Download Photo Byte® Here!

Excerpt from, Photography: Focus on Profit Paperback with PhotoByte® CD-ROM 416 pages, ISBN: 1-58115-059-8 by Tom Zimberoff

Photography: Focus on Profit order here!

The groom inquired casually about Picasso's fee, as he reached into his pocket for a checkbook. Picasso asked for $25,000 (in French francs). While price was no obstacle, the man joked about what a nice job it was to make $25,000 an hour painting pictures. Picasso's sober retort was, “You don't pay me by the hour. You pay for the years of hard work that made it possible for me to paint such a picture in only one hour!”

Uncertainty About Pricing
The story above suggests that the price you charge is hardly determined by how much time you spend behind a camera. Obviously, your time merits some consideration, but you already know it can't be the most important criterion, let alone the only one. So what else determines the price of published photographs?

• Is price entirely dependent upon how my clients publish my photos, or…
• Do my talent and the quality of my work count most of all?
• Should my personal experience dictate how much to charge? (If so, how long will it take before I start earning enough to support the lifestyle I want?)
• Does the difficulty of an assignment become a pricing factor?
• What if I run over budget or over schedule?
• Am I supposed to break even on production costs and bill for a “day-rate” on top of that amount or…
• Should I charge more than what it costs me to shoot the assignment plus a day-rate?
• If the answer to the last question is yes, how much more do I charge?
• How do I figure out ahead of time what all of my costs will be, so I don't get burned by estimating too low?
• Should I charge anything at all for the time it takes to shoot an assignment?
• Should I rely on what other photographers charge for the same type of work?

Deciding what price to charge is the single most demanding decision a photographer has to make, especially if you're just starting out. Nonetheless, you must make that decision over and over again for each and every assignment that comes your way throughout your career.

The Difference Between a Price and a Fee
Price refers to the bottom line, literally the last, the final figure on an Job Estimate, Job Confirmation, or Invoice/License of Rights. The price of an assignment must not be confused with any one or more of the separate fees that are comprised within its total. It is, in fact, the grand total of all your fees plus production costs, mark-up, and sales tax. When it comes to billing, price means not just the whole enchilada but the combination plate.

A day-rate, for instance, is merely one particular kind of fee. It cannot be considered a price all by itself because it represents only a fraction of the buyer's total cost. If you were to bill your clients for day-rates alone, you would, by definition, neglect to bill expenses. You might also leave yourself exposed to severe government-imposed penalties for not collecting and remitting sales taxes. Moreover, you would not make any profit.

A price includes everything buyers have to pay for:
• All of the production services you provide (at various fees) plus…
• The costs you've incurred to execute an assignment plus…
• A profitable mark-up plus…
• Applicable sales and use taxes plus…
• A license to publish the resulting photo(s)

The Complexity of Pricing
As you can see, pricing photography is no simple matter. But there isn't one person reading this book who cannot master the skill. Complexity becomes an issue only when you have to bill more than one kind of fee on a single invoice. Even though, frankly, that happens often, complexity does not mean difficulty, especially when you have business automation software to help you, such as PhotoByte.

As you learn about the finer points of pricing, different kinds of fees will need to be considered in detail. Each fee corresponds to one of the various services photographers offer their clients. In addition, you will learn how and when to bill expenses that correspond to production costs. Guidelines will be offered to help you calculate a dollar amount for each component part of your price, and for any given assignment. You will learn how to put the components together and watch them take shape as a Job Estimate, a Job Confirmation, or an Invoice/License of Rights. You will also learn how to bill for profit.

Since circumstances vary from job to job, some kinds of charges may not apply to every price. For example, you wouldn't add a specific line-item charge for film and processing to a stock-photo invoice. Nonetheless, you will learn how to charge indirectly for such costs, because it still costs you money to shoot-and time to maintain-an archive of stock photos. Making such a valuable resource available to your clients demands a profitable return on your investment.

Overhead: How Cost Affects Price
The cost of doing business affects the prices you charge for every assignment. If your costs are too high, you may have to raise your prices, making it harder to compete against photographers with lower costs and, therefore, lower prices. If your business requires a large studio and a staff of assistants and technicians, you may not be able to accept the kinds of jobs that photographers who work out of a home office can produce more cheaply. That's why some photographers merely rent studios and hire contractors on an as-needed basis. It cuts overhead.

Overhead represents the money it takes to keep your doors open for business each day, whether a shoot is booked or not; whether you have an office or a studio with a door or not. Even location photojournalists can rent studio space on an ad hoc basis if need be, billing it back to their clients. (That would be a direct cost, as explained below.) Without the financial burden of a full-time studio, which must be factored into the price of all assignments, whether they require a studio or not, you can make yourself more competitive. Eliminating any part of your overhead allows you the option of reducing prices without reducing the amount of profit you make.

Although a studio is merely one example of overhead, whatever your reasons may be for having one-or any other facility for that matter-it must pay its own way by earning a profit. Even if you rent studio space by the day and don't expense it with a mark up each time you invoice a client, it is categorically just a personal indulgence, not a business necessity. If you make use of a studio often enough, so that the cost of owning or leasing it can be amortized, i.e., spread out over many assignments, even by renting it to other photographers, then you have kept a competitive advantage. That would be an indirect cost.

Indirect Costs
Indirect costs cannot be attributed to any one, specific assignment; yet they are a part of your overhead. For example, when you buy a page in a sourcebook to advertise your work, such as in the Creative Black Book or the Workbook, the entire cost cannot be attributed to a single photo shoot; i.e., you can't bill the entire advertisement back to the first client who assigns you to shoot a job. So, you will amortize the ad by attributing a fraction of its cost to every assignment you shoot. That could mean raising your prices a corresponding amount. For example, if it costs you $1,200 for an ad, and you shoot fifty assignments per year, you would divide 1,200 by 50 and add the result ($24) to each price. Actually, in practice you will accomplish the same result by increasing your profit margin. That way you won't have to itemize the cost of the ad on your invoices. It won't stick out like a sore thumb, inviting client objections.

When an indirect cost is not billed back to your client (in the form of a line-item expense), and it is included in your profit margin instead, it is commonly called a “buried” expense. That's not to imply sneakiness or underhandedness. It's the way all legitimate businesses operate. It simply avoids the alternative of flagging a cost that is not intended to be itemized, so it has no chance of becoming a topic for negotiation. More about that later.

The same principle applies to camera and liability insurance, to cite another example. A portion of your annual premium is applied to each photo shoot. However, insurance costs are not always buried. Many photographers bill their insurance premium as a pro-rated, line-item expense. In some markets this has become an accepted trade practice. There are many similar examples.

Indirect costs also apply to the creation of self-assigned stock photos and portfolio samples. Call it shooting “on spec” if you will, but production costs and mark-ups must still be built into your licensing fees. If you don't do that, you are not making a profit.

Each photo assignment you accept will co-opt a fraction of your overall budget for marketing and self-promotion. Besides sourcebook ads those costs include picture postcards, business cards, postage, portfolios, and agent commissions. Then, you must consider the cost of ancillary services, such as legal, accounting, insurance, and graphic design. There are other indirect costs too, ranging from office supplies to client entertainment. The list goes on and on.

Incidentally, all of these costs represent money well spent because they help you extend your business and find new work. Consider them as investments. As such, almost all of these costs are tax deductible. So don't forget to discuss them with your accountant.

Don't neglect to consider the capital cost of your camera gear either. It's not going to be worth what you paid for it by the time you get it home and take it out of the box. But the difference between what you paid and what it's worth can be depreciated on your income tax returns. That saves you tax dollars.

Camera equipment also requires repair and replacement from time to time; and that takes cash. Therefore, indirect costs also include keeping your equipment in tip-top working order. You can't afford to have a camera, a lens, or a strobe light fail in the middle of a shoot unless you have back ups. And back-up equipment is also expensive to acquire and maintain. If you don't own back-up gear, you may have to pay to rent it. But all of these items qualify for tax deductions, in spite of the fact that their costs may be factored into your pricing, so they are paid for indirectly by your clients.

Finally, you must factor in all the credit services you use each month to pay for services and supplies. You probably pay some rather hefty interest rates and fees to the banks that issue those plastic cards you rely on, and also to the vendors who provide you with open accounts, especially if you are ever late with a payment.

However much you pay for credit, that amount of cash is no longer available to earn interest in your bank account or to build equity in real estate or a mutual fund. Credit, too, represents an indirect cost for a service that must be factored into your pricing. So, you see, just as you must earn a fee for shooting pictures, your business must earn a fee for providing these ancillary services, financial and otherwise. If it does not, you will end up subsidizing your customers and losing money.

Partial List of Indirect Costs:
• Advertising, Marketing, and Promotion
• Camera Equipment
• Commissions (to artist's rep)
• Dues and Subscriptions
• Employee Salaries and Benefits
• Client Entertainment
• Insurance
• Interest Payments (cost of credit)
• Legal and Accounting
• Licenses and Permits
• Maintenance and Repairs (for both real estate and photo equipment)
• Office Supplies and Computer Equipment
• Postage, Shipping, and Messengers
• Rent
• Security (burglar alarms, camera vaults, etc.)
• Taxes
• Telecommunications (ISP, cellular phone, telephone, and fax, etc.)
• Transportation (automobile, taxi, trains, buses, rental cars and vans, etc.)
• Utilities (gas, water, electric; trash removal, etc.)
• Vacation Time

Direct Costs
Direct costs are more conspicuous than, say, the postage you spend on mailing self-promo postcards each year. Direct costs are usually associated with and charged to a particular shoot. They include such things as the hiring and supervising of assistants, stylists, location scouts, and models, as well as the rental of specialized photo equipment and the film you shoot for each assignment. These costs are billed directly to your clients as distinct line items on every invoice. That is why they are called “direct” costs. They also include what you spend for film and processing, hotels, toll roads, gratuities, props… you name it. Direct costs include the commissions you might pay to modeling agencies too. (Sometimes they bill commissions to you as mark-ups.) By filling in the two PhotoByte Worksheets associated with each Job Estimate, Job Confirmation, and Invoice/License of Rights, you will be reminded about which direct costs you need to bill to your clients. Referring to your receipts will help you to remember too.

Costs Versus Expenses
A cost usually means a charge against your business, the amount you have to pay for a product or service. An expense usually means something you bill to a client. In other words, they pay. An expense is, in that context, part of your revenue. An expense is calculated as:

Cost + Mark-up

Finding a Starting Point
One of the most common mistakes made by new photographers is to price themselves too low. It's bad enough that they trust hearsay and rumors from photo assistants, lab technicians, and magazine pundits to determine what other, more established photographers are charging; those are not reliable sources of intelligence. But they do it anyway, deliberately pricing themselves below whatever figure they happen to hear on the street, presuming that they can break into the market by offering bargain basement prices. They are mistaken. If you don't think you're good enough to demand top dollar for your work, neither will your customers.

Buyers do not pick photographers based on price alone. If you figure on establishing a foothold in the marketplace by pricing yourself below market levels, even by guessing what seems to you like a modest price for any given shoot, you could be shooting yourself in the foothold.

Market Price
There is no magic formula to help anyone arrive at a price, nor is there such a thing as a “standard price” for any kind of photo assignment. Just about every shoot is different and will have a different price, even if the subject matter is similar. That goes for stock photos too, because they are used in an infinite variety of ways. But there does exist a sense in the marketplace of what buyers are willing to pay, of how high they're willing to go. This theoretical limit is called a market price.

A market price is based upon what the preponderance of photographers has billed for similar assignments and stock photo sales in the past. Unfortunately, however, the market price can be too low when the majority of photographers don't know how to formulate a price. That's why a market price should not be held up as an industry-wide standard. It may nonetheless prevail because of how easily photographers have succumbed to the pressure of competition, some of it unfair.

That pressure will be leveraged against you to its fullest extent because of the greater economic power buyers have; they will pit you against other photographers. If those other photographers are unsophisticated about pricing, the only results you can count on for all of you are lower prices, lower revenue, and lower profits.

In the end, pricing boils down to bargaining skill. That's the difference between the price you ask for and the price you get. All fees are negotiable. But, as you already know, they represent only part of a price. Other parts of a price are not negotiable, such as the expenses you bill. With that in mind, just remember that you don't have to settle for the first offer you get. Get as much as you can! Don't be embarrassed or afraid to ask for what you want. Once you start quoting low prices, it's hard to bargain them back up. To put it succinctly, and in the inimitable words of former Heavyweight Champion George Foreman, “Dog don't bark, dog don't eat!”

Even though it's tempting to simply charge what everyone else does-or at least what you think they do-based on what competitors and clients are willing to tell you, you can get into trouble that way. They don't always tell the truth! There are better ways to ascertain a market price. And there is no rule that says you can't push the envelope, driving it higher.

Pricing Surveys
It's easy to find sources of photo-pricing information. For instance, each of the national trade associations (i.e., ASMP, PPA, and APA) publishes member surveys from time to time. An email or a telephone call will facilitate a request to see the most recent one. (A charge may or may not apply, and membership may be required.) They generally show a range of fees billed by those members who have responded to the survey. Examples of dollar amounts are separated into columns (i.e., low, medium, and high) corresponding to various types of media uses, that is under what circumstances the photos were published.

Corrupted Information
Beware that pricing surveys are not always accurate or complete:

• Surveys do not always account for more than a basic usage fee, yet there are usually additional fees and costs to factor into the bottom-line price for a photo shoot.
• Surveys can be skewed by the number of respondents, which may include only a small percentage of those photographers who were actually polled.
• The respondents from one regional market may outnumber those in another. If you're not given that information, the survey will be tainted and misleading, because what might be a tantalizingly high fee in Schenectady might be low by New York City standards.
• Surveys become out of date quickly because prices are susceptible to change.
• Finally, surveys do not single out photographers who have used best practices to determine pricing and profit structures. Consequently, any carelessness on the part of the respondents (especially when they are few in number) will lead to unrealistic and artificial prices, whether biased on the low side or the high side. You have no way of knowing how many-if any-of the respondents regularly mark up their billed expenses for a profit, let alone whether they billed any expenses at all. And you have no idea what their actual costs are.

Price Fixing
Please note that the trade associations that publish surveys are sensitive to charges of collusion, or price fixing, something that is forbidden by federal law. They are not allowed to set prices or even to provide guidelines for setting prices. They are only allowed to make public the information they have polled from their members. So never tell a buyer, for instance, that the ASMP recommended such and such a figure as a fair price. There are no “ASMP minimums” and no “ASMP day-rates!” That applies to the other associations too.

Downward Pressure on Prices
The upshot of surveys is that they can drive prices down. Here's how.

A problem arises when you try to bill a reasonably profitable fee and it is the buyer, ironically, who invokes the results of a survey to tell you that your price is too high, higher in fact than the last so-called “ASMP recommendation.” It doesn't matter how outdated that survey may be; the buyer may demand that you adjust your price down to match its results, no matter that costs have risen dramatically since it was first published. That makes it hard for photographers to raise their fees in conjunction with inflation and the cost of living.

Surveys tend to establish the going rate for photographic services, whether the information they contain is realistic economically or not. They can be used to some extent to gauge what the market will bear, but only when examined intelligently and in conjunction with additional economic factors, such as the five Competitive Pricing Factors discussed in a separate article.

Surveys may be an okay starting place for novices, but experienced professionals realize how their own pricing strategies can be compromised by the undue influence of such appraisals. One cannot rely on the results of a survey to indicate a price that will maximize profits, because fees vary so widely from one respondent to another and from one day to the next. So read surveys shrewdly, and don't depend on them exclusively. If buyers can beat you over the head with the results of a survey, they will. Therefore, keep in mind that a market price is not necessarily a “fair market price” when it comes to surveys.

A Shift in Dialog
You have learned what a price is, if not yet just how to come up with one. With that in mind, the first thing to understand about pricing photography is that you're not really pricing photographs at all. In fact, you already know that a photo business creates revenue by licensing intellectual property rights, not by selling photographs.

Indeed, insofar as photographers hope to maximize their revenues as much as possible, the dialog amongst them needs to shift direction away from the concept of “valuing your own work” to concentrate instead on pricing for profit. That still doesn't explain how to determine a price. But we'll get to that. In the meantime let's reaffirm the proposition that a photographer's work is inherently valuable. There's no question about that. But while it's easy to assert value, it's not easy to put your finger on it. It's hard to put a value on value, so to speak. Nor is the measure of any such value for you to determine anyway, because when it is self-affirmed it is even more so a nebulous concept. In truth, it can be characterized only by what publishers are willing to pay to use your images, not by some ill-defined, personal notion of what you think they're “worth.” Besides, you can increase the likelihood that your work will be valued more highly by your customers, and, therefore, that they will be willing to pay higher prices, if you simply pay close attention to their needs and desires. That is a classic precept of marketing. Therefore, the point is that the topic of value should be relegated to a discussion of marketing, not pricing.

The Foremost Principle of Pricing Photography
Having put all misinterpretations of value out of the way, and, furthermore, since you now know not to rely on surveys to cover all the elements of a price, there has to be some other way to help you put an assessment on what you do for a living. But even if you consider the time it takes and what it costs to shoot a photo assignment, and if you include some less-than-precise measure for your talent and experience, there must still be a fundamental, more economically sound criterion that equals, or even outweighs, all of the other factors to consider when determining a total price. There must be some kind of yardstick for meting out the value of intellectual property itself, because IP plays such a significant role in your business model. Conveniently, there is such a yardstick. It is, of course, copyright.

How other parties wish to use your intellectual property is the most important criterion for ascertaining its value in a pecuniary sense, the only sense your business self should care about, the artistic self being irrelevant in this context. Copyright allows you control the use of IP and its price by parceling out publication rights, piece by piece, in exchange for payments. Copyright is the most significant mechanism by which you put a dollar sign on your work. Therefore, usage, supported by copyright law, is the foremost principle of pricing commercial photography. Everything else is frosting.


Previous Page <||> Next Page

Individual Excerpts by Starting Page | 1 | 2 | 3 | 4 | 5 | 6 |

Read more about Tom Zimberoff here!


return to main photo tips index