When discussing the topic of photography and pricing, there is the common misconception that an “overhaul” in your prices is required. The term “re-branding” has become a buzz-word in our industry, and many feel that a big dramatic change is what's required in order to move forwards in business.
This couldn't be farther from the truth. If you want sustainability, longevity and consistency in your business, then making big dramatic changes could be detrimental. The last thing you want to do if you are dependent on your income as a photographer is to alienate your existing market and clients. Big fundamental shifts is often business “suicide”, and while you may hear stories of photographers to completely “jumped ship” and made dramatic changes in business for the better, I would suggest that this isn't the norm. There are more stories of photographers who made a big change and ended up loosing business, so much so that they had to double-back and re-adjust, and that's just poor business practice.
I suggest that making small changes in short bits is the best way to make a great long-term impact while not loosing business and alienating clients. It's important to seriously consider sustainability and longevity when making business decisions – after all, we want to be in business for a while, right?
One of the best places to make small short-term changes to generate great a long-term payoff is in your pricing. In this article, I will show you how raising your prices by only a small amount, amortized over the year, can increase profits significantly.
What is profit?
Let's define the term “profit” for a minute, and figure out exactly what it is comprised of.
Let's define the term “profit” for a minute, and figure out exactly what it is comprised of. Profit in it's very basic definition means the amount of money you have left over when you subtract your expenses from your income. Furthermore, your income, simply put, is calculated by multiplying the number of sessions you have by how much you make per session. Therefore, profit can be broken down into the simple formula:
Profit in it's very basic definition means “the amount of money you have left over after expenses.”
Profit = (# of sessions × $ per session) – expenses
When we look at it this way, it's clear to see that there are really only three ways to increase your profit:
- Increase the # of sessions
- Increase the $ per session
- Decrease your expenses
The first profit increasing method – booking more sessions – is a marketing discussion, and so I will leave that for a future article. Certainly booking more sessions will increase your bottom line, but this also means that you will be working more hours or having to pay more for staff, so it's effect on profit will be proportional and limiting at the same time.
The third profit increasing method – decreasing your expenses – is a great way to “trim the fat” and increase your bottom line, however often there is only so much to do in this area. Some expenses can't be reduced or cut out and so we will find that there is eventually a limit as to how these changes will affect our profit.
The second way to increase profit – increasing the amount of revenue per session – is the simplest method and can have the greatest impact on the bottom line. Simply put, I am suggesting that the most effective way to increase your profit is to increase your prices. The only way to do this while maintaining sustainability is through a rational and measured approach to price increases. Small increments of 10% or 15% will yield significant increases to your bottom line.
Case-Study for Increasing Profits
Diving into an example for calculating higher profits
Let's say, for example, that you were a wedding and portrait photographer, and you currently photograph:
- 25 weddings per year at an average of $4,000
- 2 portraits per week at an average of $800
This equates to a gross annual revenue of $180,000. A small 10% increase in your prices will bring your average wedding revenue to $4,400 and your average portrait revenue to $880, and this equates to a new gross annual revenue of $198,000. Your cost-of-goods haven't gone up, your expenses haven't gone up, and so the additional revenue that you make is pure profit.
Who wouldn't want an extra $18,000?
Calculate for Yourself
We have created a great tool here on SproutingPhotographer.com for you to calculate these numbers for you that are specific to your unique business structure.
With this tool, you simply input how many portraits and weddings you photograph each year, as well as what your average revenue is for each. The tool will then calculate how much additional profit you'd make in your business from small incremental changes in your prices.
What steps to take next
My actionable lesson for today’s article is to consider small incremental changes to your prices. Determine what is reasonable and “safe” for you, your market and your clients, and make the change. I suggest starting with a 10% increase in prices. This will yield immediate returns and it is something that will ensure business sustainability and longevity.
If you enjoyed this article and would like to read more about the mechanics of pricing for photographers, you should definitely check out our book “Pricing for Profit”, which you can purchase physically from Amazon here or our e-Book version which is available for immediate download here.