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Excerpt from, Photography: Focus on Profit Paperback with PhotoByte® CD-ROM 416 pages, ISBN: 1-58115-059-8 by Tom Zimberoff |
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Note from the founder of Garage Glamour™ -- This is third of several excerpts of Tom Zimberoff's book, Photography: Focus on Profit. Recommended by top educators as part of their curricula--this is a must have if you plan on succeeding in the business of photography--Rolando.
Deteriming Your Salary
© 2002 Tom Zimberoff
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The aggregate assignment fees you earn throughout any given year should be at least equivalent to the annual salary of an employee doing the same kind of work for someone else.
Suppose you have a friend named Fred who works for a graphic design company and earns $35 per hour. Then you should be making at least that much plus enough extra to cover the overhead of running your own business, plus a profit on top of that. Otherwise, you will make considerably less money than Fred. And don't forget that Fred has all of his health insurance and other benefits paid by his employer too.
Because of all the time you are obliged to spend on administrative, supervisory, marketing, and menial chores that Fred doesn't have to do, you need to make more money than he does to have a net personal income that is roughly the same.
The extra time and money you spend on marketing and administrative duties are what make it possible for you to keep your business afloat; you must constantly seek and find new work. Nobody else is going to do it for you. The same reasoning obviously applies, even if you pay someone to do it for you; you'll require a source of additional revenue for any employees of your own. But those kinds of activities do not bring in immediate cash. Only performing photo shoots does that. Those other kinds of expenditures are represented by indirect costs. So, consider that while you are trying to reel in new and better assignments and not getting paid for your time, Fred is collecting a regular paycheck. He doesn't have to worry about looking for new sources of revenue day in and day out. The company he works for pays other employees to do that kind of work. His employer also makes a profit on the work those employees are paid to do. Therefore, you should be earning at least what both Fred and the other employee earn put together, plus some profit on top of that!
Here is an exercise to illustrate how to find a starting point for both the amount of profit your business needs and to calculate a reasonable compensation for your freelance photographic services (an assignment fee*). To reiterate, since many people employed at larger companies work at an hourly wage, their example will be used for the sake of comparison, even though it is recognized that photographers do not work by the clock.
Determine Your Assignment Fee
Let's make up a term called shoot rate. There really is no such term. But for the sake of this exercise, a shoot rate is what you might charge per hour, if you could work and survive that way. It will help you arrive at a ballpark figure that measures what you earn versus other salaried professionals. It will give you a starting point to arrive at a competitive margin of profit.
• Take your monthly average of billed expenses** (costs passed along to clients plus a mark-up) and divide by 172 (4.3 weeks x 40 hours).
• Add your fixed, monthly, overhead (business-related only!), including such items as rent, insurance, automobile, telecommunications, etc. and divide by 172.
• Add the rate per hour that you think you would be entitled to as an employee. Use someone you know and respect as a model, someone who works for a large company. If you wish, use Fred's hypothetical $35/hour figure.
• Now, estimate what you think is a reasonable percentage of profit and add that into the equation. (Avg. Monthly Billed Expenses x Profit %)
The result looks like this:
Avg. Mo. Billed Expenses $7,000/172 = $ 40.67
Fixed Monthly Overhead $3,750/172 = $ 21.80
Comparative Hourly Wage $ 35.00
Profit (20%) $ 8.13
Total $ 105.60
Continued on Next Page
*This method is more sophisticated that the one cited earlier in this Part on [page ___.]
**This information is available in PhotoByte. After you have billed a few assignments, you can click the Billed Expenses button on the Sales Reports screen. See Part 8, Operations, for an example of how to do such a report
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