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Lesson Info

Understanding Price Breakdown

I am going to help that you do the actual math behind your photography business, so that you can correctly price out your own packages. We're gonna do this by looking at all of your costs as a whole. A lot of people look at some of the costs and they don't realize all of the other ones that are involved here. And I'm going to show you the basic basic package to make. A base package. So, not gonna make all of your packages for you but it'll give you a good starting point here. Things that you have to think about when creating your pricing, number one, your cost of business. So this is the cost of you being in business. It's not by the other end of the spectrum the cost of sale. The cost of sales what it cost you to actually produce the content for that wedding. The album, second shooter, the graphic designer, post processing, all those things are a cost of sale. The cost of business are things like your marketing. Your website hosting that you have to pay, whatever subscription it is. Y...

our Animoto subscription. Your 17 Hats subscription. All the costs of things you have to pay for. Your insurance, equipment, education, just to be in business. Just to be able to offer and operate your photography business. Number three, is pay per hour. How much money would you like to make per hour? That's a good thing to think about. Let's make sure that we are not working for a Mcdonalds wage. Otherwise let's just work at Mcdonalds. Although I do hear they have a great benefits package (laughs). (audience laughs) Number four. How many weddings do you want to shoot a year? Are you boutique or volume? Do you want to shoot a hundred weddings per year? Then you have to look at this cost for a hundred weddings per year. Do you want to only do 20? Very different numbers. Alright? I personally like 20. 20 is a nice number for me right now. And then number five, your pricing model. So what do you want your model to be? Is it going to be that volume model where it's a little bit less expensive on the profit side? Or is it going to be more boutique style of a model? So, those five things are what you have to think about. So let's start with number one. How many weddings per year? Let's just say there's 52 weeks in the year right? So 52 weddings. I shoot one wedding every weekend. How many of you guys have done doubles before? Triples? Quadruples? Yes you can (laughs). Thursday weddings are like making a comeback lately. My husband used to do a lot in the Sephardic and Orthodox Jewish community, and they have weddings like every day during the week. So, he would work weddings like every day. Like five weddings in a row. Crazy. So, let's just conservatively say we're doing one a weekend (laughs). Alright? So, we want to take a vacation. Two weeks, alright? So that knocks out two. So this is only 50 weddings left. Let's just say you're in an area where there's 10 off season weeks. I personally do not particularly like working winter weddings because in the north east it is cold, miserable, snow stops you and it gets dark really really early. So, you've got about 40 weddings then you want to work. And then assuming that you work alone, 40 is still a lot and you have to keep that definition of success in your mind. So, maybe 30. That's a nice number. So I'm gonna base all this math on 30 alright? 30 weddings. But you put in whatever number that you want. So, 30 weddings per year. So. Cost of running the business. What does this look like? These are very basic numbers for all of these different things. But, they're pretty close I would say to what it is that you want. Whoops. We went backwards. Alright. So, your equipment education, about $5,000 per year. That's probably what you spend on buying equipment and it's not every year you spend $5, but think about the course of five years. You'll probably spend an average of that on your education, your equipment. Buying Creative Live courses. Going to trade shows, all this stuff. Insurance and travel. Whether it's the toll on your car, or equipment insurance, liability insurance. Roughly $2,000 per year. Right? That makes sense? Subscriptions. Internet. $1,500 per year. That's a good estimate-ish. You're gonna actually put your numbers in by the way for this. When you go back home when you're done watching this course, you're gonna hit rewind. And you're gonna have your credit card statement and your Quickbooks right next to you. You're gonna add all this up, but I'm just giving you round numbers. Advertising. About $1,500 per year let's just say. Including any marketing of any kind. Facebook ads, Google ads, whatever it is. Bridal shows that you do. Things like that. And then if you have studio space, that can be a big price tag on top of it. So, about $ per job. So what I did is I added these four numbers up, and then divided them by 30 weddings. Right? So then that gives me, the number of per job the cost of doing business per job. $330. If I have a studio roughly about 600. Does that make sense? Cool. I got the nods. Got the nods are good. Are you with me? Alright, so first part of our equation, cost of business $333 per job. That's number one. Next we have to do the cost of sales. So we've got all these things to look at now. We've got a photographer. $400 per job for a second photographer. If you're doing a volume studio you have to add the cost of your primary photographer. If you have an assistant you have to add the cost of your assistant. If you're where I'm working and you're hiring very talented photographers you might be paying them six, $700 a job. So make sure you allot for that. Post production. Let's just say $200 per job. If you're doing more weddings, then it might be less because ShootDotEdit for example is a subscription service. So it might be a lot less. Album design. About $200 per job. And I'm kind of including in there like the thank you card design and all the other designs and things that I do. And then the tangibles. The actual products. Things that you're giving them. The USB drive. The nice boxed USB drive. Don't just give them download links please. Give them tangible goods any time you can. (sniffs) So about $500 per job. Add all those four numbers up. $1,300 per job. Your cost of sales. I'm not dividing that by the amount of weddings 'cause that's per wedding what it costs so. That is the second part of our equation. So we've got $333, cost of business per job. $1,300 cost of sales per job. Now we have to take a look at how many hours that we work per wedding. What do you think it is? It's a lot more than just that 10 hour working day. All of you are like all that, all that time. And I don't think I've even really added that much of how much I just told you you should be doing right? But you've got about five hours of communication. Whether it's them coming in and you sit down with them and sales or emails or on the phone or texting or Instagramming or Facebook messaging or whatever it is that you're doing with them. So five hours of commination. 10 hours shooting assuming it's a 10 hour wedding day. Add another hour for engagement sessions. Then of course there's travel. Maybe you're driving an hour and a half each way to an engagement session. An hour and a half each way to the wedding. That's all extra time. Five hours of post production, any production. Ordering things. And then 20 hours for everything else that it takes for you to get that client in your door. So let's just say I want to make 50 bucks an hour. That's pretty good. That's less than a doctor, more than a hamburger flipper right? That's pretty good. So, 50 bucks an hour and I'm working 40 hours per wedding on average. Probably closer to 50 but let's go with so I don't have to press anyone here today alright? So 40 times 50 is $2,000. If I want to make $50 an hour, I need to clear without expenses, $2,000 per job, to make 50 bucks an hour. Alright? That sounds like a lot. All of a sudden I just throw out this massive number at you right? $2,000 right? So that's the next part of our equation. We've got our cost of business, cost of sales. Now we need to tack on $2,000 per job. So these are basically the numbers here alright? So let's actually do the math. So now we have to times this. Times 30 weddings. So the first three numbers, one, two, three add up to this $3,600 number. That's basically the lowest price per job that we can afford as a real business owner to charge. Now we do that for 30 weddings. How much money we makin'? You're making $60,000 per year. You're like wait a minute. 3,600 times 30 weddings, that's like over $100,000. And that's what it feels like when you get those big checks sometimes. And you think to yourself delusionally in your head that you're making $100,000 and let me tell you something, you're not. You are just a steward of that money. You are a steward of everything except for that $2,000. But actually, you're not even keeping all that $2,000 either. So you do 30 weddings, you minus your costs, but then you have to minus your taxes. So, that's your gross income. What actually comes in but you minus all of your costs, 50 grand. Now you only have $60,000 net income. But now you minus like 30% ish taxes. $42,000 and that my friends is why most photographers work at Starbucks. And why most photographers finance their equipment. Because while I just gave you all the low numbers here, it's not enough. It's still not enough to actually create a business that feeds a family of four. Right? I'm gonna let you look at it the other way around. Because you can look at it the other way around and just maybe your brain works that way and you want to look at it in a goal scenario. So let's just say you have a sales goal of roughly $100,000. So you can break it down the other way. So, that net income you want to make, let's say you wanted to make $42,000 a year. Then you have to times it times the 30% of taxes and the way you do that on the calculator is you divide it by .7. Then you divide it by the cost of sales and then that's your sales goal. So, what you basically do, you're gonna take this. Let's just say you want to make $100,000 per year. $100,000 per year. I don't have my phone on me. My calculator, but some of you do right? Anyone have their phone on them? No one? Alright. I have a calculator. You do? Perfect alright. Let's do it for us. I don't have one on me. So let's just say we want to make $100,000. Alright? $100,000. Can you put in 100,000 divided by .7? That's 142,000. Alright. 142,000 basically means the net that we need to take home after taxes. Now, out of curiosity let's just divide that into 30 real quick. Cause that will tell us how much profit per wedding we need to make if we want to make $100,000. $4,761. So we need 40, I gave you an equation for 2,000, but if you want to make $100,000 a year, you want to be a six figure income photographer, you need to clear after expenses $4,700 of profit per wedding. At 30 weddings a year. Alright? So let's go back to what that would be. Can you, if you take that number just times it times and we'll get back to that. 30? Yep. And then we're gonna divide it by .55 just assuming that our cost of sales are what we looked at. Cost of sales, cost of production in running a business. It's about $260,000. So your sales goal, if you want to make $100,000 a year, your sales goal is 200 and... 60. $60,000. So if you kind of want to work that the other way around. You've got this sales goal number that you want to hit of gross income to make $100,000 a year, about $260,000 of sales. That's more than double. Right? So but I want you to think about this. So many people get tripped up in receiving this money but not planning for where it's going. 'Cause it has to go somewhere. You have to invest in your equipment. Your equipment will break. You have to invest in your education because you need to keep learning. Especially to keep up with the times. You have to pay for your albums. Have you ever heard the story's of photographers that by the time their client ordered the album, they couldn't afford it? So then you, what happens? You put it on a credit card. And then how much more are you paying for this album because you couldn't actually pay for it? This album that would've only cost you $500 right? In the tangibles. Now it's costing you $2,000 by the time you pay it off. That is a quick way to lose business. So many photographers do not do the math here. Do not do the math. And that's why instead of, we'll go back to what I was saying much earlier, instead of looking at photographers who are under you, in price and think oh they're just taking all the business, think oh my Gosh I have to help them. Because they're not going to make it. I make it a point, to find photographers that I notice that, and I offer to help them. Because they're not gonna make it charging $500. They're gonna be in debt later. Out of business and in debt. And that's not where we want to be. Right? Alright? So those are some pretty hefty numbers to look at. I am gonna pull up my packages for you and you are more then welcome to go online and look at these. That's the website address right there for my collections. I keep them online. Because any time I change them I want all of my clients to have that change also. Right? I don't want to send them a PDF one that clogs up their inbox and mine. Two, it'll probably go to spam anyway. And three, anytime that I update my pricing I don't want to send it out to everybody. Alright? It just updates it when they have an online link. So these are just the top three packages but I wanted you to notice all of my 10 rules of pricing being applied here. (coughs) So I started with that top down mentality. So the highest package is at the top. Right? I have them listed as the price but then I also have the value listed there. So that is if they took all of those items and added them up a la carte. So I'm doing the math for them here. I have the a la carte price list that they can look at, but they're not sitting there and adding it all up. Now what's the difference? So they're saving $6,000 here-ish. Down here they're saving about $4,000. Down here they're only saving $1,700. So that goes into the more they buy, the more cost effective it is for them. But I'm still making more money. I'm still making more profit on all of those. You don't see it here because I don't have the two collections on the bottom, but below here, none of the packages include the high res digital files. The packages below there, one of them includes an album but the other one doesn't. It's just eight hours and me showing up. Everything below here is also not full day coverage. Full day coverage I define as two hour before, either the first look or the ceremony up until the cake cutting not to exceed 10 hours. Because, hours. That's one of, it's so funny. My husband and I used to fight about this. 'Cause he would stay. And it's different for video. 'Cause he would stay at weddings for kind of an indefinite amount of time. But for him he was paying his guys a flat fee. But for us, as far as photography goes the more hours we stay at a wedding, it directly equals more costs. We have to pay our assistant more. Our photographer more. Our post production we have to pay more. There's more gigabytes for our hard drives. There's more gigabytes for uploading it if you have to pay for your storage of the photos on backing up or on your online galleries. Things like that. So, the longer you are at a wedding, the more money you're paying. So please, don't plank it. Make sure you define your full day coverage. What else is in there? Whenever I have people that come in I guide them to one of the packages that I think will work well for them. And it's usually B or C, is usually where they fall. But if I sense that high end bride, I will definitely tell her that I think A will work for her. And I do book that one fairly often. I do about 20 weddings a year. I would say probably three or four of them every year is one of the top ones. And then the rest fall usually into B or C. And again, one every three years falls below that. But you're more than welcome to look at my pricing. I feel like it only inspires you. And if you're in New Jersey or New York and you're gonna look at that and undercut me, what the heck? But fine, go ahead. (laughs) But it's no secret. Alright? I do want to give you guys the best pricing advice ever. So we're gonna go into the best pricing advice ever and I want you to try this. Alright? Every time somebody books your highest package, raise your prices. Every time. Because they would have paid you more. And it's also a really great indication that you've started to reach a higher clientele. Because they are booking your higher collection. Now I know that's intimidating. Three of you went oh okay great let me write that down. The other three, like what? (laughs) You want me to do what? Alright? But you can do that. And maybe it's a baby step. Maybe it's just like okay little $100 there. Everything by $100. Maybe it's just 10%. I don't care what it is. Give yourself a raise. You deserve a raise right? And you won't see it for another year. (laughs) Because, by the time you collect that final balance it's gonna be a year from when you actually raised your prices. But give yourself a raise. I want you to try that. Just do it for yourself. Don't panic. If somebody's not booking you over $100, because you raised your prices by $100, goodbye Felicia. Right? (laughs) Like. Bye Felicia. I mean you don't want them anyway. They don't value you if they don't want you to be there. So you want to work with people who value you and who want you to be there for their wedding. I mean it's hard enough, me trying to convince you to value yourselves. The last thing you want is to bring more people into your life that don't value you. So, it's fine. Another thing you can try, is let's say you've decided that you want to book 20 weddings for the year. If you hit your quota, every wedding after that that inquires for that year, say you hit your quota 2018 you're at 20 weddings, anyone else that inquires for a 2018 wedding gets prices that are much higher. Maybe $1,000 higher than normal. $2,000 higher than normal. So anything over your quota, you're just experimenting with new pricing. It doesn't matter if they don't book, you're just experimenting with it. Right? It's just extra for you. So try it. You realize you're worth more, your clients will too. And then if you can experiment with this, and you keep booking and you keep booking it's like oh. That's fantastic. And it's okay to let some of them go. Just breathe. Let them go. Right? 'Cause also what happens? You have higher prices, you make more money per job, you can work less weddings. Right? And make more. I used to shoot 40 weddings a year, 30 weddings a year. I'm doing 20 now and I'm making more than I was shooting those. And that lines up with my definition of success. And that's what we want to do. So, be okay letting those ones that go. Chances are they would've been a headache to ya anyway. But best pricing advice ever is that first one I gave you. Every time someone books your highest package, raise your prices. I don't know who gave it to me. I'd love to hug them 'cause I've raised my prices four times in one year. In the first four years of business I think I doubled my pricing. And now, my average bride is roughly between 10 to $12,000 per wedding. With my peak much higher than that. So for me right now I offer just a service and then the products afterwards and they pay for that afterwards. Out of curiosity, for your packages, let's say your top package and they, how do you structure that payment schedule, Oh. with the client? I like that. So I require a $2,000 retainer that holds the day for them. Non refundable retainer. Six months beforehand they pay me another $2,000. And then the final payment is due 14 days before. It's fairly standard practice for the balance to be paid before the wedding. I've had people that are like, oh but we're not getting your album till later. And I'm like oh but you'll probably be divorced anyway. No I'm just kidding (laughs). But, it's standard practice. And anyone who just, if they don't want, and I've said this to clients before. I was like if you don't trust me with your money ahead of your wedding, you shouldn't hire me because you don't trust me. You clearly don't trust me. Don't hire someone you don't trust. And that's fine. That yeah. So. That's how I do it. I know some people do it like 50% before. I used to do just the retainer and then the balance but then it was like, $2,000 check and then a $10,000 check. And I wanted a little payment in between there. Also because I've had weddings get called off beforehand. And depending on where they get called off in the contract they sometimes owe me money. And I'd rather that not happen. So if I collect another little payment beforehand then it's less likely that they'll owe me something after something happened where there's no wedding. I'd rather that be the case. But it, another note on that, if somebody cancels the wedding, please don't refund them the money. That you've calculated that in to cost of business and I'm not saying, there's always exceptions. Death and things like. That's it. Only exception, death. But there are exceptions. But, please remember there's costs of running the business. You've turned down profit. You've lost profit. You've lost referrals. You've lost a lot, a lot. Their emotional problems should not become your financial ones. Right? Love my brides. Love all of them. But, you are, you're providing for your family here. Question? Two actually. One why use value as opposed to savings in doing the math for them? And then also, I'm thinking psychologically, why five packages for the argument for like three and so forth? Yeah. So I think you could do it the other way around with the higher savings. I do higher value because that's how I want them to perceive what I offer them. As the value. Look at the value you're getting. But the other way could work. It's just psychologically different. And then, three to five packages is what people say are the best. Those two prime numbers. Three or five. As far as, I think it has to do with decision making process with okay we can knock down the top two or knock down the bottom two and then work one way or the other. Or bottom one, top one. So. Yeah. But, probably not more than five. More than five is to much I think. And my clients are picky so. Three was to little for me (laughs).