Most photographers start in photography because it’s fun. There’s something so satisfying about capturing your adventures in photos. It’s so easy to get started with a phone in your pocket. Add a little curiosity to the mix, and you’re quickly on the road toward photography expertise.
For lots of people, photography remains a fun hobby only. But for you, it’s a different story: Photography could be a means to freedom from your day job. It could mean spending your days expressing yourself and bringing joy to others. What an awesome dream!
How can you make sure that your photography business is successful? By making sure it’s profitable. If you want your dream to be reality, you have a choice: become super wealthy before you start, OR learn how a business actually works.
Define Your Vision
To get started and keep on track, it’s important to figure out what you’re doing in the first place. This will help you make decisions as you go. When faced with a new opportunity, you can run the idea through your vision “filter” to see if it’s in your wheelhouse, and will actually benefit your company.
Here are three questions to get clear about your vision.
Question 1: What is the purpose of your business?
Consider why your business exists in the marketplace. Who do you serve, and what do you do for them? Keep it simple. For example: My business helps moms enhance the connection with their children.
Question 2: What makes you “best in class”?
This doesn’t have to be completely unique; it just needs to be clear. For example: We provide an easy, child-friendly experience to ensure great portraits that moms will cherish.
Question 3: How do you make money?
This is your Business Model, or a conceptual plan for making money. For example: I sell A la Carte printed portraits to parents and grandparents.
With answers to these questions, you have a foundation to lean on, but it’s incomplete. When your client shows up, wallet in-hand, you need more information. How much money should you ask for? Well, that depends.
Pricing is one of the most challenging parts of owning a business and an integral part of profitability. You know generally “how you make money,” but to set a price, you also need to know exactly HOW you make money. This is the elusive question that can make or break your business, and the answer is different for everyone. There’s a method for figuring it out, and that’s what I’m here to help you do today.
Do The Math
UGH! Math is such a royal pain!!! It takes forever, and it’s a total bore. But remember – photography requires math too, and you’ve pushed through that to make you a better photographer. Heard of the inverse square law? What about the confusing relationships between shutter speed, aperture, and ISO that you fumbled through? You’ve taken the time to learn about the math behind photography so you can persevere and pursue the craft you love. Now it’s time to learn about the math behind success so you can persevere and create the business you dream about! If you can’t make it work on paper, you’ll never make it work in reality.
I’ll explain the steps to you, and you can definitely do them yourself based on what you read here. But, if you’d like to make it as easy as possible, I have some gifts for you! Head over to https://laragrauer.com/profit and you can download some spreadsheets with formulas baked in so all you have to do is plug and play! I’ll wait while you do that …
Ready to go? Roll up your sleeves, grab yourself a drink, and read on for some big-impact learning!
Step 1: Make Your Spending Plan
Wait. You need money in your pocket, but we’re gonna focus on spending? That’s right. Successful businesses spend money to support their well-being. Just like you need to eat in order to keep your body going, your business needs nourishment to stay functional.
Make a list of everything you need and want in the coming 12 months. Dream big! The Spending Plan worksheet you downloaded will give you a head-start on this list. Definitely include necessities like rent & insurance, but don’t forget to plan for business education! Free articles like this are great, but nothing can replace in-depth learning from someone who has walked the path before you.
Once you have your list, add your salary, plus any salary or fees you might pay for an assistant, a studio manager or other helper that wasn’t already covered. Add everything up to see how much money you’ll be spending – and therefore, how much your business needs to bring in to remain healthy.
Side note: in the Spending Plan spreadsheet, you’ll see a place where you can enter what you think your average cost of goods sold (COGS) will be as a percentage of your total sales. This exists because when you sell a product, it creates a cost you wouldn’t otherwise have to pay (someone has to pay for that album the client bought). You must add this variable figure to your total revenue in order to maintain the health of your business.
Next, decide how many photo sessions you’ll manage in a week. For many boutique portrait businesses, that number is 2 sessions per photographer, per week. Multiply your number by the number of weeks you plan to work in the coming year (be sure to give yourself some vacation time) to find out how many sessions you should aim for.
After everything is added up, divide your grand total spending figure (including COGS) by the number of sessions you want. This is the average sale you’ll need for your dreams to be a reality.
Take a break! Get yourself some ice cream!
You just took a big step toward doing the work that the vast majority of photographers never do. Pat yourself on the back. Give yourself a moment to savor what it feels like to know your numbers. If your average sale number scares you, then take a deep breath and allow room for the next steps on your journey. It’s just a number. You can customize your business model to accommodate the life you want when you have more information. When you’re ready, move on to the next step.
Step 2: Pricing & Sales Strategy
Don’t just check out your competitors and spitball prices for your business. How do you know they’re profitable? Your prices are yours and they should be backed up with your own numbers and strategy.
Start with a list of the products you will sell. For each product, determine how much it costs to produce. If you sell digital files or licensing only, you do not get to skip this step!! There are both material costs and labor costs to consider. Material cost includes the cost of any prints, mounting, framing, shipping, packaging materials, thumb drives, etc. This is obvious to most people. What may not be obvious is the labor cost for each of your products.
If disaster struck and you couldn’t work, how much would paying someone else to get a product into your client’s hands cost? Photo editing, uploading files to an online host, making in-person deliveries, and everything else you do takes time. How much would it cost for someone to do it on your behalf? If you don’t add labor costs to your COGS, then you may not be paid enough for your efforts. Plus, without labor costs included in your calculations, you won’t have money to hire outsourcing help as your business grows.
The pricing worksheet you downloaded has 2 tabs. One helps you determine the COGS for each product. The other allows you to enter the COGS from tab 1 and a related price to test whether it leaves enough money for your spending plan. Most small businesses need a lot of cushion in their prices to cover expenses & salary. Consider keeping your COGS% very low. Change it as you see fit as your data becomes more complete.
You can input a la carte products or complete collections in a single line, as long as your COGS total is complete for the item. On average, your COGS% should match the percentage you entered in your spending plan, so you know you’ll hit the right sales target. Adjust your numbers in both spreadsheets to make sure they work together.
As you may have noticed, working out your pricing strategy takes some time and finesse. You may find that selling a single print is not sensible. Your price will have to be sky-high to justify all of the work it takes. Play around with the numbers, imagine ways you might combine products for efficiency & client satisfaction, and land on a strategy you’ll use to sell products that solve your client’s problems.
Your strategy should be designed to produce an average sale that has plenty of wiggle room to cover both your COGS and your fixed expenses (including your salary!). Depending on your business model, you may see single sales above or below your target. In the end, it’s the average that matters most.
Phew! You did it!
There’s s bit more to come, so give your brain a break. Take a nap or go for a walk. Know that you are now a superhero in the world of business! Your chances of success just increased exponentially. You are an elite professional in the world of solo entrepreneurs!
Step 3: Test Your Plan
If you ever watched Bar Rescue, you might have seen John Taffer put a restaurant and its staff through a “stress test.” They invite (or hire) lots of people to come to the venue and order food and drinks to simulate a busy day. The staff gets to discover their weak spots so they can fix problems before they open for real customers.
Think of your cash flow document as a kind of “stress test” for your business. It’s a chance to plug in your spending, pricing, and sales plans to see whether or not it will give you the results you need over time. If your numbers miss the mark, go back to make adjustments. If they represent success, it’s time to lock it in and put your plan into action!
The third spreadsheet you downloaded is your Cash Flow Forecasting tool. This spreadsheet lets you see how your financial position changes over time. It shows you if you’ll have a shortfall due to various financial “stressors” like vacations, slow seasons, or the odd-ball annual expense.
There is a “references” tab where you can plug in your average COGS and your likely credit card fees. Enter that first in tab 2. Then, go back to the first tab and enter your best guess for projected sales each month. There’s space to enter any funds you’ll be investing or borrowing to fund the business too. That’s the money-in section.
Next is expenses. The COGS will fill itself in based on your projected sales. Plug in the fixed expense values from your spending plan, being careful to put the correct amounts in the months when you expect to spend the money.
After you’ve entered the info into all 12 months, you’ll see how much money is left in the bank at the end of each month! If you’ve entered your salary (as you should), then this ending cash balance at the end of the year is money you can incorporate into the following year’s spending plan – or hold it in reserves for better business health. It’s all up to you.
That’s it! Throw yourself a party!
When you feel satisfied with your cash flow plan, then you’re ready to turn it into action. You can take it to the streets, knowing that your prices are appropriate, and if you hit your sales & marketing goals, you’ll have no trouble paying yourself the salary you deserve.
Once a year (or even better, once a quarter or once a month), compare your spreadsheets to your results and see how close you came to your goals. Next, make adjustments to your future plans based on the new information. At this point it’s just a periodic update: easy peasy! You’re now a full-fledged business owner, in control of the business that you’ve built. Here’s wishing you all the success you dream of!