CHAPTER 7: Pricing and Products

Different business models work for different photographers. There is no one right way to price your services, but there are some guidelines to understand so you can stay in business and earn a profit.

When pricing your services and products, there are many things to consider, including your costs to produce the product or service, your living costs, and other business expenses. Are you going to run a high-volume, low-cost business model or a low-volume, high-cost boutique business model?

When you are in business, your main goal is to earn a profit. This is different from your goals as a hobbyist. Pricing can be tricky; you want to book new clients, cover your costs, and earn a profit—otherwise it’s not a business, it’s a hobby.

Don’t cheat yourself and rush through this process. You must put in the time to price yourself appropriately; otherwise, you might find yourself working at Starbucks next year.

There are also ways to adjust your prices by understanding how consumers shop; by using those concepts, you can create a pricing plan for your products to increase your profits.

How do you figure out how much profit you need? Here’s a quick-and-dirty version to give you an approximation. Figure out the salary you need to earn and multiply it by 3 (or 4 to be conservative). This is what your business needs to gross in total sales, also known as total annual revenue.

Let’s say you need a salary of $30,000 in order to make this business work for you. This means your total sessions and product sales need to be a minimum of $105,000 in gross sales. If you shoot sessions and include image files for $300, that’s 350 sessions you’d need to do in a year. Not very realistic, is it?

My advice is to start with your business plan and your budget (refer back to Chapter 4). Without understanding your costs and overhead expenses, you are simply guessing. When you put together a business plan, you end up with market research and salary projections, and this kind of information should be the foundation for setting your pricing and packages. Of course, you’ll need to adjust as you go.

How to Price

How much should you charge for your products and services? It’ a question every photographer faces and the answer is not simple—if it was, you wouldn’t be struggling with it. The real problem is a lot of businesses are not sure how to price their products, and by starting too low they lose money every time they sell a product. This results in them going out of business…slowly. Pricing is no place for emotions; this is strictly business.

If you are a portrait photographer, I recommend visiting a local photography chain for a session. Not only will you get access to their pricing (which may be higher than you think) you’ll also experience their sales presentation. You’d be surprised at how effective their tactics can be.

Understanding Your Market

Understanding your target market, and figuring out what your ideal client is willing to pay, is an important consideration when setting your prices. You also want to consider your competitors’ pricing so you have an understanding of the going rates for photography in your area.

Check competitors’ websites, network with photographers, and ask mentors to give you feedback on your pricing. I do not recommend approaching competitors posing as a client. Most photographers can tell when they are being shopped by another photographer, and it can lead to a poor reputation for you.

In the Bay area where I live, wedding photography rates average from about $2,500 to $4,000. My competitors, however, serve the high-end market, with starting rates at $5,000 and some going up to the $10,000 range. How do I know this? From networking in the industry and being open and willing to share my pricing and knowledge with my colleagues (and competitors). When setting my own prices, I do not base my pricing and packages solely off my competitors, but I do consider it.

There is more on understanding your market in Chapters 3 and 13. In the end, part of the process will be experimentation on your part to see what the market will bear.

Gross Earnings vs. Take-Home Pay

There is a big difference between your business’s gross earnings and profit, which translates into your earnings. I cannot tell you how many times I have heard photographers (usually wedding photographers) talk about how they earned six figures in a year. Once you start to question the exact numbers, it turns out they grossed six figures but took home about 30-35% of the gross revenue. This means you need to gross about $100,000 in sales to see a salary of about $30,000.

Understanding Your Time and Costs

To understand the costs involved with a particular service or product, take a look at all the time involved to create the session or product from start to finish.

Make a list of everything included in a package’s associated costs, such as flash drive if you include files, prints, canvas, album, album prints, shipping, proofs, proof box, packaging (bags, tissues, bows), etc. Add up everything and you have a total for your cost of goods for a package.

Now you want to understand how much time goes into creating a package. As an example, here’s what you might estimate in terms of time to create a portrait package including prints, an online gallery, and a small album:

• 2.5 hours. Client meetings and communications

• 1 hour. Gear prep

• 2 hours. Shoot

• 1.5 hours. Drive to and from session

• 1 hour. Download cards and backup files

• 2 hours. Color correct/edit/cull

• 2 hours. Retouch and apply actions (for a small shoot)

• 1 hour. Prepare and order prints and proofs

• 1 hour. Prepare image files for client and/or archival

• 1.5 hours. Design album

• 1 hour. Create client gallery and online slideshow

• 1 hour. Receive and review prints from lab and album from binding company

• .5 hour. Package everything up (album, prints, proofs)

Total: 18 hours for a 2-hour portrait package

When you see how much time goes into this package (not to mention lab, album, and packaging costs), you might find it isn’t profitable for what you priced it at. (Whoops!) And this is before adding in costs of overhead, which you might not have too much of if you are starting out, but will need in order to run a business (insurance, equipment, marketing, sample products, business cards, brochures, website, and so forth).

Therefore, the pricing formula involves figuring out all of these costs—your time, the cost of goods sold (COGS), a portion of the overhead, and any other business expenses. This is how you become profitable and stay in business. You have to ensure your pricing enables you to earn a living; otherwise, you are just playing at an expensive hobby. To recap:

• Cost of goods sold (COGS). These are your hard costs to provide the package. Might include the album, prints, packaging, and other product costs.

• Time required. The number of hours you spend to create the package. Set an hourly rate you are comfortable with and that covers the expenses. Let’s say $20 per hour makes it worthwhile for you: That’s going to be 16.5 hours x $20 + taxes + withholding for insurance.

• Overhead and other expenses. As we discussed earlier, set a budget for your business to include all the expected overhead costs, and then divide that cost into the number of packages or sessions you plan to sell. Let’s say the overhead and other expenses (like marketing) cost you a total of $22,000 to run your business annually. If you book 30 weddings, the cost of your overhead to factor into each wedding is about $750. That amount is a cost of doing business, and needs to be added to the price of every session or shoot. This is where many new photographers fail, and it can lead to bankruptcy. Not good!

It’s a lot of work to do this initially, but it is essential if you are serious about your business. Once you get this groundwork laid, you can begin to look at different business and pricing scenarios:

• 50 portrait sessions per year (A) with an average sales package of (B)

A x B = estimated gross sales

• 30 weddings (A) at an average sales package of (B)

A x B = estimated gross sales

• 80 events a year (A) at an average price (B)

A x B = estimated gross sales

• A combination of 20 weddings (A) with an average sales package of (B) plus 30 portrait sessions (D) with an average sales package (E)

(A x B) + (D x E) = estimated gross sales

By sketching out those different kinds of scenarios, you can see what different pricing options look like in gross sales. By doing this exercise, you will be much better prepared to create pricing, set goals, and determine the direction of your business.

Now let’s look at these equations using real numbers.

Weddings

Most established wedding photographers shoot between 15 to 45 weddings per year. The number of weddings they photograph depends on factors such as how well they market themselves, their reputation, their ability to perform well during consultations, and their understanding of appropriate pricing.

Some photographers prefer to keep their after sales (and the time involved) minimal so they can focus on shooting as many weddings as possible. On the other hand, many of those $10,000-per-wedding photographers you hear about are perfectly happy to shoot no more than 10 weddings per year, allowing them to provide excellent customer service to a small group of clients, and to work fewer hours to be with their families.

Take some time to review the following potential scenarios to get a sense of what different pricing models could look like in your business. Keep playing with figures until you get to the number of shoots that feel reasonable and realistic for you, and then adjust pricing models to get to a salary you are comfortable with and that the market will bear.

• Scenario 1: 37 weddings with an average total sale of $2,800 per client (including after sales) = $103,600 in gross annual revenue. Aiming for the PPA standard of keeping about 35% of your studio’s gross annual revenue, you’d earn about $36,000.

• Scenario 2: 45 weddings with an average total sale of $ 1,900 per client (including after sales) = $85,500 in gross annual revenue. Keeping 35% of that leaves you with almost $30,000 in take-home pay.

Portraits

Established full-time portrait photographers tend to shoot between 50 and 250 sessions per year. An important factor that helps determine the number of sessions a photographer can do is whether she has a studio (where she can schedule several sessions per day and control the lighting) as opposed to doing sessions on location with available light (requiring more prep time and driving).

Are you interested in a high-volume business model with lower pricing, working with kids every day and shooting as much as possible? Or would you prefer a low-volume business with higher pricing, focusing on fewer clients and offering exceptional customer service? Can you see your business expanding to include several different photographers? Will you have a big focus on after sales (which takes time away from shooting to create and deliver the products)? Think about these issues and consider how you want to run your business.

Consider the following scenarios to get a sense of what you can earn with different pricing models. Adjust the numbers for your own situation. Once you get some final numbers you think will work for you, plug them into your budget.

• Scenario 1: 72 portrait sessions (6 per month) with an average total sale of $1,200 per session (including after sales) = $86,400 in gross revenue. According to PPA’s formula, that leaves you with about $30,000 as your take-home pay.

• Scenario 2: 205 portrait sessions (17 per month) with an average total sale of $650 per session (including after sales) = $133,250 in gross revenue, and about $47,000 for your take-home pay.

With each of these scenarios, in order to increase profits you need to either increase the number of sessions (usually through additional marketing), the total average sale (by focusing more on your sales approach), or both. You might not get to these figures in the first year, but if you have a good road map, and you spend time planning and implementing new business, sales, and marketing strategies, you can get where you want to go.

Consider Your Services

Are you providing a custom photography experience, or more of a get-em-in, shoot the same six poses, and get-em-out approach? Does your custom photography service include creating portraits designed for the clients’ personal tastes? Do you shoot on location, so each experience is customized to the client? Or do sessions take place at your studio with one backdrop and lighting setup, so it’s easy to do multiple sessions in a day?

Be sure your pricing reflects the value of the services you are providing. Help clients understand this by educating them about the differences in your approach through the language on your website, what you say in consultations, and your handouts.

Living Expenses

In order to stay in business, you need to be able to cover your living expenses. This means you must consider those expenses when pricing your services. For example, let’s say you price your services at an average price of $1,500 and you expect to book 40 weddings each year. That’s going to bring in a gross total of $60,000. Not too bad, right? Wrong. Once you factor in your overhead and COGS, you are lucky to end up with 35%. This means your salary is actually $19,800.

See how fast this can go downhill? The U.S. poverty threshold for 2012 for a family of three is $19,090. I’m not trying to scare you, my goal is to educate you on the realities of this business, so you can set appropriate pricing that will allow you to earn a decent living and keep doing what you love.

Single-Price or Package Model?

Is it better to have a one set price or to offer packages? It depends on your personality, your goals, how much you want to shoot, your ability to sell yourself and products, and how you’d prefer to run your business. Both models work.

The first model is a single price for your time (the creative or sitting fee) and an à la carte approach to products.

Typically, this price model does not include image files; otherwise, there will be little to no after sales. If you are going to include the files, however, be sure to add the value of that on top of your creative fee.

The second model is a package model, where the client pays a flat price for both the shooting fee and products. For example, you charge a set fee for a portrait sitting and a collection of prints. A wedding photography package might include the shooting fee, an album, and some prints.

Single-Price Model

If using the single-price model appeals to you, make sure you charge enough for your time and assume you will not sell any additional products when putting your budget together. Remember, though, that doesn’t mean you can’t suggest other products. Make sure clients know what you offer and give them the opportunity to buy. Create a product guide and give it to every client, so they know the product options and prices.

When considering what to charge for a shooting fee, you need to figure out the total amount of time you spend on the job, which includes:

• Soliciting the job and meeting with the potential client

• Shooting

• Post processing

• Handling customer service, including talking with clients on the phone and answering emails

For example, if you are shooting an event and plan on being there 7 hours, you must take into account the hours required to download, sort, edit, and output the images; plan for the shoot; prep the gear; drive to and from; handle customer service and client meetings; book the client; and so forth. Instead of 7 hours, the actual time needed for the job is probably about 40 to 60 hours.

If you charge $3,000 for coverage, this is $50 to $75 per hour for 40 to 60 hours, not over $400 per hour for 7 hours of work (like the client might assume). Of course, you still have other expenses to include. We can’t forget about adding in the additional costs of running your business, like overhead and marketing. Once you factor in those costs, you are left with less.

Let’s say you have figured out you need to subtract $900 per wedding off the top to cover overhead and business expenses. Now we are working with only $2,100, leaving you with closer to $35 to 50 per hour. If you could earn that rate 40 hours a week, 52 weeks a year, that wouldn’t be bad at all—but that’s not the reality of this business.

Another way to look at this is: can you make a profit photographing a wedding for $2,000 or whatever figure you have in mind?

That depends on the number of weddings you will shoot in the year and your costs.

If you book only one wedding a month, that’s a gross profit of $2,000 a month or $24,000 a year gross revenue. Is that enough? Considering the 35% model (according to the PPA), your actual earnings would be in the neighborhood of $8,400. This is not fun to think about, I know. However, do the hard work now, and save yourself many years of frustration later. It’s possible to run a photography business and love your life, but you have to set yourself up for long-term success.

Package Model

Now let’s talk about package pricing. These are usually associated with weddings and portraits, but can easily be applied to other types of photography businesses. It is a matter of combining the costs of the photography time with a set of additional services or products.

But how to come up with a set of packages and what to price them? Let’s say you offer three packages, one for $3,000, one for $5,000, and another for $7,000. Most people will look at the three choices and go right for the middle one. They perceive the cheapest to be the lowest quality, while the most expensive is too much, making the middle one just right.

Look around at how other companies do this all the time. There is a good reason the iPhone and iPod come in three sizes. Each comes with a different memory capacity and for many people it’s easiest to justify getting the middle one. Seems like the best balance between memory and money, right?

In my experience, having a set of three to five packages works extremely well. The lowest package offers good value for the budget-minded client while the top package is designed to make the others look more affordable. Most people want the middle package, as it feels like the safe choice. However, I always sell a few of my most expensive packages every year. When clients tell me they want the most expensive package, I always have to remind myself to act as if it’s perfectly normal!

Working for Peanuts

There seems to be a philosophy in the photography business suggesting that those starting out need to pay their dues or work their way up the business ladder. This is the kind of advice given on many photography forums, especially when it comes to discussing pricing.

The people who are suggesting this are not on your side. Don’t misunderstand me; the photography business is not easy and if you charge too much for an inferior product, your business will not succeed. Many of the photographers who think you need to suffer through the starving artist phase of your career are thinking like artists and not like business people. Chances are you may struggle financially in the first years of your business while you figure everything out, but to purposely price yourself too low (or even worse, work for free) is a recipe for financial ruin.

There is one other important thing to know about pricing yourself too low: It undervalues your work. There is a perceived value to anything you buy, and pricing is the first indication of the value of a product. Take a car mechanic for example. If you need a car repair and get quotes (say $1,000 to $1,200) from a variety of mechanics and then come across a mechanic who quotes $300, your immediate thought is he won’t do as good a job as the others. The same is true for your pricing. You are telling the client how to value your work.

Finally, you need to make sure you are not giving away too many extras that cut into your profit. Are you the photographer who gives away the image files with every shoot, guaranteeing zero product sales later?

We used to give away image files with all engagement sessions. It never occurred to us how much money we were throwing away until the following happened.

One day at a wedding, we headed into the reception to photograph the details. To our absolute horror, the clients used their engagement files to decorate the entire reception. They had an album professionally designed (by someone else), a large portrait, stickers on the favors, photos as table signs, and a slideshow. The worst part was, they purchased all kinds of products…from someone else. Now they hadn’t done anything wrong, but we were upset to see a cheap representation of our work and we allowed someone else to profit from our work. We should have had a great sale from the client since they obviously loved our work. The next day I changed our packages so this would never happen again.

We now offer the files as a bonus with a minimum engagement product purchase of $1,000 or more. Alternatively, clients can purchase only the files for $800. If a client is considering a product and they want the files, it can be enough to justify the purchase. It’s a great way to make your clients feel they’ve gotten something extra.

Products

Let’s look at some products. You need a good mix of affordable and higher priced items to ensure there is something for everyone and you are not missing out on potential sales by offering only the basic prints and albums.

If you are a sports photographer, cover the local news, or photograph concerts there is not going to be much of an opportunity for after sales. However, if you photograph high school seniors, pets, weddings, family, maternity, boudoir, or kids, after sales should be a big part of your business if you want to increase your profits. In Part 3, we’ll talk about how to actually sell these products, but for now, start thinking about the different types of products you can sell.

1. Albums. Vendors offer a wide variety of albums for every budget. Some album companies will design, print, and bind the album, so you don’t have to learn how to design albums or put time into album production, but you still get the benefit of the sale.

2. Framed collages. This is a popular item and it’s ready to hang when the client receives it. We get our framing done through GNP Frame, and send the print directly from our photo lab to make everything super easy.

3. Canvas wraps and metallic prints. These are not something clients can print at home, making them great products to offer. They are ready-to-hang products, so you don’t need to mess with framing.

4. Printed notecards. Save-the-date cards, thank you cards, holiday cards, and birth announcements are popular products but you have to price them carefully in order to maintain profitability. Make sure to set a minimum order on these so you get paid for your time.

5. Retouched image file. This is a single image delivered in a variety of sizes and formats depending on what the client wants. Charge for the time involved in retouching and preparing these image files, otherwise you are taking time away from profitable activities when you do freebies for your clients.

6. Proof prints. This is a complete set of prints from a session or wedding. Proofs are usually sized at 4x6 or 5x7 and contain a complete set of the images from the shoot.

7. Digital files. The price of the full set of digital files needs to be high enough to make up for any after sale losses. By supplying the files you are allowing clients to get the prints and other products from someone else. Set the price to make the session worthwhile if this is the only purchase.

8. Signature portrait. The image is printed and mounted with a mat wide enough for guest signatures. If you aren’t sure about the amount of space needed for the signatures, ask the frame company for advice.

9. Slideshows. You can put together a slideshow quickly if you have the software. The other cost involved is packaging. Slideshows can be sold individually or used as a bonus item to generate higher sales.

10. Image boxes. This product works particularly well for boudoir clients and as a high-end portrait product. It makes a great mantle display with a tabletop easel and is a way to help clients enjoy (and purchase) a number of images.

11. Folios. These are a relatively inexpensive product and are great to display a couple of small images in a hutch or office. Some album companies offer these gorgeous folios in beautiful silks.

12. Mini accordion albums. These are great sellers for senior portraits and baby photographers. It’s an inexpensive item, easily carried in a purse and shown off to friends and family.

13. Jewelry and handbags. These products are popular with newborn and baby photographers. Find a specialty vendor online to order some samples.

Once you have figured out what products to offer, you need to order samples to show in client meetings, and design a product guide (using images of your samples) to give out to every client. If you don’t show it, you won’t sell it.

(4) Save-the-date cards.

Other Pricing Considerations

There are a few other issues related to pricing that may come up for you. Here’s how to handle them:

Pricing and Sales Tax

Don’t be fooled into allowing clients to get away with not paying sales tax, otherwise you will get stuck with the bill. Clients may balk at this, but it’s the law. Clients do not refuse to pay sales tax in retail locations, so do not allow yourself to be taken advantage of.

Friends and Family Discounts

Should you offer your services to friends and family at cost or for free? It’s only a couple of hours to shoot their wedding, right? Wrong. When you consider that you will have 40 to 60 hours involved from start to finish, it seems like a lot to ask, doesn’t it? That’s going to take your focus away from a paying client or marketing your business while you work on their wedding.

Pricing on Your Website

It makes sense to put your starting price on your website in order to give potential clients an idea if they can afford your services. The more expensive you are, the smaller the client pool. In this case, you want to do some prescreening to ensure you aren’t wasting your time or clients’ time by giving them an idea of your pricing before they meet with you.

Are you wondering how you are going to sell all these great products? I know, sales can be scary. I hope that now you can see how essential it is to price your services carefully and offer a great product mix to benefit from after sales. In Part 3, we get to the sales process, and I’ll share with you the various sales tools, techniques, tips, and tricks I use to sell all these great products.