It’s not how much you make… It’s how much you keep. Every photography business is different. For some, it is your livelihood and your main source of income. For others, it can be a supplement to the main bread winner or a part time business. Regardless of how your business is set up, I want to help you keep more of what you make.
We often get caught up in our gross sales, and if it isn’t the mark we want to hit we are disappointed. But, what we really need to look at is our bottom line, which is the amount left over after all of our expenses have been paid. It’s our owner income plus our net profit. PPA has great resources to help you see what percentages you should be allocating to all the areas of your business so that you can make your bottom line a bigger percentage.
The first area to trim will be your general expenses. These expenses are the expenses you have to keep your studio running day to day. For example, the rent you pay for a retail studio, the electricity bill, etc. A few things to look at in your general expenses are your overhead and advertising/marketing expenses. Are you paying rent? This can be one of the biggest drains on a photography business. Having a home studio drastically cuts your overhead, which allows you to keep a greater percentage of your profits.
Another big expense can be your marketing/advertising budget. I know when I started as a client with PPA’s Studio Management Services, one of the major problem areas we found was my marketing/advertising budget was out of control. I didn’t realize just how much I was spending to place ads and try to get my name out there. Paid advertising with places like Google Adwords and Yelp can get out of hand fast. Also, placing advertisements in magazines is a quick way to spend a lot of money with little to no return. There is always a small percentage this works for, but you have to see how much you are spending versus the return on clients. The best advertising is word of mouth, which is also free!
Knowing your numbers is key to figuring out what areas need to be trimmed down and what areas are working for your business. Another place to trim besides your general expenses is your cost of sales. In case you are unfamiliar with cost of sales, your cost of sales is everything that goes into making a product for your client. If you have zero clients, your cost of sales will be $0. There are two sides of cost of sales you need to be aware of when you start looking at what goes into it. One side is the material costs for making your products, and the other is labor cost, also known as your time and any contract labor needed to finish your products.
Keeping your cost of sales in check also allows you to keep more of every dollar you make. If you know how much it costs you to make each of your products, you will be able to see where you can save money along with what you need to charge to be profitable. PPA recommends that studios keep their cost of sales at 25% for both home and retail studios. So, for every dollar you make, you should be paying 0.25 cents to make your products. If you have a cost of sales higher than 25% that cuts into your bottom line, but if you have a cost of sales lower than 25% that is extra money on your bottom line for you to keep!
One way to get your cost of sales lower is to look at what products you sell the most and make sure these products are the most profitable for you. Meaning they have a cost of sales of 25% or less. If you don’t use any kind of method of tracking your products, I suggest you start. I personally use Successware for my business management software, and I have found it to be invaluable. You don’t have to use Successware, but I do encourage you to use some form of management software to track your clients, profits/losses, and products. It will make your life easier!
If you have any questions about keeping more of what you make please send me an email or leave a comments here. I will also be doing a post on how to start with cost of sales pricing… It’s the easiest place to start to price yourself so you can cover your costs and make money on what you sell!