The Basics of Pricing for Profit

The Basics of Pricing for Profit


Stacey LaCoursiere is a Newborn & Destination Wedding Photographer based out of Duluth, MN.

A profession in photography is one of the few career paths where you can just wake up one day with no formal training and be a photographer. Although formal training is absolutely recommended (ex. workshops, business classes, college training, or mentorships), it is not required. As an industry though, we are headed down an unprofitable path if we continue to ignore the basics of pricing for profits. Unfortunately, I didn’t figure it all out until I finished my Bachelor’s in Business Management and read up on specifics of photography pricing. I have learned the hard way, but you don’t have to. So how does one start out as a new photographer building a portfolio while also aiming to become a profitable business?

LaCoursiere-Newborn

DETERMINE YOUR HOURLY RATE

First, I highly recommend learning, understanding, and building your package and product pricing based off of your hourly rate. You can learn your hourly rate through a formula, which puts together your cost of business, costs of living, costs of shooting, and dividing it by the number of sessions/weddings you do per year. If you haven’t already, I highly suggest doing a little Google research to find information that fits your business model (Stacy Reeves Greatest Pricing Guide Ever is my personal favorite!). It is a pretty simple process when you are starting out because you have a relatively small list of expenses. Obviously, as your expenses grow, you will need to revisit your formula to adjust.

For sake of understanding this article, let’s throw in an example:

1. Cost of Living + Cost of Running Business

2. + Cost of Shooting Session/Wedding

3. ÷ by number of weddings or sessions shot per year

4. ÷ by number of hours spent shooting just one wedding or session

5. = Breaking Even Hourly Rate

(You’ll need to do a formula for weddings and a formula for sessions to for the most accurate numbers to be applicable to shooting that type of client.)

In order to leave room for profit, you should take your hourly rate and multiply by three. One-third for costs, one-third for taxes, and one-third for profit. So if you are taking your hourly rate to determine the lowest possible price for an 8-hour wedding package, you may find suddenly that your lowest wedding package should be $5,000! When finding your session rate, you will not be multiplying by three (unless all digital images are included in the session fee) because the sales made post session will be serving as your profit margin. If you would like to dive into hourly and product pricing further, I recommend finding a guide that works for you to know what your numbers are.

Typically, formulas do not include costs of living because many photographers are part time, but even if you are only a part time photographer I encourage you to create a salary for yourself. In two years, you will get to the point where you need a salary because you will finally know you deserve it, so best do it now. For example, I am a full time photographer but my husband’s income covers our cost of living. So I add a cost of living to my pricing to include my salary, daycare costs, paying off student and car loans, and home improvements. Be generous and try to think about years down the road when you no longer need to build a portfolio and would like to have a steady and comfortable income.

LaCoursiere-Bride

RATES WHEN BUILDING YOUR PORTFOLIO

Obviously, as a new photographer it would be pretty hard to charge your hourly rate when the number can get very high. The fewer sessions or weddings you have the higher that hourly rate will be. There are a many different methods to charging while building a portfolio, but I have two in particular that I would like to share:

METHOD 1. Charge your break even hourly rate times two. If you found your hourly rate was $125, you should charge $250 for a session at a minimum. This method will cover your expenses and give you a savings for income taxes. If at the end of the year (or earlier if you have a good accountant), you end up not having to pay into taxes, then yippee, you have yourself extra money for new equipment. This method will get clients in the door, but unfortunately once you start charging your full rate (hourly rate x 3) it is very likely you could lose past clients gained because your rate will be beyond their threshold. You may also lose some word of mouth buzz if they have been spreading the word on your great prices.

METHOD 2. Create your pricing structure and brochure based upon the hourly rate number needed to run profitably (your break even rate times three). I also encourage you to “fluff” this number up even more because the costs of running your business will increase over the years as you find ways to make your client experience even better (as in branding, gifts, welcome packets, etc.). Then, create a “portfolio building” discount where you discount the session rate 50-60% for 6 months to a year. Be sure to include your full rate in your marketing material, so that potential clients and booked clients will see the value in your discount. Market this special like crazy. Blast it over social media and blog about it weekly, create mini session promos, send flyers to your friends and family, get together with daycares or wedding planners, just make it happen! After the discount expires, start booking at your profitable rate and don’t look back. Because this rate should include everything to run your business profitably plus some extra padding, you should not have to raise this rate for some time. And guess what? Because this rate was already advertised and shown to clients, the word of mouth will not change because everyone already knew your rates and value.

LaCoursiere-Wedding

CHOOSING YOUR METHOD

Here is one argument I hear about method number two: It takes far longer than six months to a year to build the experience and knowledge gained from building a portfolio during that time. What if, before you ever took your first paying client, you went to a few intensive training workshops and classes that offered client interaction? What if you assisted another photographer for a few years in order to make sure you could provide your first client with a great experience? What if you are really dedicated to starting your business off on the right foot? Then without doubt, method two is the way to go.

I can’t tell you if there is a right way or a wrong way, but I can tell you I took the path of method one and I am frustrated by the time spent (and possibly wasted) in the first five years of business. The time it took to constantly update pricing lists, marketing to the wrong clientele for my pricing, and working continually for a bottom dollar leaves me feeling … tired! Did I learn a ton? Yes. Did I gain experience and a great portfolio? Yes.  Am I remaining profitable now? Yes, but at the costs of losing clients along the way because I had to continually raise my rates as I went, because unfortunately, I learned the hard way. The client that can afford a $400 total in session fees and product is not the client that can afford a $1000 total in session fees and product.

THE PROFIT MARGIN

When it comes to prints and products, the rule of three can become a rule of multiplying by five up to twenty in some cases. Just because the 5×7 costs you $2.50 does not mean you can charge $7.50 and still make a profit. If a client orders just one 5×7, don’t you still spend 15 minutes retouching and ordering it, 15 minutes packaging and printing shipping labels, and extra time bringing it to the post office? Suddenly you have spent an hour on just one 5×7! Hopefully your client will order more than just the one print, but in any case you need to price accordingly. Your session fee or wedding package should have already covered your business and living expenses.

There are varying opinions on the rate of mark-up on prints. First, you should determine how many hours total you work per year. If your starting pricing is simply too high for your area’s market, consider spreading those costs out to your post session sales. Including digital images with your session fees can be a lost opportunity cost. So take advantage of that and use this to cover the gap in income that you need to make your final mark-up rate. Create packages for your engagement sessions that allow you to bring your final income from wedding packages up to that needed amount. Confused? Here’s an example:

Say you need $5,000 to make a profitable rate per wedding booked; $1,666 break even number per wedding times three. But your location can only support around $3,000 max for a bottom wedding collection. So you book a $3,000 wedding collection and then aim to make at least $2,000 more in pre- and post-wedding sales from engagement session images, albums, and prints sales. It won’t happen every time, and in this case when you book your upper wedding packages, you’ll be making up for the lost minimum rate. However, if your products are priced correctly you’ll be able to get pretty close or even higher than that profitable rate.

LaCoursiere-Wedding2

RIGHT FOR YOU

Let me simply say that there are a million ways to find the right pricing for you. I don’t know THE way to pricing, nor will ever claim to. I only know my experiences. Ten photographers in the same town will and should have different pricing structures because they are ten different people with different financial needs, costs, and demands. It is as simple as this, if you have never learned your costs and do not know what your break-even point is, then pick up a calculator and start now. For you. For the future of your business. For the future of the industry.

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4 Responses to “The Basics of Pricing for Profit”

  1. James Koeper says:

    Very good and useful information. Thank you so much for your insight and for sharing your hard earned experience.

    Jim

  2. James Keck says:

    I like your approach to pricing. It is not the same old thing that I have read before. I especially like method 2 rates for when you’re building a portfolio!

  3. mario says:

    Great article. This is pretty much how I established my pricing. I’m part-time, which means I have a day job. On that job, I already know how much per hour my salary is. So for my photography gigs, I simply give myself a raise/per hour (double, sometimes triple depending on the client). In short-It’s a rate I’m willing to spend time away from family and other hobbies.

  4. Joe Shooter says:

    Cool post but please change the background pattern, it’s absolutely terrible and it almost gives me seizure lol