Monday, March 1, 2010

On Pricing and selling. A new series starts.

Pricing. Mad Science, Unmasked Hope, or just a living?

In my current PUG tour I’m covering several topics around the makings of a successful photography business. It’s funny, but the one I get the most comments and questions on - by far - is pricing. No one topic seems to yield more anxiety or anguish than pricing. One photographer in one city sort of part-jokingly said, “I’m an artist! Why don’t people just get that and pay me what I’m worth?” Well ... Joke or not I know a lot of photographers feel this way and so I figured it’d be worthwhile to tackle this subject in the hopes that a nugget or two might be helpful.

What should I be charging? This is probably the most common question I hear. Like all things, the answer isn’t simple. Usually the answer involves lots of questions. (and sometimes that’s frustrating too!) I would propose a little exercise. Copy this onto a Pages, Word, whatever document, print it out and take it to a coffee shop. You need a break anyway. This will be worthwhile.

First: What are your expenses? Off the top of your head - since you’re sitting here in a coffee shop - add up your mortgage or rent, car payment, insurance, and incidentals. You just want a sense of that number. Now, add up the expenses related to your business. If you’re a Pictage member, your subscription, etc. What about gear? How much did you spend? How long will it last. Dividing what you spent by the number of months you expect it to last gives you the cost of your gear. (If you’re a tech junkie like me this number might be a little scary!). Once that’s done add all of the numbers up and you have your monthly expenses.

Second: Do you have other sources of income? Many photographers are able to offset their expenses with a day or part time job. Many others are married or partnered with someone who helps defray expenses. If that’s the case, you can apply that income against your living expenses - but not your business expenses. (that’s cheating). Doing this will leave you with a realistic number that tells you approximately how much it costs to be you on a monthly basis. That’s an important first step.

Third: Think about whatever your specialty is and the time, from beginning to end that it takes to do it. If you’re a portrait photographer how long does it take you to shoot a portrait session? Count preparation time, the shoot, editing time and time associated with delivering product. When you look at it this way, it’s amazing how the hours can add up! The fee you charge for any service must offset the expenses you incur during the time it takes to deliver the service. Otherwise, you’re going backwards. If you figure out how many of these sessions you realistically shoot in a month, then you can compare the hours of work to the cost of business and living and dividing the cost by the time will tell you how much you have to charge to break even. (take a deep breath first).

All of that was simply to get us to a starting point. Some of you may be encouraged by what you see. If you’ve kept your expenses low then the hurdle is low enough to see your way clear without too much effort. However, if your expenses are higher it can be pretty sobering. (This is one of many reasons why I think consultants who tell photographers that they need expensive cars, watches and other stuff to impress high end clients are hurting more than helping. Your wealthy clients - the really wealthy ones - won’t notice what you’re driving. They couldn’t care less. I had the chance to sit next to a multi-billionaire having dinner at a restaurant bar in Florida. He was wearing a swatch. Do not extend your debt because you think that pulling up to a client’s house in a BMW is going to get you the job. Lots of other things yes. This one, no.) Ok - off of that soap box.

On to Pricing:

The number you figured out above is the number you need to make to break even. Breaking even makes your business a “going concern.” Breaking even means you can pay your bills and live to the next month. (Provided your bills don’t increase). Most businesses don’t break even so if you’re breaking even pat yourself on the back and be happy. But you need to do better than break even. You need to be putting money away. That’s really where pricing comes in:

Most photographers have either base-plus or package based pricing. Base-plus is more relevant to portrait photography. You charge a base amount, say $300 for a session, five digital files and one print, plus - any options the client chooses, IE for multiple poses, settings, etc. Package based pricing is more prevalent in event photography.

For some reason Photographers like to price packages in threes. Basic, Standard, and Super-Hyper Good are the norms. (though your naming conventions are better than mine). Pricing psychology tends to drive consumers to the center. If you are experiencing a situation where people are picking your base package it is because you aren’t doing a good enough job - from a visuals and value perspective - of selling the center package. (You have too much good stuff in the base package.) Or - Your site or price list is formatted in a way that makes the base package look more attractive than the other two. Either way, if this is happening you need to take a look at your packages.

Your pricing for each one of these packages needs to reflect the work you put into them. Setting your price by getting pricing from three other photographers in your area is a bad idea. Their expense structure may be different than yours. They may be charging more because they’re getting more business from referrals. There are lots of things involved in that. Your pricing should be based on the time it takes you to complete the services in the package, plus a profit margin that reflects your confidence in your business. More confidence = more profit (and an increased likelihood that you will walk away from under-paying jobs).

Here’s why this is important. When the client negotiates you have to be able to articulate the basis for your pricing. “I charge X per hour and this package includes 8 hours of coverage (8X), plus 10 hours of editing time (10X), plus 4 hours of delivery time (4X). If you want to pay me less let’s see if we can trim some hours.” Being able to articulate it this way means to your client that your pricing isn’t simply a made up number that you put on your site in hopes that someone might actually pay it. It is based on thought, labor and experience. By suggesting that you may remove a service - IE creating their DVD with the digital files on it - 3 hours of editing, formatting and file transfer time (3X) you tell them that the negotiation is a two way street. They understand that if they want to pay less you will do less. It’s compromise. You’ll be surprised how many people go back to starting to talk about adding things on.

That’s probably enough for today. Next week we’ll talk about ways to sell more prints, albums, etc. It’s easier than you think. In the meantime, as always and with proper warning flags attached, if you want me to take a look at your pricing, site, etc., know I’m always happy to. (Whether you’re a Pictage customer or not). There’s never any charge and so my opinions are pretty much worth what you’re paying for them.

Oh - and see you at WPPI! I’m the mostly bald guy running around in the Pictage booth or lots of other places. Feel free to stop me and say hi. I heart Photographers!




Kevin Swan said...

Great stuff, mate!

Paul Morse said...

Great post Jim!

Max Surikov said...

Jim, great post. Adding, matter of factly, to the client that you cost includes X number of processing hours is key.

Coby said...

Thanks Jim, great stuff for a newbie

Diane {Palmyra, PA Photographer} said...

VERY good points!! Although, I disagree, I like your naming conventions. ;)

Sarah Esther said...

thanks for the points! I wonder if I could convince my clients that I'd be a better photographer if they'd pay for a BMW.... jk :)

kris fulk said...

Your articles are always so enlightening, Jim! Thanks so much!

Colorado Wedding Photographer, JasonG said...

Great article.

David Wittig said...

Great article Jim!

Aric Becker Photography said...

Great stuff!! I would love for you to take a look at my site and pricing. How can I email you my info?

Brian Noppe Photography said...

Even seasoned pros can learn from this article....Merci beaucoup!

Kevin Jacobus said...

Hey Jim,

At some point I started being aware and practicing exactly the method you've written about--and I consider it educating the client as opposed to hoping they respect the "art." Most people understand getting paid for work done. Putting it in practical terms means anyone can understand it. I've found that when a client leaves educated, I am more successful. Great post, and looking forward to more!