Pricing
High Print Prices?
October/22/2007
Today I received the following question from a former student: How do you justify such high print prices now that photographers can do the printing themselves? I've heard this question many, many times. In fact I've been told by numerous photographers that they are reducing their prices — to be more competitive — now that they can do the work the lab used to do. My response is always the same: This makes no sense, particularly when you consider that digital images typically are more expensive for you to produce than the film variety. Inevitably, I get this argument in reply: "But it costs me only a few dollars for the paper and ink. My lab charges were so much more."
Well . . . in my studio, my husband shoots film, and I shoot digital, and I can prove that it costs more for a digital 8x10 than it does for an 8x10 produced using film — whether you use a lab or not — simply because it takes more TIME to produce it. Whenever a photographer takes on production work . . . or when you hire someone who does production for you . . . you must establish a time charge when pricing. The figures shown below are from an exercise I did recently for a Studio Management Services class. It was based on charging $30 an hour for production time. This is a very reasonable figure, as if you have an employee doing the work, you want to make some profit on that employee's work; and $30 an hour is the rock-bottom figure any owner should be charging for doing his or her own production work. Owners can simply make more money doing work that will grow the business. Production is merely a by-product of studio growth, so you need to put your efforts toward the things that actually propel growth.
COSTS FOR INITIAL 8x10
$ 7.50 . . . Acquire & backup 50 RAW+JPG images (15 min.)
$ 2.50 . . . Import images to ProSelect (5 min.)
$ 20.00 . . . Prepare 25 images for presentation (40 min.)
$ 5.00 . . . Retouch 1 image for 8x10 (10 min.)
$ 2.50 . . . Produce hi-res image in ProSelect (5 min.)
$ 2.50 . . . FTP image to lab (5 min.)
$ 2.50 . . . Backup finished print and file order (5 min.)
$ 3.00 . . . Lab cost for 8x10 print
$ 2.50 . . . Lab shipping
$ 1.00 . . . 8x10 mount
$ 2.00 . . . Digital media charge
$51.00 . . Total Cost of Sales (excluding packaging)
Note that only $8.50 of the costs for a first 8x10 are "hard costs" for the goods that go into the portrait. The remaining $42.50 is made of of time charges billed at $30 per hour. Everyone's workflow varies, so you need to work out these costs and charges for yourself. (For the record, I believe most studios are better served when they outsource their work to a lab. But that's a subject for another day.)
The premise used for this 8x10 costing example is as follows: All presentation and production accomplished in ProSelect, using Ron Nichol's Production Retouching Palette controlling Photoshop. Production time charged at $.50 per minute or $30 per hour. No time charge for RAW conversion or color correction on the assumption that RAW+jpg mode allows images to be viewed in jpg version, converting only the RAW image that is selected for the 8x10 before it is retouched.
So what should the 8x10 price actually be?
Studio Management Service's 2006 Benchmark Survey recommends that home studios can be viable at a 35% Cost of Sales (requiring a mark-up factor of 2.9); however because studios in a retail location typically incur higher overhead, these business need to operate at a 25% Cost of Sales (requiring a mark-up factor of 4.0).
At a $51.00 Cost of Sales, here is the math for the two scenarios:
Home Studio: $51.00 X 2.9 = $147.90
Retail Location: $51.00 X 4.00 = $204.00
You can spread this price out between a session fee and a print fee, or you can spread it out over numerous prints in a package, since duplicates and additional poses do not incur all the initial costs. That's your choice. But what won't work is to charge only for the hard goods and not for you time. If you do so, you're likely to have more business, because your work will have a very appealing price; but the business you get will not be profitable. In short, you simply won't be able to pay your bills or take out a salary. You'll have the rough equivalent of a very expensive hobby. Remember: Time is Money . . . even for photographers. Charging for your time is the ONLY way you will be compensated for your time, talent, and business investment.
Well . . . in my studio, my husband shoots film, and I shoot digital, and I can prove that it costs more for a digital 8x10 than it does for an 8x10 produced using film — whether you use a lab or not — simply because it takes more TIME to produce it. Whenever a photographer takes on production work . . . or when you hire someone who does production for you . . . you must establish a time charge when pricing. The figures shown below are from an exercise I did recently for a Studio Management Services class. It was based on charging $30 an hour for production time. This is a very reasonable figure, as if you have an employee doing the work, you want to make some profit on that employee's work; and $30 an hour is the rock-bottom figure any owner should be charging for doing his or her own production work. Owners can simply make more money doing work that will grow the business. Production is merely a by-product of studio growth, so you need to put your efforts toward the things that actually propel growth.
COSTS FOR INITIAL 8x10
$ 7.50 . . . Acquire & backup 50 RAW+JPG images (15 min.)
$ 2.50 . . . Import images to ProSelect (5 min.)
$ 20.00 . . . Prepare 25 images for presentation (40 min.)
$ 5.00 . . . Retouch 1 image for 8x10 (10 min.)
$ 2.50 . . . Produce hi-res image in ProSelect (5 min.)
$ 2.50 . . . FTP image to lab (5 min.)
$ 2.50 . . . Backup finished print and file order (5 min.)
$ 3.00 . . . Lab cost for 8x10 print
$ 2.50 . . . Lab shipping
$ 1.00 . . . 8x10 mount
$ 2.00 . . . Digital media charge
$51.00 . . Total Cost of Sales (excluding packaging)
Note that only $8.50 of the costs for a first 8x10 are "hard costs" for the goods that go into the portrait. The remaining $42.50 is made of of time charges billed at $30 per hour. Everyone's workflow varies, so you need to work out these costs and charges for yourself. (For the record, I believe most studios are better served when they outsource their work to a lab. But that's a subject for another day.)
The premise used for this 8x10 costing example is as follows: All presentation and production accomplished in ProSelect, using Ron Nichol's Production Retouching Palette controlling Photoshop. Production time charged at $.50 per minute or $30 per hour. No time charge for RAW conversion or color correction on the assumption that RAW+jpg mode allows images to be viewed in jpg version, converting only the RAW image that is selected for the 8x10 before it is retouched.
So what should the 8x10 price actually be?
Studio Management Service's 2006 Benchmark Survey recommends that home studios can be viable at a 35% Cost of Sales (requiring a mark-up factor of 2.9); however because studios in a retail location typically incur higher overhead, these business need to operate at a 25% Cost of Sales (requiring a mark-up factor of 4.0).
At a $51.00 Cost of Sales, here is the math for the two scenarios:
Home Studio: $51.00 X 2.9 = $147.90
Retail Location: $51.00 X 4.00 = $204.00
You can spread this price out between a session fee and a print fee, or you can spread it out over numerous prints in a package, since duplicates and additional poses do not incur all the initial costs. That's your choice. But what won't work is to charge only for the hard goods and not for you time. If you do so, you're likely to have more business, because your work will have a very appealing price; but the business you get will not be profitable. In short, you simply won't be able to pay your bills or take out a salary. You'll have the rough equivalent of a very expensive hobby. Remember: Time is Money . . . even for photographers. Charging for your time is the ONLY way you will be compensated for your time, talent, and business investment.
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Cost of Sales Question
September/06/2007
Yesterday I got a Cost of Sales accounting question about packaging materials. Some background on this subject: The guideline for determining whether an item is a Cost of Sales expense or a General Expense item is this: If you have no business, you have no Cost of Sales. Since packaging materials are required only if you have a sale, then ALL packaging material is accounted as a Cost of Sales expense. But wait . . . there's more to this question.
The photographer was referring to a packaging item designed especially to create "buzz" by the recipient because of its unique design . . . referring specifically to the BellaGrafica bag shown below:
The photographer wondered that since the primary purpose of the bag is to have an excited mom show it around to all of her friends because it is personalized with her child's portrait, perhaps the cost of the bags should be accounted to Advertising, which is a General Expense. Yes, that's a valid argument; but it's far more practical to account it to Cost of Sales, which will insure that this cost is included when you are pricing. In effect, Mom is paying for the bag, and as a COS item, it is marked up; thus there's more profit for you. If you account it to advertising, the cost becomes a drain on your business, and there is no pricing mark-up. See the difference? It is huge. In my opinion, there is nothing sweeter—or smarter—than having clients pay for your marketing!
For pricing on this wonderful shopping bag, click here.
The photographer was referring to a packaging item designed especially to create "buzz" by the recipient because of its unique design . . . referring specifically to the BellaGrafica bag shown below:
The photographer wondered that since the primary purpose of the bag is to have an excited mom show it around to all of her friends because it is personalized with her child's portrait, perhaps the cost of the bags should be accounted to Advertising, which is a General Expense. Yes, that's a valid argument; but it's far more practical to account it to Cost of Sales, which will insure that this cost is included when you are pricing. In effect, Mom is paying for the bag, and as a COS item, it is marked up; thus there's more profit for you. If you account it to advertising, the cost becomes a drain on your business, and there is no pricing mark-up. See the difference? It is huge. In my opinion, there is nothing sweeter—or smarter—than having clients pay for your marketing!
For pricing on this wonderful shopping bag, click here.
Pricing Basics
April/05/2007
I get lots of questions about pricing . . . questions that reveal that many photographers don't understand the basics of pricing and the industry standards that govern the mechanics of pricing. Right now I'm working on some new pricing information that I believe will be helpful for photographers in the digital age, but in the meantime, here are some resources that are available to you now:
In 2005 I did a DVD series PPA has available on PPA.com. Click the graphic below to learn more.
Professional Photographer magazine also has three of my older magazine articles archived on its website. Clicking on the graphic below will get you there, and you'll also find some other very interesting articles in the website's "Profit Center" feature.
In 2005 I did a DVD series PPA has available on PPA.com. Click the graphic below to learn more.
Professional Photographer magazine also has three of my older magazine articles archived on its website. Clicking on the graphic below will get you there, and you'll also find some other very interesting articles in the website's "Profit Center" feature.