ARE YOU PRICED FOR YOUR MARKET?

This is easily the most important time of the year for many photographers.  "Booking Season."  This is the time of year when 80-90% of couples are getting engaged, and looking for photographers. For a lot of photographers, this time of year brings with it a roller coaster of both success and frustration.  The phone rings, and and the emails start coming in.  You work on booking consultations and getting signed contracts, and somewhere along the way the doubt starts to set in.

It only takes one of two "you're too expensive," responses to begin to wonder if anyone will ever pay you what you think you're worth.  Then, you start questioning whether you're really worth anything at all.  "All of these inquiries keep telling me that I'm out of their price range... what's wrong with me?!" 

One of the most common struggles that photographers face, is knowing whether or not they are charging the right price for their market.  This happens frequently at the beginning of the year, as so many photographers have just raised their prices, and aren't experiencing the same "results" as they had previously.  

There is a level of panic associated with the question "am I charging too much?!"  In our minds, we play out a scenario where, if we keep our current pricing, we'll never book another job!

It's natural as our businesses grow, that our prices will change based on our increased experience, quality of work, and overall experience we provide our clients.  I think that the "crisis" occurs when we fail to step up our game plan, when we step up our pricing.

This isn't going to be a post based on how you should price (contrary to what the title might have suggested).  My core belief is that you should be charging what you're worth.  You should be charging based on the value you add to your clients.  YOU have to figure that out.  

The truth is - you can charge almost anything you want, IF you're able to align yourself - and your value - with the right market (or demand).  But as we increase our value - and our price as a result - we often fail to re-align ourselves with the appropriate market.

Here's what I mean.  If you were charging $1500 to photograph a wedding last year - and your work was good - you probably attracted a lot of brides.  You probably were able to generate business through bridal shows, online advertising - even craigslist.  You were able to align yourself to that market pretty easily - because it's a LARGE market of consumers.

But let's say you now want to charge $2750 because you realized that you're worth much more than you were charging - AND you'd like to actually make money.  What are the chances that you'll continue to attract a new type of client (one that will see value in spending $2750 on you to photograph their wedding) if you don't change the market you're aligned with.  It's not likely that you'll attract the right clients without changing your approach to the market.

And what if you next year want to charge $4500.  Chances are, the strategy - and market - that worked for you at $1500, and then $2750, will be a failure as you try to elevate your value.  You have to ask yourself "where do couple's that spend this amount on wedding photography, find their photographer?"  

You have to find the right market - and then go after that.  For me, as we've grown, an increasing part of our business comes from our past clients, venues, and event designers (planners).  

As you increase your value - and what you charge clients - the reality is, you're going to need to find a new source of clients.  The things that worked at lower prices are no longer going to work.  We often spend a lot of time trying to find the right price for our market.  Who says that has to be your market?  If you want to charge higher prices - you have to find the right market for your price.

WHY IS PRICING SO PAINFUL? [PART 1]

Ask a new photographer what is the hardest thing to figure out as they launch their business, invariably, 'what to charge' is at the top of the list.  In addition to being one of the hardest things to figure out, it seems that many photographers have an anxiety and fear surrounding the subject of pricing.  What is it about pricing that makes it such a painful thing for photographers?  

I think that the number one thing that drives pricing decisions by photographers is fear.  Whether it is a fear of never booking any clients, fear of what other people will think, or fear of being unable to make a living as a photographer - often times, photographers become paralyzed by fear when thinking about their pricing.  It doesn't have to be that way.  In fact, figuring out your pricing isn't even that hard - if you sit down and do the work.  

Let's look at how you can turn your pricing from painful - into profit.

It's not as hard as you think

First, I think that many photographers spend far too much time stressing out about pricing.  Most of the time, I think that even if photographers have an idea of what they "should" charge, they convince themselves that no one will ever book them.  It's simply not true.  (Though, as an aside, what if it was true that no one would book you at the price you need to charge to be profitable?  Sounds like a good arguement that this isn't a particularly good career path for you - not an arguement for lowering your prices.)

In reality, figuring out how to design your pricing comes down to understanding a few principles, and doing some work.  

It's about numbers

Photographers come up with all kinds of ways to pick prices.  They look around and try to figure out what photographers in their are are charging.  They try to determine what "the market will bear," or they even base pricing on what they themselves would pay.  Unfortunately, none of these are based on any kind of rational thinking.  

Consider for a minute, the wisdom of basing your pricing on what another photographer charges.  Do you know anything about that photographer's business?  Do you know what kind of expenses they have, or how much they make?  Do you know how their business operates, what types of products they offer, how they manage their workflow, or what type of overhead they have?  If not, why would you want to model your pricing after them?

What you charge should be based on your expenses + a profit.  It's that simple.  Your pricing is based on the products and services you provide, plus a profit margin.  Add up everything that goes in to providing a product, or a service, and you have your expenses.  

For example, for a product like an 8x10 print, add up everything involved in selling that print (your cost of sales). 

   Wholesale print cost: $2.20

   Mounting: $1.50

   Time involved to produce (including importing, editing, processing, retouching, preparing, sales session, and sending to the lab) 75 minutes @ $30/hr: $37.50

  Total cost of sales: $41.20

Then, you have to also account for your fixed expenses (things like overhead, administrative costs, marketing, capital expenses and non-sales labor) as well as your profit.  The PPA Benchmark survey recommends that your Cost of Sales should be no more than 35% of your income.  If you want to make the math really easy, a good "rule" would be to take your Cost of Sales on a product, and multiple it by at least 3X, to get your retail price.  So for your 8x10, that price would be $123.60.  You can certainly mark your prices up higher, to create a higher margin - but this is a good place to start. 

Need more help with the numbers? Check out the Photographer's Pricing Guide

Check back tomorrow - and we'll cover how to price your time!

PRICING FOR A PROFIT: PART 2

 

In PART ONE of this series, we talked about pricing the products we provide.  In this post, we'll talk about one of the hardest things for creatives to wrap their brain around: how do we compensate for our time? 

Most photographers have no idea where to begin when it comes to pricing their time.  It’s hard to have an understanding of the value of a photographer’s time when the market is so varied.  It’s also hard because most photographers don’t have a complete sense of the time actually involved in various tasks, and we discount the cost associated with our time.  

So, how do we value our time?  How do we begin to price for the value we bring to the equation.  And how do we balance that with a market force that is moving towards the commoditization and depreciation of value in photography? 

First, let’s look at what a reasonable amount of compensation is for the various tasks we perform and the amount of time we spend.  Let’s say we decide that number is $30/hr.  That’s actually pretty fair, and a good place to start.  

Then, we need to begin to understand the amount of time you really put into a shoot.  Track the time it takes you to prepare for a shoot.  The time it takes you to perform a shoot or event, the time spent in post-processing, and the time it takes interacting with clients. For our studio, a 10 hour wedding, ends up being about 25 hours of time (not including sales, etc).  

For some studios this needs to be more, or less depending on your workflow, systems, etc.  Whatever it is, you have to begin to consider the amount of time - and the value associated with that time - that goes into a shoot.  And we also have to realize that we still have to mark that up to cover our expenses.  So, in our situation, every hour we spend shooting is 2.5 hours total time.  So the hourly rate we charge for shooting needs to cover that.   

What this means is that our “cost” for an hour of shooting is $30 * 2.5 = $75.00.  That’s the cost of labor behind every hour that we shoot.  Now, we still have to mark that price up by 3 in order to cover our other costs.  So for our situation, we should charge no less than $225 per hour for photography coverage.  Your math may be different depending on how much time you spend on the back end. 

We counted up everything we put into a wedding, from meeting with clients, post-production, and selling, and totaled that time.  You’ll need to make sure that you’re tracking your time to be sure you’re fairly compensating for your labor. 

Now, there are really two ways we can look at this.

1. We can decide that we need to make the equivalent of $30/hr for full time work.  This is a little more than $62,000 a year.  If you shoot 20 weddings a year, you’d need to take at least $3,100 per wedding as compensation.  This means that you’d probably be charging $7K - $9K per wedding.  This is a perfectly reasonable way to look at it, provided you are able to meet your targets for booking.  

2. A second way of looking at it is to decide that your time spent in your business is worth $30/hr, and you’re going to factor in exactly what time it takes for a wedding.  In my case, I might take that $225/hr (to cover my other expenses), and multiply it by 10 hrs/wedding and I get $2250.   

This is the minimum amount I need to charge for my time in order to take out my $30 per hour.  Now, 25 hours per wedding isn’t full time work. And it’s especially not full time work if I’m only shooting 20 weddings/year. This means I’m essentially being paid for part time work.  This is okay too - especially if you’re willing to fill your other time with other work.   In our situation, we actually charge our clients more than $225.  In the examples that follow, we used a figure of $300.  There are several reasons we used this number - one of which is that it’s a higher profit - and it’s easier to add in examples!

Either way, you have to have a place to start to value your time.  You need to place a value on your time, figure out how much time it takes, and be sure you’re charging to cover your time and expenses.  This is the value you bring to your business.  You are essentially an expense of your business.

 How do you price your time?