Are you running a profitable business?
Do your prices incorporate the costs of doing business, meaning are you covering your expenses, taxes, and still making a reasonable profit?
I tend to always want to start these posts with disclaimers. I try to be as open an honest as I can be with all of this information and I feel starting with a bit of a disclaimer feels right.
I am not a full-time photographer. I do not want to be a full-time photographer. I love my full-time job at Hurley and enjoy having a creative outlet in photography. The convenience, assurance, reliability, whatever you want to say of a steady paycheck and benefits makes it easier for me to not have to rely so heavily on the ebb and flow of a photography income. If you’re full-time, even if you’re part-time I recommend hiring a CPA and going through your financials. To both see how much you need/want to make and to see how much you’ll owe in taxes. Prepare for the year and then adjust as things change.
Many people use the phrase “Cost Of Doing Business” differently. I’m part of some Facebook IPS (In Person Sales) groups and they harp on this. They have to figure out these numbers so they can appropriately charge per 5x7, 8x10, album, canvas, etc. that they plan on selling. I’m a “shoot & burn” photographer. Meaning I deliver my photos digitally. This changes how I structure my pricing as opposed to someone making their money off prints. I am making my money on the service of shooting photos so the time it takes in planning, shooting, editing, marketing are what I’m determining my cost of doing business for. Blah blah blah. All that is to say how I look at my Cost Of Doing Business, is how much expenses or overhead do I have each year. I’ve already booked out the year so I know what my top-line revenue will be, I’m going to project my CODB and then I’ll know how much my taxes and take-home net profit will be. Easy enough.
So how I do this is imagine every single thing you pay for to run your business. It’s easiest to start with your fixed costs the one with monthly/yearly fees. Take the monthly fees and multiply them by 12 so we can add up the CODB for one year.
Customer Relationship Management Tool: Honeybook $400 a year
Editing programs: Lightroom/Photoshop: $10 a month / $120 a year
Photo Galleries: Pixieset $288 for the year
Website hosting: Squarespace: $144
LegalZoom (In California, you need a lawyer if you have an LLC): $159
LLC Fee: $800
Permit (OC Parks): $150
City Business License: $100
Liability/Gear Insurance: Hill & Usher: $659
Fixed Cost Sub-total: $2,820
Okay, those are all the fixed costs. Now try to come up with some healthy estimates for the variable costs. Dig in to all your expenses. If you use a credit card for your business. Look at all your transactions for the year and estimate if you’ll have those again next year.
New Camera (My Mark III is close to 200,000 shutter count, gonna need to replace that soon. Yes, I know I can depreciate this over multiple years, but I don’t work like that, I’ll always be replacing gear so yeah): $2,500
Luckily I don’t need any new lenses otherwise I’d add those here.
Hard Drive Space (Backup all your work on at least two separate hard drives and on cloud based storage): $500
Wedding Gifts (USB, boxes, prints, shipping): About $120 per wedding, $1,200
SD & CF Cards (replace those things and always have enough so you don’t have to format prior to delivery of the wedding): $200
Batteries (for flashes): $100
Entertainment (food, coffee, taking clients out): $600
Second Shooters: $2,750
Camera Cleaning/Servicing: $300
Internet: $60 a month, $720
Variable Costs Sub-total: $8,870
My CODB includes the cost of film, processing, film camera, etc. but I’ll omit that as I’m assuming majority of you are shooting purely digital.
Here’s a few more you may need to consider:
Credit Card Fees
I also include a contingency amount. Like a buffer for when you need a new camera strap, or you lose your flash, or whatever comes up you didn’t plan for. Set a healthy amount aside as a contingency and then as the year ends you could spend that on something you want if you didn’t end up spending all of it.
So for the sake of not knowing all of the last parts above, let’s work off the items I listed costs for:
Fixed Costs: $2,820
Variable Costs: $8,870
Contingency Costs: $2,000
So $13,690 of known costs just to run your business. No ancillary costs yet and not factoring in taxes.
Now I take that number and divide those up across the weddings I’m shooting for the year. In 2019, that’s 10. ($13,690/10). So I have $1,369 of cost just to shoot each wedding (again, not including health insurance, cell phone, internet, computer, car, etc.) If you’re shooting more like 20-30 weddings than this makes your CODB spread out across more weddings but it also increases some of your expenses like storage space, wedding gifts, and puts more wear and tear on your equipment. All things to keep in mind.
So why is this all important? Well when you’re charging $1,500 or $2,000 a wedding or whatever you do when are first starting out, you’re actually losing money when you factor in taxes and those other costs. Now that you know your CODB, you can feel a lot better about charging the necessary amounts for running a profitable business.
I hope that wasn’t too confusing and that this helps empower you to better plan your year, charge a healthy living wage and run a successful and profitable business. If you enjoyed this article, please shoot me a DM. Your comments help encourage me to keep writing these articles and sharing my knowledge.
Now that you’ve read how to calculate your CODB you can check out this article to see how to structure your prices.
If you need help growing your business, I offer mentor sessions for photographers. You can learn more about those here.