What do you mean I can’t keep all the money? The Cost of Small Business.

disclaimer: This is the school of Angel Gray version so pretty please forgive me if it isn’t exactly MBA worthy.  I write simply from my experience with Angel Gray Photography and the experience of the retail store my husband and I own. Also, I am not writing in defense of pricing but rather to help offer insight into pricing.

I’ve been writing this post in my head for years. I’ve read several other articles with the same message, I’ll post links to one or two at the bottom. Others I won’t provide links for because the tone sounded angry to me, like the writer is mad at people for not having a complete understanding on their own.  So, first of all, I am not angry! I totally get it! Obviously there are business savvy people out there and then there are the rest of us! Before I owned a business (let alone two of them) I assumed that the money I paid for things – be it my new outfit or the hair stylist or even a car – went straight into the hands of the business owner. I knew there was some cost associated, the shampoo, the employees at the store, the actual physical stuff (now known to me as cost of goods sold) but I never thought beyond that – not once.  That will sound naive to some of you but I think that a lot of people have the same assumption if they’ve never had any reason to dive deeper into business. Geez I majored in Social Sciences, cut me some slack!

Hey, I’m not complaining! My husband and I have been married 12 years almost and 10 years ago we didn’t plan to be business owners. But it is where we’ve been led in our life and it’s working for us. Owning a business is not for everyone and does have it’s pros and cons but I just want to be sure to say that I am thankful for free enterprise. I’m thankful for the opportunity to start a business doing what I love, cultivate it and watch it grow. I am thankful for the flexibility my work offers me, giving me time during the day if I need to go on the school field trip, take a child to the doctor or work from home.  I am thankful for the challenge that comes with striving to have a successful business – it’s fun and exciting!  I’m listing below some of the costs associated with having a business only to help raise awareness for small business and photographers everywhere.

So, here’s the thing. Photography can be expensive. Of course it depends on how much you decide to invest but let’s just assume you want a photographer with experience, professional customer service and to come away with beautiful artwork for the wall, an album, maybe some digital files for archive, etc.  If you’re looking for a wedding photographer you’ll want all these things and more: full coverage on your wedding day, engagement session, artistic vision… You might browse through various websites and wonder why there is such a big price range. I want to help demystify that for you. And really it applies to all small business. You might know that my husband and I also own a video game store. Dana opened that in November 2010 and I am always intrigued by how very different yet similar our businesses are!  There are three main contributing factors to price -at least for me and on varying levels for him-  Experience/Customer Service,    Market Value/Supply and Demand,    Cost of doing Business.  Yes that is a little oversimplified but my article is on the verge of needing chapters so let’s keep it condensed!

Experience/Style/Customer Service/Reliability:  Yes I just lumped those all together! This is the area where consumers have various priorities – there’s no right or wrong.  For example, when it comes to style I care a lot more about good jeans than good sunglasses. Why? I wear my jeans a lot and keep them for years. I know from experience that certain brands of jeans are better than others and yes they do come with a higher price tag. I drop/break/lose my sunglasses all the time so although I recognize the value of a good pair, I don’t want to invest in them.  Can you sometimes find a gem? A cheap pair of jeans almost as good as the more pricey ones? I’m sure it’s possible! Is it going to happen very often? Nope. Typically you get what you pay for. I know it’s not rocket science, but when you purchase a Coach bag you are not just paying for the premium leather. You are not paying simply for the name either. You are paying for the style and the quality, something that doesn’t happen for brands overnight. Customer service and reputation levels come into play here as well. When you purchase a massage at the spa vs. the massage school you will pay more for lots of reasons, one of them being customer service and overall experience. Do you want to be pampered? Are there times when you just need more customer service than others? Times when you don’t? I  know for me I can DIY my kids bedrooms and I’m fine with the results but when it comes to my main living space, I’m at a loss- I need help!  If I need a pedicure, I’ve gotten pretty good at doing my own but there are times (most of the time) that I want to pay for the experience, for that 45 minutes of relaxation. ahhhh

Oh. My. Gosh. Don’t even get me started on food! Are you as happy with a date night at McDonalds as you are at your favorite restaurant? What makes it your favorite? Do you order and ask why it costs more than the fast food place? No way! You know why it costs more -it’s better in every way and it will be good EVERY. TIME.

So how does this relate to photography? You pay for the photographer’s experience. This is HUGE when it comes to events like weddings where there are no do-over’s.  It’s huge, if you ask me, all the time because who wants to put any amount of money into something and not be happy with the end result? Once I bought a watch at Target only to be quickly reminded that there’s a reason for the price tag on better brands – they work for more than a couple months! Even if the first investment was small, I still felt like I threw money away. You pay for style. Finding the photographer who really fits for you will likely end up translating into a photographer with consistant style (and they are probably using quality equipment.) You pay for customer service, reputation and reliability. There is broad range here with photographers. From full service help before during and after your session or wedding (which is the model for AGP) to quicker shoot and burn services offering very little when it comes to customer service (you’re kind of on your own with your disk in this model.) Of course there is also the in-between and yes, the fit for you, your budget and priorities might be the shoot and burn photographer. Like I mentioned before, there is a big range of price when it comes to photographers and several factors that play into it. Your priorities and budget will determine your decision. It’s apples and oranges to compare shoot and burn to full service, or someone who is just learning to someone with experience. Think about your priorities. Maybe photography to you is like sunglasses to me.  Or maybe photography is a very big deal for you. Maybe you’ve realized that experience, style, customer service and reliability are valuable to you in this area. Whatever you do, look carefully at your options. Be aware that there are masses of “professional photographers” out there who are in a beginning stage of learning while working and even though the investment is small, just be sure you understand what you are paying for.

Market Value & Supply and Demand: Yep I’m combining again! Market value is simple and doesn’t require much explanation. Things cost more in different places. If you live in Miami, things generally cost more than Melbourne. If you live in LA, things cost more than Orlando. From the home you live in, to the plumber to the photographer.  However, if your photographer is from Orlando but shoots all over the world, his/her market value is not based on Orlando anymore. Also, if your photographer is in high demand (supply is less than demand) he/she will cost more. You can see this example when you call for an appointment and they are booked out further than you thought they would be. This happens to me all the time with my house cleaners! But they are AWESOME so I’m okay with it and I plan ahead! I would rather have them come once a month than pay less to have someone every two weeks. They are that good. When it comes to retail there are more subtle differences across markets (cars, shoes, video games…) EXCEPT when supply is very low and you find yourself shopping Ebay, paying double for that toy your child asked Santa Claus for!

Cost of doing Business: This is the area that I was CLUELESS about for so long. Before I list out some of the expenses related to running a photography business, I want to remind you that this applies to all businesses! Of course there will be major differences, but it would make the world a better place if we all just agree to take cost of doing business into consideration when we start to form thoughts on price.  Especially for small business. I think I can speak for all of us when I say, we don’t get to take all the money home – or even half! Professional Photographers of America sets a benchmark of 35% for photographers bottom line profit. We are encouraged to aim for that and no it doesn’t include a benefits package. My husband and I, like all small business owners, are responsible for our own health insurance, retirement savings and tax payments.

One BIG note here: Some photographers are not factoring their cost of business into their price. I’m not judging – I was one of them for a while and it is characteristic of a business in early stages to do that. Maybe they are funding some of the expenses from their personal accounts rather than the business funding itself. Or maybe they have had some help from someone outside, mom or dad, credit cards, you name it.  Or maybe (like me) they just don’t know enough to include all their costs. I figured it out early on, once it came to tax time, as I started adding up expenses then realized OUCH, “That’s my bottom line?”  It has taken me years to get acquainted with how to set prices and to see the bottom line get just a little bit better every year.

So far we know that price is effected by experience/customer service, market value, and now the biggie: COST OF DOING BUSINESS.

Explanation before the List: Oh man this will vary so much from business to business depending on how much the business offers the client, whether there are employees, a studio etc. I started out with very little overhead, working only from home, offering minimal customer service and having no employees. That’s generally how you start out unless you have some major investment funds! Nothing wrong with it, but as my business grew, the demand for my work grew and being only one person (with a family too) I was faced with a decision. I could focus on less clients and take things to the next level with quality and customer service OR simplify things in order to continue to shoot higher quantity.  I’m just a quality kind of girl.  I choose it above quantity every time. I’d rather have one good pair of jeans than three cheap ones!  So, my decision was obvious.  Flash forward a bit and currently, at this stage in my business, I have a studio -with modest rent thank goodness. I have the studio because I saw a need for my clients to have a place to come sit with me, review their images, receive help figuring out what they want to do with the photographs and see and touch lots of samples from albums to wall art, etc.  I’ve had the studio for almost 2 years and am 100% happy with this decision because I feel like my clients are SO much more satisfied after receiving help like this.  Plus I don’t have all the stuff at my house, which my family kind of likes too.  I shoot in the studio sometimes too which is a huge benefit of having the space but not the #1 reason I decided on it.  I also have an employee, a graphic designer slash business manager who offers my clients yet another service – professional graphic design. This comes in handy for our beautiful wedding albums, custom greeting cards and fabulous storyboards. It speeds things up, improving customer experience and Kristi does accounting too so yeah, no brainer, she’s awesome.  I’m not a graphic designer, I’m a photographer. Oh and I’m definitely not an accountant. By hiring Kristi I can offer my clients something better.  Of course this is based on a business model for full service, high quality products.  It is not the only way to do it and if it stopped being a good fit for my life I would need to reevaluate.

The LIST: (In no particular order. Some prices are listed, other’s estimated. Obviously equipment, computers etc. have been acquired over time for me -years. If I couldn’t come up with an accurate number quickly I left it off and assumed you get the idea.)

Time. Time is a major commodity for me and all of you I’m guessing! The time I spend shooting is only a fraction of the time I pour into my work for clients and for Angel Gray Photography. From the customer service before and after a shoot to the post-shoot editing, to the preparation of products and finally the packaging. Check out this cool pie chart I saw on Facebook via a photographer named Gianlucca Colla: https://www.facebook.com/photo.php?fbid=301297013248656&set=a.107341685977524.4470.100001050806755&type=3&theater

Cost of Goods sold. Might as well start with the obvious right? Even I knew about this one ahead of time. The cost of your prints, canvas, albums, etc. is of course one factor in the final price. I provide a lifetime guarantee with almost all my products because they are so high in quality.

Equipment. Trying to estimate cost of equipment is tough and it will vary between photographers. For me it means two professional camera bodies (one for backup) and all the best when it comes to lenses. The total value of my equipment including lighting equipment is in the range of $12-15,000.

Computers and software. I need to use the best monitors and software to offer professional editing. I use special software for slideshows, I use Quickbooks for accounting and I use a web based program for business management. I have to have the best solution for backing up digital files in order to assure my clients the safety of their images, so I use a Drobo. I use a lap top at the studio (which I bought used in great condition) and an imac at home. No way around this one! $5,000 (Don’t forget computers and software require updates plus some of these fees are yearly, like my business management system and my slideshow software.)  P.S. Photographers, you can also skip the editing software and opt to outsource your editing or do a little of both.

Education or continued education. I reserve at least $500/year, sometimes more if I have it, for continued education.  I like to attend a big conference at least every three years. I also studied photography in college.  At that time, I invested in my future business.  Yay for that!

Insurance. My insurance covers my business for all kinds of liability and covers my equipment as well. It costs about $500/year. It is important to be insured for obvious reasons but beyond that – some locations such as the Disney Wedding Pavilion will not even allow uninsured photographers to shoot there.

Cost of LLC and business license renewal yearly. This is around $200/year for me. I’m lucky! It’s much more for people in food service!

Studio Rent, water and electric Monthly: As previously mentioned, I have a good value for my studio space. Electric and water are usually $200/mth in addition to rent. If you are looking to rent a retail space say, in a Walmart plaza, rent there will be 5-7 times what I pay and even more depending on the size of the space. I never would have known that until we opened GameChanger.  Wowzers!

Phone and Internet Monthly: Around $90.00 combined, commercial internet is a bummer!  I’ve tried “mobile me” and all kinds of alternatives but haven’t found anything to be reliable enough at the studio outside of full internet service.

Sample products: In order to show clients samples I have to purchase them. I have done this over time but would estimate that I’ve invested around $4000 in samples all together and I try to update a few things every year.

Kristi Webb my graphic designer/business manager! Kristi is a part time employee and she has an hourly wage  better than minimum wage because she’s got skills.  I hope to keep her so I’ll need to offer raises too!

Childcare: I employ babysitters on a regular basis, I use aftercare sometimes at the school and I have to spend much more on childcare during the summer.  Babysitters are $10 hour for three kids and every summer camp is x3 !

Website: This includes the actual web address yearly and the hosting monthly. I also pay a different company (Zenfolio) for all my online galleries where clients view their proofs and album designs. I think this comes to a yearly total amount of $450

Professional Memberships: These keep me and my business on it’s toes and offers assurance to my clients as well.  PPA membership yearly:$323  Chamber of Commerce Yearly: $400

Basic Office Supplies: All kinds of stuff that helps me communicate with my clients and keeps the studio clean and stocked with all the basics. Toilet paper in the bathroom? Check!

Merchant Services: Want to use a credit card? I pay for this service both monthly and as a percentage of every credit card sale. Yes it is worth it in the end but it is an expense most people don’t know about.

Printing Costs: I offer my clients beautiful printed materials to help make their experience great and to keep everything easy to read and understand. By the time we get to a session or wedding my client should feel well educated regarding how things will work and the various ordering options. I stick to a budget here without sacrificing quality.

Marketing: I don’t spend a lot on traditional marketing. I don’t usually place print ads but I do treat my clients really well and depend heavily on their word of mouth. I offer a great referral program. I give my clients gifts, I keep my products packaged beautifully, I keep my website up to date and functioning well, etc. This is marketing to me. Anything I else I do is usually free or almost free: newsletters, Facebook, etc. I’d rather invest into people and trust that word will spread. My business model is not based a huge quantity of clients so it doesn’t require a huge marketing effort.

Vehicle: I don’t actually factor this cost into my prices but wanted to include it here since most of my work is on location and there is no vehicle reimbursement.  I can claim mileage on my tax return and that’s it.


End Results: Obviously most businesses require a few years in the beginning to show profit at all. At this point in time my goal is to meet the PPA benchmark of a 30-35% bottom line profit at the end of the year. Some of this might go back into the business for something I want – like a new lens. Mostly though I use my paycheck just like everybody else.  It helps feed my family, pay our own monthly expenses, health insurance, etc.  And then there’s taxes -erg, too much taxes.  But there are benefits too!  I listed those in the beginning. I only list the expenses to help raise awareness for small business and photographers everywhere. If you read this far, you are seriously dedicated and I appreciate your time. I hope if you own a small business or are planning to, that this will help you to prepare for the cost and to build a strong foundation with your budget, pricing and business plan.

Here are some links to more good articles on the same topic -there’s tons of them so I just pulled a couple out to paste here.

“Why does custom photography cost more?”    http://www.professionalchildphotographer.com/information/?page_id=16

“I’m a photographer and I need help with pricing.”  http://www.served-up-fresh.com/easy-as-pie/

Thanks for reading! Leave happy comments below – no grumpiness allowed!

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