Pricing isn't a topic that most photographers like. While it might be boring, tedious and unimaginative, it is an important part of running a photography business. I've talked about it before in this introductory Sprouting Photographer article, but it bears repeating here. Most of us get into photography because we love the art and creativity of photography, but we quickly realize that unless we can get people to pay us for our work, it'll be nothing more than a hobby. Making a living as a professional photographer is realistic, but you have to put in some time setting the foundation, and pricing is a part of that foundation. Luckily, pricing is a topic that I love (I know … I'm a nerd) and am happy to discuss it in today's article!
You can't arbitrarily set your prices as a photographer – it's not measurable and repeatable.
This article is all about the mechanics of pricing, and in particular how to price your physical products. At SproutingPhotographer.com, our mantra is to be specific, direct and share concrete business ideas. Therefore, to accompany the discussion here in this article, I am going to use the example of an 8×10 print to illustrate the concepts. This discussion could be adapted to any physical product, however, so please feel free to use the ideas here and apply them to your own product offerings.
Some photographers pick their prices arbitrarily without real reason. They simply feel that they should be charging a certain amount, and so they just pick that number. This isn't the best way to set yourself up for a successful career as a photographer though, as you can't really be sure that your “out of the air” prices are realistic, profitable, or appropriate. Also, when you arbitrarily choose pricing, it also doesn't give you any measurable or repeatable way to establish pricing for other items in your product line. You end up with inconsistent pricing that is all over the place without logic or reason.
How to price
The five main influencing factors that should affect your prices
There are five main factors that should influence your pricing. They are as follows:
- The quality of your work and your finished product
- Your perceived value in the marketplace and the perceived value of your products
- How confident you are as a photographer
- What your competitors are charging and what the market will bear
- Your cost-of-goods
When looking at these very basic factors, the first three (quality, perceived value, confidence) are all intangibles and therefore slightly subjective. You can offer the best quality, present your work beautifully and be entirely confident in your ability, but all this doesn't help you come up with a price. At best, it gives you a self-focused approach to pricing, which says “this is what I think I'm worth”, but that isn't enough.
The fourth influencing factor on pricing (competition) is an important one to note. Of course it wouldn't be smart to copy your competition's pricing, but I feel it's important to at least be aware what your local market will bear and keep that in the back of your head as your establish your own price structure. You don't want to be so far off the line that you are looked at as being unrealistic.
The 5 influencing factors on pricing are quality, perceived value, confidence, competition and COGS.
While we're on the topic of relevancy, creating a pricing structure that your local market will bear is important. As I mentioned in the first SproutingPhotographer.com article, there are so many great educational resources available to us as photographers, but you must to be realistic and relevant to your local market when making business decisions. For example, just because an established photographer from Southern California tells you in a workshop that he charges $165 for an 8×10 print doesn't mean that you should, too. You need to be realistically priced for your area otherwise you'll price yourself completely out of the local market.
While there are five influencing factors on pricing (above), it's clear to see that the only real measurable way to establish your pricing is by using the fifth factor, which takes into account your cost-of-goods. Before we go too deep into the mechanics here, I'd like to explore the concept of cost-of-goods for a minute. If we're using an 8×10 print as our example product here, the cost-of-goods does not mean just the cost of the print from your lab. Many photographers make this mistake and don't factor in the real costs of a product. Cost-of-goods for a product is so much more.
Cost-of-Goods is defined as the direct costs involved in producing a product or service which usually includes labor and materials.
It's important to note that cost-of-goods include labor. Many photographers don't factor in their time when establishing their pricing, and that is a sure way to not make a living with your photography business.
Walking through an example of these principles, calculating “what does an 8×10 print cost?”
Let's go back to our example of an 8×10 print. Let's walk through the process of producing an 8×10 print for a client, from start to finish, and see what is really involved:
- First you spend 10 minutes retouching the image in Photoshop to make sure it's perfect.
- You spend a quick minute cropping and sharpening the image for the size of print (8×10) ordered by your client.
- Now that the image is ready, you spend 3 minutes to order the print from your lab via the ROES software, choosing the right paper stock, finish, shipping option, and so on.
- The print costs $3.50 from your lab.
- The shipping charge to get the print from your lab to your doorstep is $6.50.
- When you get the print in to your studio, you spend 3 minutes unpacking it and inspecting it.
- You package up the print in a museum-quality arrival sleeve, a beautiful box with tissue paper, a “caring for your print” card and wrap it up with ribbon and a beautiful bow. All of this goes into a custom-printed tote bag with more tissue paper. The cost of your packaging is about $5.00 and it takes you roughly 5 minutes to package it up.
- You spend a quick minute writing the e-mail to your client, letting them know that their print is in and ready for pick up, and you propose a time for them to come in.
- When your client comes to pick up the print, you spend 10 minutes chatting with them, making sure they're happy with the print and talking about their next session.
That sounds fairly average, right? I don't think that this is an unrealistic workflow. If anything, it may be underestimating some of the time calculations, but let's go with it for now. Let's calculate what actually went into the print.
33 minutes total time and $15 total hard cost
If you're a full-time professional photographer and are hoping to make a sustainable living from your business, let's put your annual salary at $60,000, which I think is more than fair. We have 50 weeks of work (2 weeks vacation) and 40 hours per week, which calculates out to $0.50 per minute, calculated as such:
÷ 50 working weeks
÷ 40 hours per week
÷ 60 minutes per hour
= $0.50 per minute wage
If our per-minute wage is $0.50, and we put a total of 33 minutes into the 8×10 print, then that means our labour cost of the print was $16.50. Add to that the $15 hard cost, this brings our total cost of the 8×10 print to be $31.50.
So far we haven't taken into consideration any other ongoing fixed expenses such as utilities, taxes, equipment, education, and so on. The PPA benchmark survey recommends that a home-based studio operates a business model of 35% cost-of-goods, meaning that your variable expenses (cost-of-goods) should be 35% of your total revenue. The remaining 65% is eaten up by fixed costs and business profit.
Therefore, if we're operating under a 35% cost-of-goods model, we must mark-up our costs by 2.85 (100 ÷ 35 = 2.85) to arrive at a final product price that:
- Covers our hard costs
- Pays for the time that went into creating the finished product
- Leaves room (65%) for overhead expenses and business profit
This means that we need to multiply our 8×10 cost of $31.50 by 2.85, which gives us a final product price for an 8×10 print of $89.78.
Let's stop there for a minute. Many of you may be saying that $90 for an 8×10 print is outrageous and that you couldn't sell a piece of paper for that much in your area. That's ok. You've just hit on the other “influencing factors” that we discussed earlier:
- Confidence – you don't think it would go over
- Perceived value – you feel that it's just a piece of paper
- Competition/Market – your area wouldn't support prices that high
These are important discussions to have. Maybe with these three influencing factors, you have come to the conclusion that somewhere in the $65 price range is more appropriate and realistic for your 8×10 print price, and that's ok. That just means that you need to price other similar products in your line-up (i.e. 16×24 prints) to have a higher mark-up so that it's balanced with the lower mark-up on this product (8×10 prints).
There still ends up being some guess-work with using the factors of confidence, perceived value and quality to adjust your prices, but at least using the cost-of-goods pricing model, you have a foundation to start off with.
What to do next
First, calculate what your per-minute wage is (annual salary ÷ 50 weeks ÷ 40 hours per week ÷ 60 minutes per hour).
Determine your labour costs by recording how much time goes into the production of the finished product and multiply that time by your per-minute wage (above).
Determine your material costs by adding up the hard costs associated with the product (printing, shipping, packaging).
Add the labour costs to the material costs to determine your total cost of a product.
Multiply your total costs by your mark-up of 2.85.
Adjust your price if necessary to be in line with your quality, confidence, perceived value and local market area.
This process might seem tedious, but it is crucial to the long-term success of your photography business. Repeat this process for each and every one of your products and services. If you don't want to do it manually, we've designed a great pricing calculator here that will do it all automatically for you. If you're interested in learning more about the mechanics and ideas discussed here in this article, you should definitely check out our book, “Pricing for Profit” where we dive deeper into all of these ideas. You can buy the physical book from Amazon here, or you can grab our eBook for immediate download here.