions.

What are you going to do about it?

Thus if we take the variable cost and multiplied it by 5 we would then satisfy the equation. But I would suggest that you use 7, this would cover hidden expenses.

C. The third method is a COMBINATION

From our formula you saw that: Revenue 100 % Variable Cost 20 % Fixed Cost 65 % Profit 15 %

Using the same system for a family portrait session to ensure profitability

You may have been wondering why all of a sudden I started using 7 as the multiplier. It's very simple. When we used 5 as a multi¬plier it only covered basic costs of the material. If we did any work to it whatsoever, such as retouching, spraying, and mount¬ing; these additional costs are not covered. The costs of the material would be covered, but not the costs of the labor. By in¬creasing the multiplier to 7, the additional labor will be cov¬ered.

If you priced your portraiture based on the combination method, you would make a profit, provided you did enough sessions to cover your break-even point. The loss can only be eliminated by one of three methods:

1. Take more photo sessions 2. Sell more photos 3. Increase prices

It is very important to note that by multiplying your costs by 5 it covers just a basic service. Thus, if you want to be in a high volume, low service market - that would be your minimum starting point.

By increasing your multiplier by 7, you start to recoup some of the costs incurred by offering more services.

If you want to have a very high quality studio, offering incredi¬ble service you will have to increase your multiplier. In order to figure out exactly what it would be, you must figure out approximately how many sittings and weddings you can effectively photograph and approximately how many portraits will be bought, including the sizes and divide these variables into your required revenue. As one of the top photographers in your area, you can also charge a premium to delineate your expertise.

My good friend Ed Booth CPP, M.Photog.Cr. API, formerly from California and now residing in the sun drenched state of Florida quickly reminded me that most of the truly successful photographers that he knows, and he knows a lot, in fact he taught hundreds, all use digital equipment. He laughed when he said that although you save a ton of money by not buying film, it is all spent constantly upgrading your digital equipment. One other very important comment that he made went along these lines, “Stick to what you make money at. You make money by spending your time marketing, photographing and selling; in that order. Leave the print enhancement and creation to the professionals!”