Cost of Doing Business

The Cost of Doing Business 

by Walter Krogh Sites

There has always been much discussion as to how much a photographer makes, how much the general public believes they should be making, as well as a slew of  misconceptions as to what customers should be paying or what customers believe photographic work is even worth-- both in terms of monetary value and aesthetics.               

In the following article, I'd like to guide you through a bit of what it takes to keep a small studio or home-business running from solely photographic work. This is for the few who believe good photography comes free or who may feel that simply paying a couple hundred dollars will ‘guarantee’ them the quality they are looking for. They may find a decent photographer at a lower price and be perfectly content. But chances are that such photographers are hardly running a viable business and thus trying to sustain themselves becomes impossible, especially with top-notch quality photography that is tailored to meet the demands of the customer. Their existence may be more the pursuit of a hobby than a serious business. 

             
To begin, it may be appropriate to explain how much working in the digital realm costs. So, let’s say I were starting up my own business from scratch. First, I would need some basic gear: camera and lens, $2500; flash, $450; tripod, $350; laptop, $1500; software (Lightroom, Photoshop), $1000; hard-drives, $450; misc. (bag, batteries, memory cards, lighting tools), $950. Remember, the above items constitute a basic set-up, that is, the items necessary just to get started in a basic way. There are no shortcuts when quality is involved! This figure doesn't include multiple flashes, back-up cameras, extra lenses, printer, paper, scanner, more hard-drives, additional light stands, grips, fixtures, etc. This puts the beginner’s total capital investment at about $7200. Of course, this is not enough to run a studio; just enough to be a one-person event photojournalist, which is the easiest way to get started, to establish a reputation and to grow a network of contacts who can “spread the word.” This figure can easily be tripled depending on some strategic gear-based decisions. I'd say the figure for someone serious about getting started as a full-time photographer would be about double that figure, that is, about $15,000. 

Needless to say, all the above – the equipment and supplies – have far-reaching tax consequences. For the moment, these are not included in our calculations, since the amounts can only be offset by positive income. And income can fluctuate from year to year, especially in the start-phase. Nevertheless, they must be borne in mind if one intends to maintain and sustain such a business. Finally, the initial outlay for gear will not only depreciate (in a tax sense) over a fixed number of years, but will also physically degrade, that is, show signs of wear and tear.  Highly sensitive digital technologies are the tools of the trade, produced in a market that is constantly undergoing change. Hard-drives will need replacing, cameras break and digital tech will need upgrading and fixing much sooner than your old Nikon F bodies. If you take decent care of your gear, you can make much of this digital technology last three or more years before you'll have no choice but to upgrade again. Most digital technology has an average life-span of about five years. Then, as noted earlier, the market will show and require change, forcing the photographer to adapt. You might reasonably incur much of that same start-up costs fresh every few years just to stay on top of the tech-trend and, most important of all, to satisfy customer expectations.                

Let's now talk about what it costs to keep a one-person, home-based photography 'studio' running on a yearly basis. We are talking about working out of our homes, maybe using a garage (if you’re lucky to have one) as a studio and being the only full-time employee. So again, this is pretty basic stuff, which means no off-site studio space, gallery or office expenses, such as costly rent, away from home.

        

All figures are estimated costs per annum:

         - $   600            Business liability insurance
                      - $   750            Car Insurance                                                     
                      - $ 2400            Health insurance ($200/month)                           
                      - $ 1000            Gas (meetings/gigs/location/post-office, etc.)
                      - $ 1500            Advertising (magazines, print, web, etc.)
                      - $   700            Membership dues/professional organizations
                      - $   450            Web hosting fees/updates/domains                    


                      - $ 1200             Phone                                                                    
                      - $   720             Internet/network                                                  
         
                      - $ 3000            Second shooter/assistant                                 
                      - $ 1000            Workshops/seminars/conferences                 
                      - $   950            Legal help, tax prep and other professional help
         
                      - $   300            DVDs to burn events and back up archives         
                      - $   450            Paper for printing proofs and comps   
                      - $   500            Ink for printer                                                     
                      - $   150            Other office materials (packaging, pens etc.)      


                      - $ 10000          Rent for apartment (house, if so lucky)
                      - $   1200          Heating/electric                                                   
                      - $     250          Appropriate work attire (shoes/clothing)              
                                                                  

Sub-total:      $ 27,270 / per annum

Also, we can't forget what the federal government wants in return for allowing us entrepreneurs to run our little businesses. As a small business owner taxes can be very tough, but that's just part of the game. For starters, social security wages are double what the normal wage earner has to pay. In sum, we might be asked to hand over about 30% of our gross income to the tax collectors. Let's put this all into a deeper perspective.

Let's say I'm a dedicated wedding photographer. We'll estimate I charge $2500 per wedding. I'm sure many people just gasped with surprise "Oh, that much!" Actually, that figure is pretty low for talented work. After all, let’s not forget that a wedding gig is not a one-day affair. It requires considerable preparation time before (e.g. photo consultations and location scouting) and several days afterwards processing the product, printing and delivery. Let's assume I manage to get the prime wedding season fully booked at that average price. I estimate max 20 weddings  (and that's a very busy schedule, too!). All told, I’d make approx. $ 50,000 that year shooting only weddings.

         minus  $ 15,000            Taxes on $50,000                                                 
           minus  $ 27,270            General operating expenses            
           minus  $   4,000            New gear (replace/repair/upgrade)

Remainder:      $ 3,730 / per annum

So this final figure represents what remains for food, car repair/costs, personal investment, family, leisure, etc. That's not very much to live off or to re-invest in your business. Student loans are also NOT included in these figures, which can easily be another $300 or more each month. Payments on a car can also be up in that similar price range. While car expenses can, under some circumstances, be a deductible expense, the above, highlights how little is left for the everyday things in life. Costs are usually much higher than this too. Just imagine what kind of ongoing business income a studio needs to make to maintain a dedicated location or a gallery, full working studio lights and gear, props, production budgets or even full and part-time employees!?

It seems, at least in part, that if a ‘one-person studio’ wants to break even on operating expenses, he or she wound need to earn no less than $ 50,000 a year– before taxes! A growing business should probably be making something like double that! Now go ahead and do the math for yourself. That girl up the road who charges $ 150 for a portrait shoot-- she's probably only booking one a day (if that.) In fact, hypothetically, were she to book one for every day of the year (which is unlikely to happen), that's 365 days x $150 = $54,750. She just barely broke the figure mentioned above. Furthermore, she is not growing much of a sustainable business. Even at double her shoot rate, she is not likely to book even half that many gigs each year. So, how do we stay in business?

If you are one of those few lucky ones, that are able to book that many weddings each year, you must be talented, come highly recommended and, well, you’ve got to be a fantastic business person! After all this, to make your business grow, a well-rounded professional needs to explore multiple different industries and niches. Stock photography, sports, food, editorial, event, portrait, corporate, architecture etc.-- these are just a few of the many other avenues a good photographer can and should be pursuing in their ‘off-season.'

Thanks for listening to my 'rantings.' I'd like to stress that my above figures are derived from a hypothetical perspective and should be viewed as merely instructive.

Good luck and happy shootings.