Like the last post, there's a lot crammed in - an entire weekend, actually - so make some more coffee and set aside several hours. This post is about nuts and bolts of setting prices. It is about taking into account how much you need to charge to meet or exceed your financial goals, not about whether you're "good enough" to charge that much or how to close the deal. (Sue Bryce did a presentation on that particular topic at her keynote speech at the 2017 WPPI conference, which she has shared online here. If you watch it (or already have) this blog post is ONLY about finding the number you need to know so you can check and see if you did in fact "add 70%" to your COGS.)
While it's true that self-limiting beliefs will taint your ability to succeed, delusions of grandeur won't help your cause either. Even if, like The Little Mermaid, we want to be "Part of That World," for most of us success won't end up with us delivering the keynote speech at international wedding conferences but with the mortgage getting paid on time. We are also often told that all we need to do to make the jump from 3-figure to 4- or 5-figure sales is "educate" our clients and they will magically start investing thousands instead of hundreds on our services. This, too, is somewhat misleading - the best sales person in the world not only knows that he cannot sell a brand new fully loaded Porsche to a single mom with 4 kids living on an income of $25,000 a year, but he knows it's a waste of time trying. (A kind and caring salesman would also be happy to assist her finding something in her price range instead of calling her "cheap" but that's another conversation altogether.) It's enough to say that there's nothing wrong with dreaming big but first you need to set SMART goals, knowing that you can shatter them later.
As a precursor to digging into the actual mechanics of what you are going to put as prices on your website, we need to spend a moment talking about the customer experience your brand carries. A wedding consult at the donut shop conducted by a person who shows up in gym shorts and asks to go Dutch on the bill is going to create a very different experience than someone being invited to the photographer's portrait studio and being served champagne and chocolate-dipped strawberries while watching emotive slideshows showcasing the photographer's work. While you might fantasize about the latter, any number of life circumstances may prevent you from being there (yet!) but really, it's probably time to ditch the gym shorts. (We will go into great detail on branding next week...)
You should already have calculated how much you need to earn to make "enough" in the last blog post. (If you haven't, go now!) I will use the same two examples (HB and studio) to walk you through this process, and I am going to use realistic but entirely fake numbers. In the case of an HBB, we will put the operating costs at $6000/year and a studio at $24,000, and the target incomes will be set at $36,000 and $90,000. Sue Bryce's suggestion in her video is that you take your operating costs and add 70%, but this is over-simplified. In the case of the HBB, adding 70% would make the target income $24,000 and the studio $80,000, which means that only a studio with a target income of $36,000 is viable, so it's back to the drawing board we go.
As we figure out your work hours and your break-even numbers, give some thought in the background to what kind of "experience" you want to create. Imagine your brand and what a consultation looks like under that brand, what the session itself entails, how you're going to take their order, what kind of packaging you'll use. It's unlikely you will be making 5-figures off weddings when you aren't able (or willing) to wine and dine your clients. For example, if you are a busy Mom, your husband works out of town most of the time, and you have limited access to childcare, "shoot and burn" might be your only viable option which simply means you need to think about ways you can create a valuable customer experience without being away from home a lot. Likewise, if you are ineligible for a passport because of the one stupid thing you did in college, then you can't realistically offer destination wedding services. Be mindful of these kinds of limitations as you work through the next part, but also keep in mind that these limitations may only be temporary and as your circumstances change, you can expand (or downsize) your business.
For simplicity's sake today, we are going to use $60,000 including all expenses and taxes, or about $5000/month, as our target income. We need to break that down into some kind of reasonable working hours, so we are also going to assume you are OK working a 40-hour work week and will take 4 weeks of holidays throughout the year. That sounds like a lot of weeks off, but if you are a wedding or family photographer that means you may in fact only have 4 weekends that you are not shooting at least one day, and will need to consider how this impacts your family life if you are married and have children whose lives revolve around weekends off. Working 48 weeks per year at 40 hours per week, your rate ($60,000/1920 hours) works out to be $31.25/hr. (There's a calculator for this further down the page... don't panic!)
So now you need to understand how many hours you're actually working. For whatever it's worth, there is tracking software you can install to track your work and get an accurate idea of your productivity but fair warning: you might be depressed how much time you waste on social media if you install it... haha! As a general rule, though, for every hour you spend shooting it's safe to assume there are 3 spent doing everything else - emails, consults, marketing, uploading, backing up, post-processing, blogging, attending conferences, etc. That means your average 1-hr family session will be worth 4 hours of work, and a 10-hour wedding will be 40 hours of work. In other words, you are willing to put in the hours for an average of 4 weddings priced at $1250 each or about 10 family sessions valued at $500 each month. This number represents the amount you need to make AFTER removing the COGS (cost of goods sold) from the calculation. (Unless you are shoot-and-burn, in which case congratulations - you're done. Go forth and be productive.)
For those who plan to carry goods, you may offer your services (sitting fee) and products (a la carte) separately but most people do some combination of both (packages.) If you are straight-up shoot and burn, that's fine - we'll talk about how to jazz that up in the branding post coming up - but if you plan on providing products, let's keep going.
Most photographers offer 3 or 4 standard packages, regardless of what type of photography they do, and marketing psychology says most people will pick a middle package. Common sense says that if you are a) consistently selling your top package or b) unable to keep up with the demand for your mid-range package, it's time to up your prices.
I'm going to do four "imaginary" packages for a generic photography company that needs to make $60,000/year not including COGS, with the bottom line being if you consistently sell the mid-range packages, you are priced to meet your income goal working a 40-hour week. All the extra sales and upgrades would be additional profit in your pocket. You can see a sample COGS markup calculator I have used here. You're welcome to create a copy for your own use if you like - you will need to do your own research to source your costs and do a separate sheet for each package. Generally, the mark-up will be 100% to 200%. For items that require a single file uploaded there's no need to calculate "production" hours but for album construction you will need account for the extra hours it takes to do the design and layout if your supplier does not provide that service on your behalf (most don't.)
Package One Includes:
60 minutes of camera time only
no discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
COGS: $0
Retail Value of Goods: $0
Hours of work: 4
@ $31.25: $125
Price to charge per session (retail + hourly rate): $125
Earnings per session (session charge less COGS): $125
By shooting 40 sessions per month and charging $125 per session you will earn $60,000/year
After removing COGS you will earn $60,000/year
Your profit margin is 100%
Package Two Includes:
60 minutes of camera time
20 edited files delivered electronically
Set of 3 magnetic keepsake accordion books
3 - 8x10 desk prints
plus 10% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
@ $31.25: $125
Price to charge per session (retail + hourly rate): $400
Earnings per session (session charge less COGS): $350
You will need to charge $400/session
You will need to shoot ~15 sessions
By charging $400 per session your gross income will be ~$74,000/year
After removing COGS you will make $60,000/year
Your profit margin is 81%
Package Three Includes:
up to 2 hours of camera time
20 edited files on USB in boutique packaging
Set of 6 magnetic keepsake accordion books
3 - 8x10 desk prints
1 - 36" x 36" canvas
plus 20% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
Retail Value of Goods: $500.00
COGS: $200.00
Profit: $300
Hours of work: 8
@ $31.25: $250
Price to charge per session (retail + hourly rate): $750
Earnings per session (session charge less COGS): $550
By shooting ~9 sessions per month and charging $750 per session you will earn $72,500/year
After removing COGS you will earn $60,500/year
Your profit margin is 74%
Package Four (Wedding) Includes:
8 hours of camera time
250 edited files on USB in boutique packaging
2 - 36" x 36" canvases
1 - 48" x 60" canvas
8 hours of album design
1 - 12" x 12" album
2 - 8" x 8" albums
25% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
COGS: $1250
Retail Value of Goods: $3000
Profit: $1750
Hours of work: 40
@ $31.25: $1250
Price to charge per session (retail + hourly rate): $4250
Earnings per session (session charge less COGS): $2500
By shooting ~2 weddings per month and charging $4,000 per session you will earn $87,000/year
After removing COGS you will earn $60,000/year
Your profit margin is 70%
Of course I have a profit margin and cost per session calculator you can use for this part, too. You just need to transfer the information from the COGS calculator over and drop in how many hours you're spending shooting and it will do the rest. If you're doing separate packages for weddings and family or boudoir and newborn, you'll want to do a separate spreadsheet for each one.
One last note for the commercial photographers out there who are selling camera time and delivering digital files - you're going to want to make sure that you're charging enough per hour or per file to cover your costs as you won't be able to cushion your profits with a lot of product. You can set prices (and limits) based on how many websites or flyers will be printed and sell a license in addition to your time or files that prohibits them from using the files without paying an additional licensing fee. For example, you can license your image for 10,000 book covers and when the book comes out on CD or they need to print another 10,000 they would need to pay for another license. There are tonnes of resources for commercial photographers at CAPIC.
So there you have it folks. Real math, real numbers. The next article will go into greater depth about how you can create perceived value by developing a clear corporate identity and ramping up your branding game. Have a great week!
While it's true that self-limiting beliefs will taint your ability to succeed, delusions of grandeur won't help your cause either. Even if, like The Little Mermaid, we want to be "Part of That World," for most of us success won't end up with us delivering the keynote speech at international wedding conferences but with the mortgage getting paid on time. We are also often told that all we need to do to make the jump from 3-figure to 4- or 5-figure sales is "educate" our clients and they will magically start investing thousands instead of hundreds on our services. This, too, is somewhat misleading - the best sales person in the world not only knows that he cannot sell a brand new fully loaded Porsche to a single mom with 4 kids living on an income of $25,000 a year, but he knows it's a waste of time trying. (A kind and caring salesman would also be happy to assist her finding something in her price range instead of calling her "cheap" but that's another conversation altogether.) It's enough to say that there's nothing wrong with dreaming big but first you need to set SMART goals, knowing that you can shatter them later.
As a precursor to digging into the actual mechanics of what you are going to put as prices on your website, we need to spend a moment talking about the customer experience your brand carries. A wedding consult at the donut shop conducted by a person who shows up in gym shorts and asks to go Dutch on the bill is going to create a very different experience than someone being invited to the photographer's portrait studio and being served champagne and chocolate-dipped strawberries while watching emotive slideshows showcasing the photographer's work. While you might fantasize about the latter, any number of life circumstances may prevent you from being there (yet!) but really, it's probably time to ditch the gym shorts. (We will go into great detail on branding next week...)
You should already have calculated how much you need to earn to make "enough" in the last blog post. (If you haven't, go now!) I will use the same two examples (HB and studio) to walk you through this process, and I am going to use realistic but entirely fake numbers. In the case of an HBB, we will put the operating costs at $6000/year and a studio at $24,000, and the target incomes will be set at $36,000 and $90,000. Sue Bryce's suggestion in her video is that you take your operating costs and add 70%, but this is over-simplified. In the case of the HBB, adding 70% would make the target income $24,000 and the studio $80,000, which means that only a studio with a target income of $36,000 is viable, so it's back to the drawing board we go.
As we figure out your work hours and your break-even numbers, give some thought in the background to what kind of "experience" you want to create. Imagine your brand and what a consultation looks like under that brand, what the session itself entails, how you're going to take their order, what kind of packaging you'll use. It's unlikely you will be making 5-figures off weddings when you aren't able (or willing) to wine and dine your clients. For example, if you are a busy Mom, your husband works out of town most of the time, and you have limited access to childcare, "shoot and burn" might be your only viable option which simply means you need to think about ways you can create a valuable customer experience without being away from home a lot. Likewise, if you are ineligible for a passport because of the one stupid thing you did in college, then you can't realistically offer destination wedding services. Be mindful of these kinds of limitations as you work through the next part, but also keep in mind that these limitations may only be temporary and as your circumstances change, you can expand (or downsize) your business.
For simplicity's sake today, we are going to use $60,000 including all expenses and taxes, or about $5000/month, as our target income. We need to break that down into some kind of reasonable working hours, so we are also going to assume you are OK working a 40-hour work week and will take 4 weeks of holidays throughout the year. That sounds like a lot of weeks off, but if you are a wedding or family photographer that means you may in fact only have 4 weekends that you are not shooting at least one day, and will need to consider how this impacts your family life if you are married and have children whose lives revolve around weekends off. Working 48 weeks per year at 40 hours per week, your rate ($60,000/1920 hours) works out to be $31.25/hr. (There's a calculator for this further down the page... don't panic!)
So now you need to understand how many hours you're actually working. For whatever it's worth, there is tracking software you can install to track your work and get an accurate idea of your productivity but fair warning: you might be depressed how much time you waste on social media if you install it... haha! As a general rule, though, for every hour you spend shooting it's safe to assume there are 3 spent doing everything else - emails, consults, marketing, uploading, backing up, post-processing, blogging, attending conferences, etc. That means your average 1-hr family session will be worth 4 hours of work, and a 10-hour wedding will be 40 hours of work. In other words, you are willing to put in the hours for an average of 4 weddings priced at $1250 each or about 10 family sessions valued at $500 each month. This number represents the amount you need to make AFTER removing the COGS (cost of goods sold) from the calculation. (Unless you are shoot-and-burn, in which case congratulations - you're done. Go forth and be productive.)
For those who plan to carry goods, you may offer your services (sitting fee) and products (a la carte) separately but most people do some combination of both (packages.) If you are straight-up shoot and burn, that's fine - we'll talk about how to jazz that up in the branding post coming up - but if you plan on providing products, let's keep going.
Most photographers offer 3 or 4 standard packages, regardless of what type of photography they do, and marketing psychology says most people will pick a middle package. Common sense says that if you are a) consistently selling your top package or b) unable to keep up with the demand for your mid-range package, it's time to up your prices.
I'm going to do four "imaginary" packages for a generic photography company that needs to make $60,000/year not including COGS, with the bottom line being if you consistently sell the mid-range packages, you are priced to meet your income goal working a 40-hour week. All the extra sales and upgrades would be additional profit in your pocket. You can see a sample COGS markup calculator I have used here. You're welcome to create a copy for your own use if you like - you will need to do your own research to source your costs and do a separate sheet for each package. Generally, the mark-up will be 100% to 200%. For items that require a single file uploaded there's no need to calculate "production" hours but for album construction you will need account for the extra hours it takes to do the design and layout if your supplier does not provide that service on your behalf (most don't.)
Package One Includes:
60 minutes of camera time only
no discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
COGS: $0
Retail Value of Goods: $0
Hours of work: 4
@ $31.25: $125
Price to charge per session (retail + hourly rate): $125
Earnings per session (session charge less COGS): $125
By shooting 40 sessions per month and charging $125 per session you will earn $60,000/year
After removing COGS you will earn $60,000/year
Your profit margin is 100%
Package Two Includes:
60 minutes of camera time
20 edited files delivered electronically
Set of 3 magnetic keepsake accordion books
3 - 8x10 desk prints
plus 10% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
COGS: $50
Retail Value of Goods: $275
Profit: $225
Hours of work: 4@ $31.25: $125
Price to charge per session (retail + hourly rate): $400
Earnings per session (session charge less COGS): $350
You will need to charge $400/session
You will need to shoot ~15 sessions
By charging $400 per session your gross income will be ~$74,000/year
After removing COGS you will make $60,000/year
Your profit margin is 81%
up to 2 hours of camera time
20 edited files on USB in boutique packaging
Set of 6 magnetic keepsake accordion books
3 - 8x10 desk prints
1 - 36" x 36" canvas
plus 20% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
Retail Value of Goods: $500.00
COGS: $200.00
Profit: $300
Hours of work: 8
@ $31.25: $250
Price to charge per session (retail + hourly rate): $750
Earnings per session (session charge less COGS): $550
By shooting ~9 sessions per month and charging $750 per session you will earn $72,500/year
After removing COGS you will earn $60,500/year
Your profit margin is 74%
Package Four (Wedding) Includes:
8 hours of camera time
250 edited files on USB in boutique packaging
2 - 36" x 36" canvases
1 - 48" x 60" canvas
8 hours of album design
1 - 12" x 12" album
2 - 8" x 8" albums
25% discount on additional a la carte pricing (all extra profit, if they buy anything)
The math:
COGS: $1250
Retail Value of Goods: $3000
Profit: $1750
Hours of work: 40
@ $31.25: $1250
Price to charge per session (retail + hourly rate): $4250
Earnings per session (session charge less COGS): $2500
By shooting ~2 weddings per month and charging $4,000 per session you will earn $87,000/year
After removing COGS you will earn $60,000/year
Your profit margin is 70%
Of course I have a profit margin and cost per session calculator you can use for this part, too. You just need to transfer the information from the COGS calculator over and drop in how many hours you're spending shooting and it will do the rest. If you're doing separate packages for weddings and family or boudoir and newborn, you'll want to do a separate spreadsheet for each one.
One last note for the commercial photographers out there who are selling camera time and delivering digital files - you're going to want to make sure that you're charging enough per hour or per file to cover your costs as you won't be able to cushion your profits with a lot of product. You can set prices (and limits) based on how many websites or flyers will be printed and sell a license in addition to your time or files that prohibits them from using the files without paying an additional licensing fee. For example, you can license your image for 10,000 book covers and when the book comes out on CD or they need to print another 10,000 they would need to pay for another license. There are tonnes of resources for commercial photographers at CAPIC.
So there you have it folks. Real math, real numbers. The next article will go into greater depth about how you can create perceived value by developing a clear corporate identity and ramping up your branding game. Have a great week!
