My stepson looked at his first paycheck and asked, “Who is FICA?” This was his first hard lesson about where the money goes — the cost of doing business. A lot of the money we pay for a service doesn’t stay with the service provider.
According to Dun & Bradstreet, “Businesses with fewer than 20 employees have only a 37 percent chance of surviving four years (of business) and only a 9 percent chance of surviving 10 years.” Of these failed businesses, 10 percent close involuntarily due to bankruptcy; the remaining 90 percent close because the business was not successful, did not provide the level of income desired or was too much work for the effort.
So many good photographers I know have to turn to other ways to make a living — not because of a lack of photographic skills, but because of poor business practices.
Two things generally cause these businesses to fail. One, they don’t know their real cost of doing business. And two, they fail to promote themselves.
In 2001, I left a staff position and started full-time freelancing. My business has averaged a 20 percent growth rate each year for the past six years. Many of my colleagues ask me how I do it.
This coming week I go to Hawaii to teach business practices for the third year in a row at the University of Nations in Kona. First, I require the students to calculate how much it costs them to live for a year. I’ve found that even the older students who have been on their own for a time typically do not know what it costs them to live.
No matter the profession, if you do not know your cost you cannot estimate what you are worth in the marketplace.
Once you know your cost and decide how much net income you want to earn, it is easy to determine what to charge for each project in order to reach that goal.
Take a moment and think of everything needed to do your job. Here are some categories from the National Press Photographer’s Association list I use. Just substitute your terms for similar categories to begin assessing your annual cost of doing business.
- Office or Studio
- Photo Equipment
- Computers (Hardware & Software)
- Internet (Broadband, Web site & email)
- Auto Expenses (Lease, Insurance & Maintenance)
- Office Supplies
- Photography Supplies
- Professional Development
- Advertising and Promotion
- Subscriptions & Dues
- Business Insurance
- Health Insurance
- Legal & Accounting Services
- Taxes & Licenses
- Office Assistant
- Retirement Fund
- Entertainment (Meals with clients)
Add your desired net income to your annual business expenses, then divide that total by the number of projects you reasonably expect to do in a year. The answer gives you the average fee per project you must charge clients to pay those bills, stay in business and live the way you want to live.
Now you must find out if the marketplace will sustain this charge.
Let’s say you need to charge on average $1,000 per project to reach your goal. If the services you provide are what people can get anywhere, then they will shop for price. If the going rate in your community is $1,200 then you are in good shape. If the going rate is $900 then you need to look at cutting your overhead — your hoped-for income, business expenses or both.
The key to earning what you want comes down to service. You must be able to demonstrate to potential clients that you offer something more if you want/need to charge more than other photographers do.
I have found that I need to know about the subjects I cover more than other photographers do. In addition, I deliver my images a good deal faster than most others do. I also listen carefully to what clients say they want and try not only to meet their needs, but to go beyond their expectations.
When I first determined my cost and income goals, it was a revelation just as my stepson’s response to FICA and other deductions from his pay were for him.
I do my best to keep my overhead low, but even so, close to 50 percent of my gross goes to business expenses. It was quite shocking for me to see what I must charge to pay the bills. This knowledge was the fire I needed to make myself more valuable to clients and to find those clients by seriously marketing myself.
Do you know what you cost?
[tags]photography business, photography advice[/tags]