How Does a Photo Business Work?

October 07, 2016  •  Leave a Comment

How Does a Photography Business Work?

I frequently get a question regarding how the pricing is set for photo services. I've created the post below to explain how the photo business works, and what is "Fair", based on different types of shoots and different levels of experience.

 

Running the Business - Costs the Photographer has to cover to stay in business:

There are 3 costs that have to be managed when running a photos business:

Equipment Costs: A for most photographers a large, up-front cost. This is the "gear" - cameras, lights, lenses, tripods, studio equipment, cleaning and repair equipment and carrying bags and harnesses. For a business like mine the gear is an up-front investment between $15,000 and $20,000. This is a partial tax write-off as a "Capital Cost Allowance", and each year you can write off a portion of the value (the depreciated value) of the equipment each year, which reflects the value lost through usage. But there is a net cost even after the write-offs that need to be covered.

 

Operating Costs & Expenses: These are usually monthly, recurring costs to keep the business running. These can include business cards, studio space rentals or leases, website hosting fees, domain registration fees, business licensing costs, etc. For a business like MPP, Operating Costs are steady at around $70 / month

 

And finally Labor Costs: are variable by photographer, but reflect the opportunity cost of that photographer not being able to be doing other work or revenue generating activities while they are shooting. With the minimum wage increase, Labor Costs are at a minimum $15/hr. If you assume that the average hourly rate in Alberta is actually $22.50/hr, the rates go up from there. Also, for every hour of shooting time, the photographer is usually investing an hour of image processing, organizing, posting, and touch-up time and a minimum half an hour of setup, preparation, image uploading, and travel to and from the venue. So every 1 hour of work has the rate multiplied by 2.5x to cover the full cost of the effort associated.

 

So what does 1 hour of shooting cost? Let's assume I do 5 shoots a week, take 4 weeks off a year, and I expect my equipment to last 3 years, which is the timeframe I expect the equipment to take to fully depreciate and/or require replacement. That means the equipment cost needs to be spread over 48 weeks/year * 5 shoots per week * 3 years = 720 shoots. That means each shoot has an approximate overhead for the equipment (with a net after tax deductions value of $12,000) of $16.7.

Averaging 19 shoots a month, Operating Costs are about $3.68 / shoot

So every shoot has a base cost of $20.38. The fewer shoots a photographer does, the higher this number. Someone who just does 1 wedding a week has this number jump by 5x, to over $100 each shoot!

And then layer on top of that labor. So for a 1 hour shoot (such as a studio) prices will range for labor from $56.25 to somewhere around $187.50, depending on the base hourly rate the photographer is using. These are post the 2.5x multiplier for the "all-in" effort. My business model allows you, the client, to set a base hourly price, but the conversion below shows how the math works. The different rates are benchmarked against other laborers of various skill to identify some comparisons. The question you should ask yourself when you are booking (and budgeting for) a photographer are where they sit in terms of skill and experience and if the price they are asking is fair given that.

1 Hour Session:

Base Cost: $20.38 + Labor:

1 Hour @ $22.50/hr = $56.25 total labor cost

This is what you'd pay a server, including tip, for an average meal for 2 people. Fair for a new photographer or one with very entry-level equipment.

1 Hour @ $50/hr = $125 total labor cost

This is what you'd pay a landscaper, painter, or other mostly unskilled laborer. Fair for photographers with 1 or 2 years' experience, and/or average talent.

1 Hour @ $90 / hr = $225 total labor cost

This is what you'd pay a mechanic, plumber, or other skilled technician. This is the range most experienced photographers will charge within.

1 hour @ 125 / hr= $312.50 total labor cost

This is what you'd pay for a highly skilled expert such as a professional personal chef, systems consultant, or specialized tradesperson.

1 hour @ >$125/hr - I'm not going to calculate this as I don't think it's fair to benchmark the rate a photographer charges at higher than what a Doctor, Lawyer, or senior management consultant make. While I believe Photography is important to help people capture and remember key moments, the risk is significantly lower. That's my own philosophy, but I can't justify an hourly rate higher than that.

 

Now consider 3 and 8 hour shoots engagement (3), sports (3) and weddings(8)

Base Cost: $20.38 - unchanged + Labor:

3 Hours @ $22.50/hr = $168.75 total labor cost

8 Hours @ 22.50/hr = $450 total labor cost

3 Hours @ $50/hr = $375 total labor cost

8 Hours @ 50/hr = $1,000 total labor cost

3 Hours @ $90/hr = $225 total labor cost

8 Hours @ $90/hr = $1,800

3 hours @ 125/hr= $937.50 total labor cost

8 hours @ $125/hr = $2,500

 

So what should you pay for Photography services? Consider your photographers' equipment, skill, experience, and the amount of shooting time you're expecting them to provide. From there, you have a good idea what the benchmarks are now and what you should look for.

That's my two cents.


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