So things were looking great in my photo business. I started to hone in on what I specialized in and started getting some nice traction on my marketing side. Then it happened. People started asking for my rates, or my day rates. I panicked and didn't know what my customers will think if I send them my rates. I looked around from Craigslist to other photographer's sites whose work look similar to mine. They vary so much. I don't know how to start. If my rate is too high, the client might shop elsewhere, and if my rate is too low, my clients will come to expect that rate next time. How much do I charge?
Well let me tell you. You always charge what the market will bear.
That being said, what you really should look at is your Cost of Doing Business (CDB). This will determine whether you're in the right market for the type of photography and rate your clients will bear.
What is CDB? It's everything you do and live that cost you money in the year. Let's look at a hypothetical photographer's CDB.
This commercial photographer, John, lives in New York and his rent is $1200 a month, and his utilities, phone and internet fees are about $500 a month. He takes a subway every day, with his Metrocard for $112 a month, to his office/cubicle he rents at office space rental, for $300 a month, and rents studios and equipments for his job, $500 total each time. He does drive a rental car from Zipcar, $89 a day, whenever he needs to go somewhere further with his equipments.
- Rent $1200 x 12 = $14,400
- Utilities $500 x 12 = 6,000
- Metrocard $112 x 12 = 1,344
- Office $300 x 12 = 3,600
- Studio/Equipment $500 each
- Zipcar $89 each
That's a yearly cost of $25,344 to just to operate a business. Plus, additional cost of $589 to each additional shoot.
John also plans on setting aside a budget for taxes, equipment upkeep/upgrades, insurance for business and personal, and a savings account. He wants to have at least $10,000 for equipments; insurance comes out to be $400 a month for personal and $300 a year for business; save at least $10,000 a year. And well, taxes are %25 of everything you made.
- So that's Business expenses of $25,344 plus...
- Equipment budget $10,000
- Insurance $5,100
- Savings $10,000
- That's a sub-total of $50,444 plus %25 set aside for the tax man at $12,611
- A grand total of $63,055 a year.
So how does this number affect your CDB? Simple. There are only 365 days in a year, and you, being the boss can decide on how many days you want to work. Say it's 250 days, you can spent the rest of the year on vacations and do some personal photography projects, or continue working to averaging down your cost. Then you divide 63,055 to 250 days. I had done the math here:
- 250 days a year: your CDB is $252.22 per day.
- 300 days a year: your CDB is $210.18 per day.
Great. That's your CDB for the day. That means if you do ANYTHING that's business related that day - that includes marketing your business, seeing the clients, getting equipments, shooting the shoot, editing the photos, sending the work to your client for approval - you will be hit with $252.22 in cost each day you're doing the things mentioned and more. You might not see it at the moment, but it's there at the end of the month/year.
So John was asked for a quote for a photoshoot for Johnson and Mills for a magazine ad for their canned tuna fish. They want it shot in a studio setting. They will require the photo retouched and will want two passes on the retouching end.
- This is an at least 5 days job.
- One day to meet with clients at their office to go over the details and art direction of the shoot.
- Rent equipments and studio, and prep equipments.
- Shoot the product at the studio.
- Retouched and send digital assets to client for approval.
- Client returns digital assets for additional changes. Changes are made and submitted for the final pass.
That's 5 days with a $500 studio rental. It will cost him $1761.10 just to be on this ad campaign. Should John ask for $1800.00 he will be a little over cost, but he will walk away with the fact that he can only need to work another 245 days in the year and have a savings account of $10,000 at the end of the year. Or, should he raise the price and knock out more dates on his work calendar for $2500?
The answer is based on what the market will bear. The important issue is that if the market will not bear the price of $1800 for this shoot, you might not walk away doing this job losing money.
Now of course, there are things that can be taken away to keep the cost low for the client. For instance, you can rent equipments instead of both studio and equipments and shoot at the clients locations. Over time, your equipment budget will allow you to own all your equipment that you rent. You can always work days outside of the 250 workdays.
You can always do jobs that are less costly in terms of your time and expenses at the right market. In the right market place where jobs are plentiful, you might be able to discount your rate, too.
So final note, the CDB is not just shooting, it's EVERYTHING you do for that client the day you start negotiating.