The One Piece of Advice That Completely Changed My Business

October 28, 2017

I started my photography business three years ago. I thought my photos were good enough that I could start making a little money. I had one problem: I didn't know anything about business. I figured that my photos and skills would magically create a profitable business.  And like so many photographers who turn to their hobby for a little extra cash, I was just happy to have the few extra hundred dollars every week or two. As my client list grew, I thought that more money was the same thing as profit and success.

 

I could not have been more wrong.

 

My "business" didn't have a real business plan. I didn't budget for anything except taxes and income. Put simply: my business wasn't built for profitability and sustainability. About four months ago, I decided to really learn about Business.

 

 

A New Mindset

 

I began to learn business reading Alicia Caine's The Photographer's Pricing System. Ms. Caine's book completely changed my mindset. Specifically, this paragraph on page 14 made all the difference:

 

"If you have business growth that needs to take place, the money for that growth has to come from somewhere. Where is it going to come from? Your clients! They are the ones who are going to pay for your marketing, for your education (including this book!), and for your computer and camera. Your clients don't just pay you for your time and cost of goods. They pay for every aspect of your business. And when you build a price list that is focused on covering just taxes, your time, and cost of goods, you will be forever reliant on your second income--or main family income--to keep your photography business alive."

 

There, in one simple paragraph, was my problem. My "business model" was completely wrong: I was only charging my clients for my income and taxes. As a shoot-and-burn photographer, I didn't have any "cost of goods sold," so I told myself that any money coming in was either my money (income) or money for the government (taxes). I was not separating personal income from all other business expenses. And that was my problem.

 

If I had to rent a lens or buy new memory cards, I just said to myself, "Well, I guess that's a little less money towards personal bills this month." When I printed business cards, I said, "Maybe it'll take a little longer to pay off our vacation." Each time I had a business expense, I just took it from my personal income. More business expenses meant less personal income from my photography business. For a few months this year, as I tried to grow my business, I didn't give myself much personal income. Why be in business if you don't get a paycheck?

 

Reading Ms. Caine's book gave me clarity and a new mindset. I shouldn't be paying for my business; my clients should pay for my business.

 

 

Budgets and Business Plans

 

My newfound clarity meant that I needed a new business model and new pricing. When I started to learn about business, my average total from a family session was about $250. I always set aside one-third for taxes. The remaining $165 went towards my income and my business expenses. If I was budgeting for growth, I should have been putting another one-third towards the business, which would leave $83 of personal income per session. If I spent an average of five hours on each client, that meant that my "luxury" service (paying for photography is a luxury for just about everyone, right?) only paid me $17 per hour. I could make more money in so many other ways, other ways that wouldn't require me to be owner and operator. Shouldn't a luxury service that I own bring me higher income? 

 

The other sad reality? One session per week would only yield me about $4,300 of income for the year. As anyone with a business knows, no matter the actual hours spent working, your business is always on your mind, 24-hours-a-day. Is that kind of time, stress, and effort worth $4,300 per year?

 

Here's where a true business model and proper goal-setting changed my business. 

 

First, I simply took stock of the hours I spent on my business. I usually spend about 15 hours per week on my business (two each weekday and five or so each weekend). I probably work 48 out of the 52 weeks each year. That's 720 total working hours for my business each year. 

 

Up next, I had to identify the income I really wanted to make from that time. How much personal income did I want to put in my personal checking account? I'm not talking business expenses or taxes, just income that'll go towards my family.

 

Let's go hypothetical from here with a round number. Let's have our 15-hour-per-week photography business bring in $15,000 of personal income. That's what 15 hours per week would yield after taxes if we want to match the United States national median income of about $60,000 per year.

 

Here's where the business model really matters. Again, I'll take this from Ms. Caine's The Photographer's Pricing System. If I want to run a healthy business geared towards growth and sustainability, that $15,000 income should be 25% of total money coming in. Why? Here's Ms. Caine's outline for earnings:

 

Taxes 30% ($18,000)

Personal Income (Paycheck) 25% ($15,000)

Cost of Goods Sold (prints, albums, etc.) 15% ($9,000)

Overhead (any expense that keeps your business running, including gear) 10% ($6,000)

Marketing 5% ($3,000)

Emergency savings 5% ($3,000)

Education and growth 5% ($3,000)

Outsourcing 5% ($3,000)

 

All of a sudden that $15,000 income requires you to bring in $60,000 from clients. That's a lot, right? Sure, but this plan focuses on growing your business and clients paying for that growth. Again, that's the key: your clients pay for your growth. Do other company owners use their personal paycheck for marketing or space rental? No! Your photography business should be the same.

 

 

Pricing

 

How can these numbers help you figure out your pricing? Let's first establish a healthy balance of your time. Ms. Caine's book suggests that 50% of your available hours should go towards clients and 50% towards the business, stuff like marketing, reading, and writing articles like this one.

 

That means you have 360 hours per year to put towards clients. Divide that by five (the number of hours you spend per client), and you theoretically need 72 clients per year. Since you need to bring in $60,000 to make your desired income, simply divide $60,000 by your number of clients (72) to get the average gross income each client needs to bring in. In my example, each of your 72 clients needs to gross at least $833.00 for you to give yourself a paycheck of $15,000 for the year. 

 

Again, each session needs to bring in $833.00 for you to make the paycheck you want in the time you have while maintaining a healthy business.

 

Will my current clients pay $833.00 for a session and all digitals? I doubt it. They're too used to inexpensive sessions where I give away digitals with a $250 session fee.

 

That's when I knew I needed shift to In-Person Sales, selling prints, wall art, albums, and more. And I knew I needed to provide a more personal, luxurious experience. That's what I'm in the midst of doing right now with my business, transitioning to In-Person Sales. Read this article on Photographers' Cooperative for more information about the In-Person Sales business model.

 

Remember, this is how you start to plan for sustainability and growth. When your external hard drive is full, your business should buy a new one, not your personal income. When your sensor needs to be cleaned, that comes from your budget for overhead, not personal income. When you want to run a Facebook ad for holiday mini-sessions, that's from your marketing budget, not personal income. When you want to attend a photography conference, that's from your education budget, not personal income.

 

Your business shouldn't be paid for by personal income. Your business should be paid for by your clients.

 

There's one more bonus to having a plan like this: there's a chance that you might save more for taxes than you need to. If that happens, then bonus! You get more personal income or more money to put back into your business.

 

Maybe you're about to take the leap from a hobby to a business. Or maybe you're a year or two in, and you just never ran the numbers. Your pricing might be arbitrary, and your goals might be vague. It's time to be concrete and specific. And it's time to have your clients pay for your business.

Aaron Taylor is a stay-at-home-dad and professional portrait and product photographer. Aaron is forever blessed to be in love and married to his best friend and partner in parenting. Most of his time is spent chasing his curious, energetic kids, a three-year-old son and one-year-old daughter. Aaron lives in Columbus, Ohio. Before moving to Columbus in the summer of 2016, Aaron was a high school English and Drama teacher in Montgomery County, Maryland. He spent ten years in the classroom and earned National Board Certification in English Language Arts. Give him his family, a good cup of coffee, and a homemade cookie or three, and all is right in Aaron’s world.

www.aarontaylorphoto.com

www.facebook.com/aarontaylorphoto

www.instagram.com/aaronftaylor

 

 

 

 

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