This post is Part 2 of The Modern Tog’s Photographer’s Pricing Guide series. Here’s the link to Part 1 of the Pricing Guide in case you missed it.
Today it’s time to think about one of the main goals of your business: your profit.
The first step in determining your prices is to figure out how much you want to take home in the form of a paycheck. This amount is what is left over after all your expenses and taxes have been taken out.
There’s two ways to go about this process. I highly suggest doing both methods and comparing the results.
Defining Success
The first method is to think about how much you’d ultimately like to be making in the future and use those numbers. The benefit of doing this is that you get a realistic picture of what you’ll need to be charging to get there and how much work you’ll need to do in order to make it happen. Looking to go full-time? This is a great way to help discern when your dream can become a reality.
Short-term Planning
The second method is to determine your profit goal for the next year. If you’re just starting out, you might be happy with making enough to cover your car payment or student loans. This may not be your ultimate goal, but it’s your next step along the path and will tell you exactly what you need to be charging now to make that a reality.
Things to Consider
It’s helpful to remember that your annual salary, if you are an employee for another company, most likely has deductions taken from it for things like taxes, social security, health insurance, etc. So if your salary is $48,000 per year, your take-home pay is probably $36,000 or less. It’s this take home pay that we’re looking at, so grab a copy of your latest pay stub to figure out what the correct amount should be if you’re trying to match it.
I like to separate our monthly expenses (such as our mortgage, savings, and the grocery bill) from our yearly expenses (such as Christmas expenses, insurance, and vacation plans) when filling out this section of the guide. I multiply the monthly expenses by 12 and then add in the yearly expenses to come up with a total amount of desired profit for the year.
If you’re using the Photographer’s Pricing Guide Workbook, click on the “Personal Profit” tab of the worksheet (it’s at the bottom of the screen). Then simply list the items and their costs out and they’ll add up all on their own, saving you time and possible mathematical mistakes. Here’s what it looks like:
Once you’ve got your desired profit for the year, you’re ready to look at your business expenses in Part 3 of the Photographer’s Pricing Guide.
