If your pricing strategy looks something like this...
- "I'll look up the website of the photographer down the street..."
- "Crap, they don't have all of their prices listed..."
- "Maybe I'll pretend to be a client and request a price list... nah, I'll just look up that other photographer down the street..."
- "Oh, I'm a lot better than this, I can charge a little more!"
- "I'll just jump on that Facebook group and ask what everyone else is charging..."
... then this post is for you.
If you’re a pricing wiz or have been around the block for awhile, this post might not do much for you. Feel free to head over to Facebook and look at cat photos, you’ve probably got this under control.
If you have absolutely no clue how to price your work or what you should be charging then follow me, grasshopper.
Some Ground Rules
- We’ll be using PPA’s suggested 25% Cost of Sales as our target Cost of Sales. You can go with whatever you’d like, but I strongly suggest you don’t go over 35%.
- The prices you’ll calculate are not written in stone, we’ll discuss in later posts how you can work with those product prices to still create profitable products and packages. This post will help you find a good place to start with your prices (hint: it’s not “well, how much is Amy charging? I’m better than her, so I’ll charge a little more”).
- I don’t even want to tell you how terribly I did in math in school. With that said, we’ll be making this as simple as possible so that even I can understand it.
Cost of Sales vs. General Expenses
Cost of Sales
Your Cost of Sales (COS, from now on because I’m lazy) is anything you spend in your business that actually goes to producing the product that you’re selling. Another way to look at it is this – these are the things you have to pay for only if you actually photograph a session.
General Expenses are your fixed costs, the things you pay for even if you don’t shoot a single session (although you won’t be paying for them for long, if you’re not shooting anything)…
You get the point. In their benchmark survey, PPA suggests trying to stick to this breakdown for home-based businesses:
- 25% Cost of Sales
- 30% General Expenses
- 45% Owner’s Compensation + Net Profit
Awesome. So what does that mean?
For every dollar that comes into your business, you should be spending up to 25 cents on the things it takes to produce the product, up to 30 cents on your rent, utilities and other general expenses and keeping up to 45 cents for owner’s compensation and net profit (what you’ll be reinvesting back into your business).
We’ll be focusing mostly on the COS for our purposes today. Ready? Let’s do this.
Fill your calendar with clients who want your photos in their homes.
The ridiculously simple pricing equation
Physical Cost of Product + Cost for your Time = Base Price
Base Price x Cost of Sale Multiplier = Retail Price
Easy so far, right? Let’s put together a product so you can see it in action.
ProDPI 8×12 Standout (because, let’s be honest, 8x10s are the devil)
- 8×12 Print – $3.80
- 3/4″ Standout – $16.50
- Linen Texture (it’s so sexy) – $0.46
- Shipping – Free (Thanks, ProDPI!)
- TOTAL PRINT COST = $20.76
(Note: You’ll want to also add any packaging costs in here as well as anything that’s product-specific. Think design time for albums and delivery/install time if you do this for canvas collections.)
Time to Produce 8×12 Standout (these will vary based on your workflow and whatnot, so I’m going to just copy PPA’s example here, for the sake of simplicity. Yes, there are ways to lower these costs. Yes, yours will vary from these. No, I don’t know why they’re still FTP-ing images to their lab. They’re PPA, they’re old-school like that.)
- Acquire and Backup 50 RAW images – 15 mins
- Import images to Sales Software (*cough* Swift Galleries *cough*) – 5 mins
- Prepare 25 images for sales presentation – 40 mins
- Retouch 1 image for 8×12 standout – 10 mins
- Produce high resolution image in sales software – 5 mins
- FTP image to lab – 5 mins
- Backup finished print and file order – 5 mins
- TOTAL TIME = 85 minutes
- 85 minutes @ $.50/minute ($30/hr) = $42.50
Are you ready for this? Oh my god, the excitement is killing me…
Remember: Cost of Product + Cost of Time = base price. Base price x Multiplier = retail price
$20.76 + $42.50 = $63.26
$63.26 x 4 (for a 25% Cost of Sale) =
So there you have it. In order to maintain a 25% Cost of Sale on an 8×12 Standout from ProDPI, you’ll need to charge at least $253.04 for it. Or do you? We’ll talk about ways to make ridiculously priced products not so ridiculously priced in one of our next posts.
While you wait for the next post to show you how to make your prices not stupidly-high, go write down your workflow, figure out how long it takes for you to do what you do, then calculate your product prices. Yeah, it’s a giant pain in the ass, but it’s absolutely worth it. Download our free product pricing calculator, then go to town on figuring out what you should be charging for each of the products you sell. We’ll make more sense of it in another post soon.