Pricing for Profit vs Bad Business or Understanding what your Business Model IS!

ChatKatChatKat Registered Users Posts: 1,357 Major grins
edited April 9, 2010 in Mind Your Own Business
In this thread Pete thinks it's bad business to not do a passport photo because in his words - it takes 10 minutes to do and for $10 he'd do it. http://www.dgrin.com/showthread.php?t=162913

As a business and financial consultant I would not do it. $10 devalues what I do. More than that - it would cost me money to give that service. While we each have our own ideas of what a business costs to run, there are many things to consider when you decide to take work on a professional level. When you open your doors (and while I have a studio in retail space - you may work from home) you have to price your work to make a profit.

First off, as photographers, numbers are not usually a strong skill for many when you go about pricing your work. The biggest area I find is actually figuring out your time and real costs.

To do a passport photo, Pete contends that it is a 10 minute job. If it is that means to take $10 would give me $60 an hour. I don't agree that it's 10 minutes.

To accept the job, as a formal business I require a contract and model release. Even if I shoot jpg and not raw, I have to count some time in to upload the image to a lab or set the image up to print. I have to write an invoice. I don't just click the shutter. I'd say it would take me 10 minutes just to do that. While my studio is always ready to shoot, by the time I check the lights and snap the shutter, position the client would be another 10 minutes. To upload the image, resize and order the print or print it my self would be another 5 -10. So the 10 minute job is 1/2 an hour.

I also have to consider that I have insurance to pay, rent to cover, my camera and lenses to include in the costs. I have to make a living at what I do and part of that living includes paying myself what I am worth, including taxes.

Now If I figure out what my real cost of business is - then it has cost me money to do that job.

It doesn't matter if you shoot sports, wildlife, travel or portrats and events - you must keep track of what business costs are. You can use a spreadsheet, notebook, or software but you must figure out that if you spend $1000 on a camera and $500 on a lens that your $1500 has a cost per use. Lights, computers, Compact Flash are real expenses. Telephones, even if you pay for a personal phone - isn't free. Business Cards, Advertising and your smugmug account - cost money. You should always have business insurance.

Now from a branding standpoint, I have set my studio up to cater to a certain type of client and shoot a specific style of job. My clients would not expect me to shoot their passport photos. My my neightborhood, we have the big box stores and one hour photo places that do that. My clients would not go their for fine art. Part of my brand includes teaching my clients about good photography.

Part of being a real business for profit. While I love to do personal projects, if I am going to be a business - then part of that is acting like one. Otherwise, I would need to get a job to cover paying for groceries and medical expenses and auto expenses too.

I am going to start a thread later in the week on how to arrive at your real pricing.
Kathy Rappaport
Flash Frozen Photography, Inc.
http://flashfrozenphotography.com

Comments

  • zoomerzoomer Registered Users Posts: 3,688 Major grins
    edited March 29, 2010
    Well $10 isn't always just $10 either.

    If you want to be a family's photographer for everything some services may be loss leaders.
    If you do their portraits, family photos and weddings you may need to do their passport photos as well.

    For anyone that just needs a passport photo this could be a way of introducing them to your business and could lead to lots more work from them, and their friends, and their friends as word of mouth spreads.

    Since it is only $10. I would just do them for free and call it a favor...as you surmise there certainly is no money it it. To go through the entire process it would certainly cost you more than that to take the photo.
  • dogwooddogwood Registered Users Posts: 2,572 Major grins
    edited April 5, 2010
    ChatKat wrote:
    In this thread Pete thinks it's bad business to not do a passport photo because in his words - it takes 10 minutes to do and for $10 he'd do it. http://www.dgrin.com/showthread.php?t=162913

    Actually, I showed you how to shoot (and print) a passport photo in 2 minutes :D

    Strange how much you value your own time yet you seem to have plenty of time to write post after post (and start a new thread) about how much more valuable your time is than $10 for two minutes work.

    Honestly-- if you time is so valuable, just let this go. We disagree. No big deal. That happens all the time. How much more of your "valuable" time do you want to spend trying to debate this issue? headscratch.gif

    Portland, Oregon Photographer Pete Springer
    website blog instagram facebook g+

  • takeflightphototakeflightphoto Registered Users Posts: 194 Major grins
    edited April 6, 2010
    dogwood wrote:
    Actually, I showed you how to shoot (and print) a passport photo in 2 minutes :D

    Strange how much you value your own time yet you seem to have plenty of time to write post after post (and start a new thread) about how much more valuable your time is than $10 for two minutes work.

    Honestly-- if you time is so valuable, just let this go. We disagree. No big deal. That happens all the time. How much more of your "valuable" time do you want to spend trying to debate this issue? headscratch.gif

    Seems like you also have a comeback to her every post as well, Pete. If the shoe fits, as they say.
  • ChatKatChatKat Registered Users Posts: 1,357 Major grins
    edited April 6, 2010
    My other business
    Pete,

    I have been a business consultant for over 20 years. I am a licensed tax professional and accountant. The Business of Business is something I have taught entrepreneurs for years. My prior background was as a Bank VP in Small Business Banking and Lending and Audit.

    This is my professional area of expertise. This is why I have responded to your posts. Not to make a point, but, you have to decide what your business model is. I know what mine is. If I had to shoot passport photos to make a living, I'd go back to being a full time accountant.

    Passport photography is not in my business model. It's not about service - it's about what my studio does. It doesn't meet the criteria of my business plan. Not too long ago I spoke to the SmugMug user group about busines in just this vein. I am teaching a similar program for PPA and taught Super Monday. I do a lot of coaching and training to photographers. You don't have to like that I don't want to do something and you don't even have to get it. It's my business and if all I want to do is create black and white images in a color photography world - it's my choice.

    Editing to add that this forum is not just a conversation between two people. Many many people read posts that never respond. A thread like this might make them think about what they are doing in their businesses as well. It's not a black and white world and for some people a constructive conversation might just make them have a good understanding of some aspect of their business. That is why I continue to respond to the posts. If one person makes a good business choice or gets an idea because I have shared something that sparks something for them to make their businesses better!
    Kathy Rappaport
    Flash Frozen Photography, Inc.
    http://flashfrozenphotography.com
  • WachelWachel Registered Users Posts: 448 Major grins
    edited April 6, 2010
    I see ChatKat's point.

    If you go to a very high end steak house restaurant you expect a certain menu. Ruth Chris Steak House, for example, is pretty famous and they have a reputation. The kind of rep that causes people to dress up and make a night of it. If they were serving Big Mac's then people wouldn't see them in the same way. It would cheapen the experience. Now, I am sure Ruth Chris could make a Big Mac...it's not what they do...even if someone asked them to.

    Bottom line...if you want to be seen a certain way then you must act that way and provide services that meet that expectation.

    Just my 2¢
    Michael

    <Insert some profound quote here to try and seem like a deep thinker>

    Michael Wachel Photography

    Facebook
  • dogwooddogwood Registered Users Posts: 2,572 Major grins
    edited April 6, 2010
    Wachel wrote:
    I see ChatKat's point.

    If you go to a very high end steak house restaurant you expect a certain menu. Ruth Chris Steak House, for example, is pretty famous and they have a reputation. The kind of rep that causes people to dress up and make a night of it. If they were serving Big Mac's then people wouldn't see them in the same way. It would cheapen the experience. Now, I am sure Ruth Chris could make a Big Mac...it's not what they do...even if someone asked them to.

    And yet ironically, McDonalds turns a much bigger profit per year (by billions of dollars) than Ruth Chris.

    Portland, Oregon Photographer Pete Springer
    website blog instagram facebook g+

  • Jeremy WinterbergJeremy Winterberg Registered Users Posts: 1,233 Major grins
    edited April 7, 2010
    I see both point of views represented in this thread.

    ChatKat is a high end photographer. If I was a photo client of her's, and saw her doing passports... I would be questioning her prices. (idk how much you charge, I'm just going to assume its more than the average joe) It would cheapen her brand identity. I probably wouldn't want to pay her thousands to shoot a wedding after that. <-in this case, it hurts her business, because her clients do not demand that service.

    Now, on the other hand... passports are VERY easy. I used to work at a mini lab/Canon dealer/studio, and we offered passport photos for like $13. It literally would take us 10 minutes from taking the picture, to printing, to ringing up the sale. The printer was kinda slow, otherwise it would've taken a lot less time. But, passports fit the brand identity of the business. Their goal was to charge less but more often. I don't know how they did it, but it seemed like every single day the studio was fully booked. Mainly because they only charge $21 for a sitting fee. <-in this case, it helps the business, because lots of people come to get them, and they expect them to do it (because they are a 1 hour photo business) aka there is a demand for it.

    I am on the border as to whether or not I want to offer them. I want to be seen as a high end photographer (even though I'm not one yet), so I do not want to "spoil" my brand. I may still do them for free for friends and family. But you will not see me advertising it. It simply would make my name seem cheap.

    ----------

    Now that that's out of the way. I agree 100% that you need to have your pricing thought out so that you actually make a profit. If anyone disagrees with that they need to shoot themselves. In the face.

    I recently re-priced all of my services and products to reflect my business costs, personal costs, and taxes. Now, instead of just barely making enough to pay the costs, I turn a profit.

    I may have lost a few clients because of getting out of their budget, but thats ok! New clients will pay my prices, and it will all work out.

    I look forward to reading your post on pricing strategies. I'll chime in with the sources I used to come up with my pricing to help out.

    -Jeremy
    Jer
  • inthesmokeinthesmoke Registered Users Posts: 15 Big grins
    edited April 7, 2010
    I haven't read the other thread and am new here, and am simply an amateur 'tog at this point. I have studied marketing/business models etc and I work for a large multinational food company.

    Whilst it is key to take into account all of those overhead costs, it is critical to realise that those are exactly that - overheads. The bulk of these costs are fixed and will be the same no matter how much business you get. This needs to be balanced with capacity - how much work are you actually getting? If you have excess capacity - ie not completely booked, then anything that covers your variable costs - ink, paper, wear and tear etc. - and some, will be giving you additional profit. It may not be at the same rate as your core work but it will bank some cash. And cash flow is critical for small businesses. It's a simple opportunity cost scenario -by doing it, what are you missing out on? Could you be spending time nailing another proposal for example.

    Of course there is the positioning/branding of your service to keep in mind. There are ways around this - operate under another 'brand'. Use basic equipment, processes and so on. You could literally have an automated process with a tethered camera, template set and ready to press 'print'. A passport photo needs to be adequate, it needn't have any real quality to it. But it would be key to separate this from any part of your business that is positioned at the more premium end of the market.

    At the end of the day you need to balance those key things:
    - Do you have time/capacity to do something extra?
    - Financial. What's the variable cost? You're ALREADY having to cover your fixed costs, if this is simply additional work then concentrate on the variable. Are you covering this and making some money?
    - Operational. Do you have the right tools and processes to do it without impairing your main business?
    - Marketing - Brand Equity. Will the work affect your equity and how potential customers perceive you and are willing to pay? Can you separate this work from your main Brand?

    This is as much about any job as it is about an extra small job, or something outside of your standard workset.

    Looking forward to your pricing commentary. This was a little blab from me :)
  • PhotoLasVegasPhotoLasVegas Registered Users Posts: 264 Major grins
    edited April 9, 2010
    ChatKat wrote:

    I also have to consider that I have insurance to pay, rent to cover, my camera and lenses to include in the costs.

    Sorry but if you are a "Business Consultant" as you claim, then you need to go back to Accounting 101 and review fixed vs. variable costs.

    Rent, unless you are paying a percentage of sales, is clearly a fixed expense. Doing this $10 job won't increase your rent.

    Insurance, unless you are paying a per-shoot insurance policy, is clearly a fixed expense.

    There may be a small arguement that cameras and lenses are "variable" expenses, but that would be splitting hairs since the useable life of a DSLR and a lens is counted in the tens, even hundred of thousands of exposures. So ok, maybe a fraction of a penny for each exposure, but hardly something you could (or would) expense on a per-shoot basis.

    Point is, while you can (arguably) factor a per-shoot "cost" based on total shoots/year divided by rent+insurance+electric+phone+etc. etc., a job like this cannot be accounted for in this manner. It's what we call "gravy" or "bonus" money... but we wouldn't charge for it...

    I think you need to look at a job like this from a different perspective... someone finds your "retail" photo studio, walks in and asks for a passport photo... you can

    (a) say, "ok, no problem, matter of fact, we do those free, but (wink wink) we really hope you'll come back with your family/husband/wife/girlfriend/boyfriend/etc (whatever is appropriate) for a full photo shoot!"

    (b) say, "Sure, our passport photos are $15, OR do you have a Facebook or maybe need a shot for your business card? Because for only $50, I'll give you a small jpeg version you can use on Facebook, or for $75 I'll provide you with the full resolution file that you can use anywhere!" (and don't coem back with the "my digital files are worth more than that" because you, of all people, should know that THEY AREN'T - they are only worth what someone will pay for them - otherwise they are a liability, taking up hard drive space.).

    (c) Tell them, "I'm sorry we dont' do passport photos" and then they walk out the door to your competition.


    Is your time worth more than the $10 or $15, OF COURSE it is... but don't be so stuck on yourself to not give it a try, with the possibility of future income!

    We just did a huge special led by a very large marketing firm here in Vegas.... for $50, the people get a 1-hour photo session, 2 8x10 prints, and 10 very small jpeg images. Of that $50, we got $25 of it.

    We sold 264 of them IN ONE DAY.

    We've shot 30 of them so far, we have been very closely tracking time spent, and we've spent 67 hours. That includes phone time, editing time, sales presentation time, etc. Our up-front income is $750, which is about $11/hour.

    BUT, since we take about 100 photos in that hour, we've also sold additional packages to half of them, totaling an additional $3400.

    Now we're at $62/hour.

    We've also booked a wedding (about $2000), 2 additional full-price Senior Portrait sessions (about $500 each), and one mom has booked us for 6, 9, and 12-month portrait sessions (including prints, etc.) for a total contract of around $1500 (about $1100 profit).

    So these "piddly" $25 photo shoots have all the sudden become huge money makers (which is great for us, since the vast majority of our business is weddings, and all these shoots are during the week, in our "downtime").

    I say, do the $10 passport photo, or just do it for free... but don't turn it down. Don't step over pennies and then step over dollars, too.
    Las Vegas Wedding, Family, and Special Event Photographers.

    Canon 7d
    2 Canon 40d
    70-200 f2.8L IS, 50mm f1.4, 50mm f1.8, 28mm f1.8, Tamron 17-55 f2.8, ProOptic 8mm Fisheye
    And a bunch of other stuff ;)
  • ChatKatChatKat Registered Users Posts: 1,357 Major grins
    edited April 9, 2010
    Problem
    You definitely have to consider fixed costs of business with every shoot you do. It's a major expense and part of your cost of business. A major problem I have seen is that photographers DON'T include the cost per click of their fixed assets and hard costs.

    Yes, you MIGHT get some additional business from a passport photo. But, again, there is a cost to do business.

    Your Big Marketing Program gives you a real chance for additional sales. I am familiar with that business model. If you are a portrait photographer - that's a great set up because you can make additional profit from that kind of volume shooting.

    But the likelihood of even selling a passport photo for a large wall portrait is doubtful. It's a big part of knowing the market you are in. I am not competing with the office supply store across the street.
    Kathy Rappaport
    Flash Frozen Photography, Inc.
    http://flashfrozenphotography.com
  • Jeremy WinterbergJeremy Winterberg Registered Users Posts: 1,233 Major grins
    edited April 9, 2010
    PhotoLasVegas, I can see your point here. But, the fact of the matter is, she isn't targeting these types of people with her marketing. So, if she doesn't want them... why would she offer $10 passport photos when her TARGET MARKET does not demand it?

    Now, to agree with you. Wow! Your marketing plan worked out pretty well. It is a great idea to offer cheap services to bring customers in. And once you have them upsell them. Its like bidding on a contract. People are always looking for the lowest bidder, and once you have them wanting YOU, upsell them.

    This kind of marketing strategy would work well for photographers like me. We're just getting our feet into the door of our communities, and the main goal is to get people to see you and your talent. I've been offering my services since 2008 to my community. While I have had a few people come to me, its not near as many as I would like. Put it this way... I'm glad I still live at my Parents house (the college I go to is about 5 minutes away from their home), because I wouldn't be able to pay rent, buy groceries, etc... on what I make from photography.

    And now, if you dont mind, I will be stealing your marketing idea, to bring me clients :D
    Jer
  • ZanottiZanotti Registered Users Posts: 1,411 Major grins
    edited April 9, 2010
    PhotoLasVegas, I can see your point here. But, the fact of the matter is, she isn't targeting these types of people with her marketing. So, if she doesn't want them... why would she offer $10 passport photos when her TARGET MARKET does not demand it?

    Now, to agree with you. Wow! Your marketing plan worked out pretty well. It is a great idea to offer cheap services to bring customers in. And once you have them upsell them. Its like bidding on a contract. People are always looking for the lowest bidder, and once you have them wanting YOU, upsell them.

    This kind of marketing strategy would work well for photographers like me. We're just getting our feet into the door of our communities, and the main goal is to get people to see you and your talent. I've been offering my services since 2008 to my community. While I have had a few people come to me, its not near as many as I would like. Put it this way... I'm glad I still live at my Parents house (the college I go to is about 5 minutes away from their home), because I wouldn't be able to pay rent, buy groceries, etc... on what I make from photography.

    And now, if you dont mind, I will be stealing your marketing idea, to bring me clients :D


    Dude:

    You changed from Canon to Nikon, now you changed your name as well?

    List me confused......


    Z
    It is the purpose of life that each of us strives to become actually what he is potentially. We should be obsessed with stretching towards that goal through the world we inhabit.
  • Jeremy WinterbergJeremy Winterberg Registered Users Posts: 1,233 Major grins
    edited April 9, 2010
    Zanotti wrote:
    Dude:

    You changed from Canon to Nikon, now you changed your name as well?

    List me confused......


    Z
    Yes, I did change my business name from my first and last name + photography to my first and middle name a few months ago. And I dropped the photography at the end. I'm trying to create a brand around myself. Make people want me because I'm ME. Along with that they shouldn't have to read that I'm a photographer, they should know it instantly when they see my name. So far its working.

    And I like my D700 alot thank you very much. I'm not brand bias. I still own a Canon Film SLR. And if Canon were to come out with a FF camera that met my needs better than the D700 does, I wouldn't find a problem in switching back.

    But, this is off topic.
    Jer
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