Pricing and Calculating Your Cost of Doing Business – Marketing for Photographers
This chapter is an excerpt from the in-depth e-book, Creative Freelance Marketing for Photographers.
To survive as a creative you have to pay rent, you need a phone, you have website bills, food costs, health insurance, and equipment costs. How can you know what to charge if you do not know what you need to make to survive?
To calculate your cost of doing business, calculate all of your monthly business expenses in a spreadsheet. Figure out what you will need to make to break even on the business, and then calculate all of your necessary monthly personal expenses. Add those together and this is your break-even point. Then calculate how long you have until you need to get to that survival revenue to not go out of business, because most likely you will not be making this amount at first.
This is the number you need to reach as quickly as possible, and it will become the center of your pricing strategy. This number is not only necessary for organizational and business purposes, but for motivational purposes as well. If you calculate that you have six months to hit your break-even point, then you will have an accurate idea of what you need to accomplish in that amount of time.
Here is a list of some of my monthly business expenses.
Website related expenses: $331
Email marketing expenses: $89
Book sales, advertising, and affiliate expenses: $987
PayPal / Merchant account: $250
Business insurance: $250
Equipment and miscellaneous expenses (cameras and office equipment, equipment replacement, paper and ink, shipping, framing, large format printing, etc.): $766.
According to this list, I need to earn approximately $2,600 a month just to cover the monthly expenses of the business, not including living expenses. This gives me more confidence in charging what I am worth. When someone tries to haggle, I can tell him or her that I cannot charge below a certain threshold and continue to be in business. It is impossible to reach a successful and sustainable income if one charges the most competitive prices. There is a price point where spending your time on marketing is more valuable than doing a particular job.
Build and further develop your skills, and then charge what your skills are worth. You are going to lose jobs for a variety of reasons, and being priced too high will be one.
In addition, as counterintuitive as it may seem, most people do not want to hire the lowest priced photographer. If you undervalue yourself, then your clients will undervalue both you and your work before they even see it.
There will always be price sensitive clients who will tell you your rates are too high, and you cannot let them dictate what you charge. The clients who want the lowest priced work are usually the more challenging and the most demanding clients. This is a lesson that most beginners learn the hard way. If you have a client that is difficult to work with and is not going to pay you what you are worth, pass on the work and instead spend that time on marketing in order to reach the type of clients that will respect you and value your work.
Calculate the minimum fee that is worth it for you to sell something or to walk out the door for a job and charge a certain percentage more than that. Raise that amount over time. Take your cost of doing business, and then calculate how many weddings, events, prints, or books you will need to sell or do to reach that amount. This can be an eye-opening experience. If you price your work at $200 and that is all you are doing, you need to sell 200 pieces a year to gross $40,000. You would need to sell 2,000 books at $20 a book. That is a print sale more than every other day and nearly six books a day to reach $40,000 in income. That volume takes time to build up to.
Now that you know this, every time you see a photographer selling their work for $75, you will understand that they either sell an unbelievable amount or more likely they have an additional source of income. It takes a lot of time to find 365 people a year to purchase something of this nature.
If someone questions your price, do not get discouraged. Educate them about what you do and explain your pricing structure. I do this often when someone questions my price or tells me that they can get something cheaper. Sometimes a client will be looking to get the lowest price no matter what, but it is just as likely that they are uninformed about what the going rate is and how much work is involved. This is your chance to give them more insight. Explain the work and skill that goes into doing the job well and how long it will take. If you explain this well enough, then the client will be hesitant to work with the creative that offered to do the job for less because that person will then seem less experienced.
Once you understand the economics of your business, create a pricing system. Hourly pricing can often be challenging. While in engagement and wedding photography, hourly or day pricing may be a necessity, for project specific work, it is usually not ideal. What if you get faster as you get more experienced? In this scenario, you are actually losing money charging an hourly fee as you improve.
If people ask for your day rate or hourly rate, tell them that you price per project and request as much information as possible regarding the client’s desired scope of work. Ensure that you understand the scope of the project so you can ascertain the extent of the desired work and how much time it will take. If someone then asks you halfway through the job for additional work that was not agreed upon at the outset, you will have grounds to tell them that this work is out of the scope and can be provided for at an additional charge.
For photography services, you will want to consider leaving pricing off of your website entirely. Some provide standardized pricing schedules but I do not. My pricing depends on the client and the work I am being hired to do. Pricing is an art form within itself that can take years of experience to learn and to excel at. Regardless, it is common to not know the ideal amount to charge a client for a particular job or commission. In these situations, always remember that you are worth more than you think.
Each job is different and each client is different. Sometimes you will quote a discounted price to work on a job that is suitable for your portfolio, where you can get exposure and work on something that you care about. Other times you will work on jobs where your work will help a company generate significant income. If you put standard rates on your website, you will lock yourself into these prices. If the prices are too low, some clients may assume that you are not experienced enough and will not even contact you in the first place, while at the same time, those same prices may be too high for some, who will not even think to contact you either. The goal is for potential clients to be interested enough in your work to induce them to reach out to you to discuss the work or services they desire.
Once a client reaches out to you and you begin to discuss the scope of work or services, getting a sense of what they would like to spend up front will greatly inform your pricing strategy. One of the most useful questions to ask is, “What is your budget for this project?” This question is not right for every situation, but it works more often than you might think. This technique works especially well right after
This technique works especially well right after a client tells you that they are short on money and need to do a job on a budget. You will hear this occasionally throughout your career. I typically respond to this by saying, “Well, I will see what I can do for you. What is the budget that you are you trying to stay within?” This simultaneously makes it seem like you are interested in helping them out, while also inducing them to show their hand as to how much they want to spend. A “tight budget” might even be twice what you would normally charge! I have done a few jobs where the client’s budget was much more than I thought it would be when they seemed price sensitive. I would have lost money and risked appearing inexperienced had I not asked that question. I have also secured jobs where I would have quoted out of the client’s ballpark; however, the amount they had to spend was still worth it.
In situations where the client does not seem as price sensitive, you can say that you need to look closer at the details and will write up a quote for them. However, in this scenario, you would offer varying levels of service based on different budgets or price-points. Perhaps you can do more with a higher budget than with a lower one. Explain this and the options that are available to them. Providing options tied to a sliding price scale is a smart way to hit the price points of many clients.
Regardless of pricing strategy, I will rarely quote a price over the phone. If there seems to be an immediate urgency, I will tell the client that I will email them within a few hours. I prefer to take some time to think about the correct price, and the quote should be conveyed in an email.
Other factors to take into consideration are how big the company is, what the project is intended to be, how broad the reach of the project will be, how long your work will be shown for, and how unique your image or service is for what they need. Basically, you want to charge more to license your work if it will reach 10,000 people than if it will reach 1,000 people because that is ten times the benefit for the client. If your style is unique or if the image is difficult to reproduce, you might be able to charge even more since they will not be able to find a less expensive replacement.
Research will also assist in informing your pricing. Learn what your competitors charge in your field and area. Take particular notice of the most experienced. They have developed this pricing based on years of knowledge and this represents that there is a market at that level. See what works for them.
If you are an art photographer, you will be selling both prints and licensing for companies. This may be for advertisements, for a local real estate agent, or for a local newspaper or magazine. It could be for anything. You can use the stock website Getty Images and play with their pricing system for some added input, and the blog whopaysphotogs.tumblr.com gives real world and current photography pricing information. In addition, one of my favorite programs to use is fotoQuote, which can give you more data.
By the time you start getting comfortable with all of this, someone will throw you a curveball. For instance, what is the cost to use your image as part of the background for a single beer truck in San Diego? That one happened, and the uniqueness of the scope threw me for a loop when it came to pricing. Having a network of people in your field to ask occasional pricing questions and bounce ideas off of can be invaluable in these situations, but sometimes you will just need to pick a number that feels right in your gut.
When selling prints, there are a few other issues to think about. If you price your art too low, it will send a message regarding quality and value. It will also be difficult to make ends meet. Sometimes the more expensive your art is, the more some people will take you seriously. People might pine over something that costs $2,000, where they will not even consider it at $200. However, as the price increases, the amount of people who can afford it decreases. Also, a good rule of thumb when pricing artwork is that the frame should not cost more than the art.
When working with art buyers, you have to make an additional consideration with your pricing. The buyers also need to turn a profit from the sale, and some structure their transactions where they net 30-50% of the sale. This will impact your pricing in that the artwork will need to be sold at a high enough level to ensure that you cover your costs and make your margins. In addition, if your prices are too low, the buyer’s fee could be comparatively less than when dealing with other artists, which will induce them to go elsewhere. When working with buyers that require a percentage, I offer the percentage of the profits and not the retail price.
Unfortunately, there is no magic formula for pricing. It is an issue that you will need to figure out for yourself through time and experience. Whatever your pricing is, be sure to update it as you become more experienced, and increase it incrementally over time. Just as you would raise the price of your services for any business or career as you improve, raise the price of your work as you become better. You are more valuable with fifteen years experience than with five. If you have long-time clients and fans that have purchased work from you, they will be happy to see your prices rise.
For further education, download Creative Freelance Marketing for Photographers.