How To Determine Your Pricing Strategy
How much should a professional photographer charge?
You’re here for an answer to that question. Maybe you’re new to the industry, or perhaps you’ve been around for a few years and are curious about your competitors’ rates: Would you earn a better profit by charging more or less?
Or maybe it’s 4am and you woke up in a financial panic. Rent’s due tomorrow, it’s been a bad month for the business, and you have no idea how you’re going to make this whole photography career thing work.
So let’s get on with what you’re here for: as a self-employed professional photographer working in the U.S. in April, 2016, you should be charging enough to make at least $67,500 if you work out of a home studio and $87,500 if you operate a retail studio. (Source: .)
That’s the short answer. If you’re satisfied with it, great—thanks for visiting our blog!
If you aren’t satisfied then get ready for the long answer.
Necessary Costs: Professional Expenses and Overhead
Before we can take a look at your competition, and explore how the overall market determines those two amounts above, we need to begin with your current financial status.
Start by looking at a year’s worth of your income and expenses. A month could work instead, but a year will provide you with a better glimpse of your needs.
First, break down your professional costs into several categories:
Consider what you need in order to do your job. Calculate the cost of everything in your camera bag—camera, lenses, tripod, lights, and so on—and think about how frequently you expect to replace, repair, or upgrade your equipment on an annual basis. Try to balance your aspirations with realistic expectations: you can budget for a better camera, but you may actually end up needing money when you lose your lighting kit.
Materials and Shipping
If you offer prints you should have paper, canvas, frames and mounting supplies, and other display materials handy, not to mention a capable printer. Again, consider how many of these materials you use over the course of a year. Also consider your annual shipping costs.
Whether you’ve already purchased photo editing software or access it through a monthly subscription, determine how much you’re paying for digital tools. Keep in mind your web hosting costs along with any indirect pieces of software you might use for marketing, accounting, and administration.
How much do you pay for your studio space? How about any locations you typically rent out?
How much do you spend per year on gas, public transit, and train travel? Factor in any vehicle insurance and maintenance costs.
Subcontractors and Suppliers
Even if you’re self-employed, you may work with others whose services you rely on: accountants, marketers, website designers, and the like.
Aside from your income tax, you’ll need to set aside 15.3% of your income for self-employment tax if you’re an independent contractor. (Don’t forget about state taxes.) You may be able to deduct much of the costs enumerated above on your annual tax return, depending on your filing status and the size of your income.
Add up all these expenses and record the total. This is your cost of doing business.
Necessary Costs: Your Lifestyle
Next run through the same exercise as it applies to your life outside of work.
Consider what you pay each year for your home. If it isn’t a fixed rate, look at your lease or mortgage and the periodic prices of properties in your area to estimate how much your payments may go up with time.
Cost of Living
What’s your weekly grocery bill? Multiply that by 52 (the number of weeks in a year) to determine your annual food expenses. Do the same for clothing, household and pet supplies, entertainment, going out, and so on.
You’ll need to pay for your own health, dental, and—a must for photographers—vision insurance. If you don’t, you’ll still have to budget to cover the annual penalty for not having coverage.
It’s never too early to think about retirement. Moreover, it’s vital to have an emergency fund. Think about how much you’re willing to save each year, and take your commitment to it seriously by considering it a cost.
Combine these necessary costs with your cost of doing business and look at the number you’ve come up with. This is your annual budget: the minimum yearly amount you need to make to break even. Divide it by twelve for your monthly budget, or by 365 for your daily budget. You can even divide it by 2080 (40 hours in a workweek, multiplied by 52 weeks) to see what your hourly rate would be if you worked a typical 9–5.
Comparison Point: The Market
Now that you know your minimum salary, all you need to do is bump it up a little—or a lot—and reap the profit, right? If only it were that simple. Market forces drive pricing, and while to what extent you choose to compete is your call, you can put your business in jeopardy by remaining unaware of what others are charging for similar work.
That’s how we arrived at our original, short answer: $67,500 (home studio) and $87,500 (retail studio) . Those number are the PPA’s latest recommended benchmarks for the average professional photographer’s net profit plus owner compensation,.
But you aren’t average. Your unique skill level, ideas, vision, and personality are what constitute the value of your work—and by extension, they influence your rates.
The length of your career should directly correlate with your pay grade. As your cost of living increases, your rate should follow suit. Plus, more experience ideally coincides with more referrals, leading to higher demand for your work.
Ask clients for feedback. If your work exceeded their expectations, consider a sign that you’re worth more than you’re asking for.
Take a look again at your annual numbers. If you’re busier now than you were a year ago, it’s time to raise your prices: try 10% to start—if prospective clients balk, lower it to 5%; otherwise, you may even want to consider a 15% or 20% increase when negotiating your next job.
If you aren’t as busy as you were last year, adjust accordingly, but be careful not to undercut your budget.
You can now determine how much profit you can reasonably expect to make on top of your annual budget.
Flexibility is one of the top reasons photographers choose self-employment. When determining your rate, make sure to divide your budget by the hours you expect to actually work. If you can only work 20 hours per week, your rate would be about twice as high as someone who can work all day would charge.
Relationships and Frequency of Work
If you’re like most photographers, you love repeat business. Ongoing clients remove the uncertainty around where the next job will come from, and thus, the ambiguity surrounding your schedule as it relates to your budget.
This is why I recommended looking at your annual expenses: we’ve all had bad months and good months, but things tend to even out over the course of a year. When you can fill each year with continual work from repeat clients, you can commit to a normal hourly rate.
Frustratingly, the lower your hourly rate, the more ongoing business you’re likely to see. Since repeat customers are never a sure thing, however, many professional photographers advise charging per project.
The Nature of Your Work
But what is a “project,” exactly? Here’s where pricing strategy gets murky. Consider what tangible products you would provide to a client:
- Prints? How many? In what size? Will they come in a book or a binder?
- Calculate the raw material cost.Image rights?
These are deliverables, representing what a client would pay for, no matter what, if they did the project themselves. Unless the client harvests trees to make their own paper—and assuming they own photography equipment—they would have to pay for raw materials. And, if the client decided to buy pre-made images, they would be purchasing the license to use those images.
When determining their pricing strategy, some photographers choose to focus on these considerations, choosing to charge per image, or making their money mostly through licensing. Either approach relies on the customer opting to buy the work after the fact, which has inherent risk.
Putting It All Together
Divide your annual budget (plus profit margin) by the amount of time you can expect to work over a year. Using the previous year as a model, note the number of shoots you expect to conduct this year and, with this number, divide that budget/time total again. You’ve now come up with your average price per shoot.
Of course, not all shoots are equal. Take into consideration all of the recent projects you’ve participated in, and break each one down by how much time it took from start to finish: travel, preparation, photography, editing, retouching, printing, and shipping. Divide your average price per shoot by the average duration of each shoot and you’ve come up with actual hourly rate, more or less.
This is not necessarily the same as your pricing strategy. Savvy photographers know how to read clients and offer them the right value proposition by performing quick mental math. Instead of quoting a wedding client at $100/hour, you can estimate that it would take about 40 hours and offer the client a $4000 package, eliminating any fears the client may have that they’d be on the hook for more than they could afford if the job took longer than expected.
These numbers are guides rather than rules—you can and should adapt them to meet your financial situation. Think about your annual budget as a gap you have to fill by the end of the year and your value proposition as the way in which you fill that gap. For example: if you haven’t had a gig in a month and the opportunity to photograph an event comes your way, charge at least as much as you would need to make that month on top of the normal costs associated with the shoot.