What i should charge for services?

I am still working on this post “Beware of Bad English”

One of the first questions that comes up when you’re starting your business is, “How much I should charge for my work?”

In this post, I’ll talk about how I calculate my cost. Before  I jump into it, here is a short disclaimer. This is for demonstration purposes only, use your own numbers for your expenses and I highly recommend that you consult a professional accountant for financial questions. This is not step by step guide, just suggestions.

Lets begin with the basics.  In business you have earnings and expenses. If you earn more then spend, you’re doing good. If you spend more then you earn, not so good.

However, when you start your business or expand it, some additional expenses may bring you in the red with intentions to recoup those expenses in the future.

This is the important part to remember. If you do not include those expenses in your future prices, you will end up not able to expand or upgrade your business in the future.

Lets look closer on expenses you may have. It will include two main parts, personal expenses and business related expenses.

Personal expenses are things like housing, food, clothes, expenses related to children, vacations, etc. These differ from person to person, so it’s up to you to know what you need to have to provide a good living for yourself and maybe your family. If you’re single, but you intend to have a family, charge as if you had a family and put the extra into savings to prepare you for your future. In fact, no matter what, you should always try to put a little aside in savings.

The other part is your business related expenses, and these have their own two parts: fixed and flexible expenses. In most cases you do not have much control over fixed expenses, but you have some more control over the flexible ones.

What are fixed expenses? They are things like rent, leases, payments for your equipment, utilities, etc. Flexible expenses include spending on your education

I will try to cover as many possible expenses as I can for a photography business, but not all of them may related to you.

It is possible for you to shoot on location with no lights, with a camera given to you as present and editing photos on a handed down free laptop and free software, posting you photos to the client on a free website. These expenses can be minimized. But it doesn’t mean you need to cut your prices. By setting your prices too low, without including possible future expenses you will limit your client market to a fixed level and will make harder for you to expand in the future. In other word don’t shoot your self in foot by setting lowest prices you can at this moment.

You can always set your price based on future expenses and offer temporary discount, till your expenses catch up to your profits.

Expenses: Equipment , Studio, Transportation, Software, Services.

I separate Equipment and Software due to trend now , like Adobe, to charge monthly fees.

That may more fall in group of services. Lets look closer on Studio’s first.

Own vs Co-op vs Hourly

Own studio the most expensive way to go, benefit you are not depend on availability and can co lease to other photographers to compensate for cost. This option in most cases will include large original investment to setup studio as well maintenance fees. I notice more and more photographers moving away from this model to co-op type of the studio. For this post I will skip calculating expenses based on owning studio, it will required it’s own post.

If you don’t know how match clients you may have or it may flex, I recommend start with hourly rent.

Most studios let you rent on daily bases. If studio rent $120 a day and you have 4 clients, you will be passing $30 expenses directly to them. If you have more then two full days photoshooting in month then monthly co-op leasing option for you. Many studios in SLC area offer Co-op studio lease around 150-220 in month. I will use average $200 in calculations. Some studio may provide additional benefit, like free use of the lighting or backdrops, that may provide additional savings.

Here is list of few Co-op studios in SLC area:

To include studio expenses in your price you can have couple approaches, one is minimum charge.

Example you have solid 8 photoshoots in studio monthly, then you take $200/8= $25, studio fee for each photoshoot. Every additional photoshoot will provide profit of $25 directly to you. Or you can base on average work week (40hr) per year = 2000 hr in year : ($200*12)/2000 = $1.2 per hour.

Most cases you will never use studio 40 hours in week and many times Co-op have limit how many days/hours you can use. Lets use more realistic numbers one day in week (8 hr). ($200*12)/(52 weeks * 8 hr) =$5.8 hr

For hour use of studio you can charge $5.8 to your client. Remember to include setup time, clean up …etc.

Usually it’s 2 hr sessions for single time shoot. Even electricity usually included in price you paying for using studio other fee also need to include flex expenses.

Cleaning materials, snacks… etc. We will include them in misalinise items later.

Lets look at Equipment:

This will be more related to Photography. You need camera, this days digital, and instead dark room – computer.

Camera equipment may include lighting, lenses, tripods. Reason separating them from Computer  equipment due to differences in  depredation and salvage value. Camera equipment have higher salvage value ( the value you may receive when sell your old equipment) it’s about 10% of original value after full depreciation time. Computer equipment have match lower resale value , about 3% and in some cases shorter depreciation time. How long and what i do recommend ask your accounting consultant for that.

In these calculations I will use an example of 3 years progressive depreciation(50% first year, 35% second and 15% third) and 10% salvage for camera equipment and 4% for the computer equipment.

Equipment you using. Rent vs Own (remember all these numbers are for show purpose only, yours will differ.):

Rent option

Camera canon 5d mk3 rent 4 days : $114

Lenses / flash 4 days :  $150

Studio rent (with lights) 4 day : $200

Misc equipment 4 days : $100

Rent : $17.62 per hour equipment fee (4 days * 8 hours)

 

Own Equipment progressive depreciation ((50% , 35%, 15%) – salvage value): 3 years

Light set : $3500

Cameras : $5500

Lenses : $5000

Flash : $1200

Misc (batteries , filters, straps, cords, diffusers … etc): $3000

40 work hours in week :Total: ($18200  – salvage value (10%)$1820) / (3 years * 2000 avearge work hours in year) =  2.73 hour

16 camera work hours in week :Total: ($18200  – salvage value (10%)$1820) / (3 years * 832 work hours in year) =  6.56 hour

Now Computer equipment (I will include many options, remove those that don’t apply to you)

CPU box: $1600

Monitor(s): $800

Pereferals (keyboard, mouse) :$200

Wacom : $400

Backup drive: $300

Computer equipment use based on 3 days in week (2 days photoshoot) = 3*8*52 = 1248 hr/year

Computer cost ($3300 – 4% Salvage)/(3 years * 1248 hr) = $0.53 hr

Software, usually I included with computer equipment, but with changing in purchase vs subscription, I moved to separate category. It is more qualify as leasing then purchasing. So you can pass full value of software on monthly bases with out depreciation and salvage fee.

Software : $600 (year)

Software : $600 / 1248 hr = 0.48 hr

 

Additional expenses (2000 hours work year) :

Internet connection : $70 month  = $0.42 per work hour

Cell Phone services : $120 month = $0.72 per work hour

Website registration : $25 /year = $0.0125

Website hosting : $10 month = $0.06

Business registration : $25 year = $0.0125

Tax services prep : $250 year =$ 0.125

Transaction merchant : 30 month + trans fee = Approximated ( $0.27)

Business insurance : $500 year = $0.25

Digital storage fee : $200 year = $0.01

Does not include misc expenses. And any advertising fee.

Total business support fee: $1.88 per hour

 

If you work on location you need calculate transportation expenses:

Car depreciation 150k mil limit : 0.10 per mil at 15k car  value (12k – real 18k in year)

Car maintenance (oil 3k – $40 = 2000 , tires 45k – $600 = 2000, other 10k – $300 = 4500) 0.06 per mile

Gas direct cost

Car insurance (120 per month 0.01 per mile)

Car registration 120 year

car total : 0.17 per mile + gas/mile

*Remember all number for demonstration purposes only

Maintenance fee:

Business workplace, office furniture, electricity, water …etc $580/month = 3.5/hr

So far our total for Co-op studio photoshoot will be :

Studio $5.8(Co-Op monthly)

Equipment : $6.56 (own)

Computer $0.53

Software: $0.48

Business support fee: $1.88

Business office: $3.5

Total : $18.75(19.01 CPI)  based on 5(8 hr) days in week work schedule. Charging this amount will allow you to replace your equipment and upgrade when needed. You can also include additional inflation (CPI) currently 1.4% in Utah.

 

Now lets look on other expenses. One of them living, that include to support your live style. And I will take $60 k, witch is minimum in most cases. That will required to bring additional $30 hr for 40 hours week.

Remember you also need to include Insurance and Taxes, Taxes usually about 1/3 of your income.

Other important fee it’s “Talent fee”, more expeirance you are, more time you send learning and perfecting your skill, that all cost money and time. Classes, courses …etc. This is flexible fee, can be adjust.

($19.01(b)+$30(l)+$10(t))+ (($19.01(b)+$30(l)+$10(t))/3)= $78.80 / hr.

You can also can have direct cost, that you may pass to costumer, i recommend to keep those separate in your bill.

May include: media(print, usb, cd, album, web site), service (MUA, dressing), transportation, snacks.

Be upfront about all expenses.

When you photoshoot in studio you need to include time you spend in post process in my case on every hour on set I spend 2 hours in post work, in some specific cases 5-10 hours. As start I recommend to use 1hr photoshoot + 2hr post work.

It’s bring to $236.40 per hour of photoshooting in studio. This is only give you $30 of talent fee and does not include any profit you may want make.

I understand that I probably missed some other expenses and some numbers was pulling out of air. But purpose of this post not to be business expenses  template, more as example to show that more to the price, then just a made up numbers and lots hidden expenses in business that you may not seen upfront.

In writing this post I used information provided from:

Studios:

http://studioo2o.com/

https://www.facebook.com/pages/NSL-Studios/236281589734182

Rental places:

https://www.facebook.com/AcmeCam?directed_target_id=0

http://www.lensrentals.com/

http://www.pictureline.com/rentals

Retailer places:

http://www.bhphotovideo.com/

http://www.adorama.com/

http://www.beachcamera.com/

http://www.newegg.com/

Insurance:

http://www.tcpinsurance.com/photographers/

http://www.ppa.com/insurance

http://www.hiscoxusa.com/small-business-insurance/professional-business-insurance/photographers-insurance/

Stats:

http://jobs.utah.gov/wi/pubs/costofliving/cost.html

http://incometax.utah.gov/

http://www.irs.gov/

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