ANN MONTEITH'S BUSINESS FAQ's
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Ann.
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PRICING
Q. If I'm
purchasing more expensive packaging, such as a shopping bag
with my logo that clients are likely to use . . . which is
good advertising for me, should I account the expense to
Cost of Sales or to advertising?
A.
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
materials are accounted as a Cost of Sales expense. Even if
its purpose is advertising, it's better to account the
expense to Cost of Sales, which will insure that this cost
is included when you are pricing. In that way, the client
will pay 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. The bottom-line difference is
huge: In my opinion, there is nothing sweeter—or
smarter—than having clients pay for your marketing!
Q.
How do you justify
such high print prices now that photographers can do the
printing themselves?
A.
I've heard this
question asked 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.
SELLING
Q.
In my children’s portrait business, my clients (upscale
moms) will pay on average $800-$1500 with me. However, I
often hear comments like “my husband’s gonna freak,” “My
husband’s probably going to divorce me,” “I’d better pay
out of 2 different checking accounts so my husband doesn’t
find out I spent this much on pictures,” and “When I told
him how much I spent, he thought it was outrageous.” The
feedback afterward, however, when the husband finally
sees the photos or canvases is very positive . . . he loves
them. But
I’m
unhappy with the negativity attached to the experience for
my female clients, both in anticipation of telling their
husbands and in enduring their husbands comments until he
sees the photos. I know that it’s much easier for a woman
to make an emotional purchase than it is for a man, but . .
. can you suggest any language I can use/pass along to
my clients to help offset this husband
sticker-shock?
A.
I can certainly understand this photographer's upset and
the negativity being directed at her business by a "third
party" — in this case the husband. My experience has been
to get the husband involved from the beginning if at all
possible. If he participates in the design session, he
becomes as committed as the mom. And typically he's the one
who ultimately will defend a larger purchase.
But I also wanted to ask Houston photograph Carol Andrews,
my good friend and fellow Studio Management Service
consultant, for her viewpoint on this, as I consider Carol
to be the "Female Finance Diva." Here's what she had to
say:
"I educate my clients IN ADVANCE of the photo session to
help identify a budget for "them." This gives my clientele
a security level. Generally, I will ask the female client
is she is comfortable going out to buy a new couch or china
cabinet without her husband. If she says yes, then I'll say
great, so he'll be comfortable with your decisions without
being present. If she says no, I'll suggest that its very
important that he be involved in the decisions, and won't
feel left out and resent HER decisions, so we'll find a
time when he can be present also. I'll tell her that I want
to respect their relationship, and do what works best for
them.
"It works beautifully, no problems. Very smooth. There is a
problem only if Dad gets sandbagged with a huge surprise on
the Visa bill. How would the wife feel if Dad goes out and
buys the biggest screen Hi Def television, has the
furniture moved and the monster media center installed?
Stand in our customers shoes . . .
"The entire key is to handle the situation IN ADVANCE . . .
get everyone on the same playing field, with the same
rules. Stanley Marcus used to have a sign on his desk that
said 'no surprises.' Our businesses run much more smoothly
with that philosophy."
Great answer Carol! If this wisdom doesn't
work with your client, then let her give you a "subterfuge
payment." After all . . . it's her marriage. Thank heavens
we're not responsible for this issue!
PARTNERSHIP
MARKETING
Q. A local
dentist has allowed me to decorate his offices with my
photography. He has a new baby that he would like for me to
photograph. I'm not sure whether I should offer him the
portraits at my cost or charge him full price, since I'm
already doing him a favor by decorating his office. I'm
afraid that if I give the work to him at cost, it's
devaluing my work.
A.
I strongly
recommend that you give
the dentist the
portraits of his child. When a retail store owner or a
business professional allows you to hang your work for
qualified prospective clients to see, the value you receive
for this exposure is priceless. Yes, you are decorating the
office, but the relationship you have established is far
more than a business-to-business one: it is a
friend-to-friend relationship. Keep your partnership
marketing friends happy! The more you do for them, the more
they will do for you! Every really successful photographer
I know who credits marketing partnerships with their
success will tell you the same thing.
STUDIO
MANAGEMENT SOFTWARE
Q. After
years of running my business using Quickbooks to keep track
of the financials and ACT! as my contact database, I’ve
decided that the time has come to switch to a studio
management software package that does both functions AND is
also geared towards photographers and marketing. I
know you endorse Successware, and was wondering if you have
a comparison of that with some of the other products. Why
Successware over other products?
A.
I recommend
SuccessWare because it is the industry's ONLY fully
integrated financial and business management software that
encompasses all of your studio business needs—business and
marketing planning, product pricing, scheduling, client and
prospect tracking, order tracking, client management and
remarketing, bill paying, payment plan management, and
complete financial management and reporting. Everything you
need is always in one place: no double entries, hunting for
cheat sheets, etc.
I've lived through the days when you had to do daily hand
entries and then spend three days each month to hand-create
your financial records. Things improved with computers, but
without SuccessWare you have to work or in a minimum of
three different applications and create your own
personalized reports, and you still can't get all the
information SuccessWare provides. With SuccessWare, once
you enter data and pay your bills, reports are automatic,
and this is the way it has to be for busy, successful
people.
SuccessWare is set up according to industry standards for
financial management and accounting, making use of
managerial accounting, which provides data that is
consistent with tax preparation needs, but also provides
information that allows you to make informed decisions
throughout all aspects of your business.
When you look around and see who's making money in this
industry, it's not a coincidence that most of them are
SuccessWare users.
You can learn a great deal more about SuccessWare by going
to their website (SuccessWare.net). You'll find all kinds
of resources—from video tours to a free download demo.
Just click here to take a look.