Working out how much to charge can be confusing if you don’t know your numbers or the customers you’re servicing.
First you need to know your cost of doing business, cost of goods, then you need to work out if people are willing to pay for the work you’re offering, because your local market will also play a part on how much you can charge.
I received a question from Alex who says his prices haven’t been updated since he started his business many years ago. The cost of running the business has increased, and his skills have improved enough that he feels comfortable to increase his prices.
Alex also sells prints, albums and digital files. But doesn’t charge a session fee, What is a good starting point for his prices and should he increase his prices because he is worried of losing customers?
Today I’ll go through some steps in working out your prices for your photography business and what happens to your customers when you do raise your prices.
Let’s get started!
7 tips to work out how much you should charge for a photo session
Firstly Alex good on you for having the courage and the confidence to raise your prices.
We should all be doing that every so often to keep on track with making more money in our business.
But as you’ve mentioned your costs increased, such as your vendors may be raising prices and that’s something we should always be aware of because otherwise we’re not making a profit, we’re actually losing money.
Pricing is one of those things it’s very hard to give you a definite answer, Without working your expenses first. So instead we will go through a couple of tips to get you in the right direction and looking at your cost of doing business is a good place to start.
1. Working out your cost of doing business
First start with using my cost of doing business calculator to workout your running costs.
The calculator is a form where you put in your expenses for your running costs such as electricity, accounting fees, subscription fees for your web hosting and software subscription, , equipment costs, insurance and so on.
I suggest using a notebook and going through your bank account first to get an idea of the reoccurring costs than your business.
Some of these costs could be one off costs but also monthly and weekly recurring costs.
The idea is to work out where all your money is being spent so your photography business can operate at a profit.
What’s your workout where your money has been spent for the year divide that cost by 12 to get your monthly spend.
The reason it’s important to understand how much money you need to make to break even. Is you need to make the bulk of your money in the busy season, and so you have enough money to cover the off season where your expenses will still be there but the work may not.
This especially true for wedding photographers, event photographers and even for some portrait photographers to keep some money in reserve to pay the bills.
For example, if you’re home based photography business has expenses for the year that total up to $9,000.
$9,000 ÷ 12 months = $750
Every month you need to make $750 to pay for your expenses to keep your business going, anything on top of that is profit.
This cost will occur regardless if you’re working on not.
If you have an offseason in your business this monthly cost will be higher for you as you need to divide by how many months you’re actually working, that will tell you how much money you need to make during the working months to cover all your costs for the year.
For instance if you only work for 8 months of the year.
$9,000 ÷ 8 months = $1,250
So naturally your cost of doing business will go up because it’s spread across a shorter time frame.
2. Working out your cost of goods
Next work out your cost of goods. So you mentioned that you sell prints, albums and you do digital files.
The cost of goods directly applies to anything that you physically, but can also include digital products as well.
For physical goods, things like printing costs, packaging, time to prepare the product and delivery costs if you’re sending it out.
Also don’t forget about the cost of editing the photos, this applies to both digital only products and physical products such as if you’re creating an album.
Knowing your cost of goods helps with creating a price list and when you combine the cost of goods with the cost of doing business you can work out your minimum running costs, and then add your profit on top of that for the final price.
So you have a portrait album package and you are trying to work out a price.
The portrait album costs $400 to produce. This includes the purchase of the album, editing, packaging and delivery.
Some people say that a good rule of thumb is to add 20 to 30% to your cost of goods. While other people say to multiply 2 to 3 times to get the product price. This of course is not taking into account any other expenses you may have.
3. A session fee can help cover your costs
A good way to cover some of your running costs is to charge a session fee , sitting fee and some people even call it a booking fee.
Usually a sitting fee includes some credit for prints or simply one print.
Session fee is $125 and includes credit or print, anything extra the client buys will be profit because the idea is to add some of your running costs within the fee and the cost you to produce that product that is included.
Say for instance you are charging $150 for a portrait session which is the sitting fee and includes one large print.
Most clients would buy more than one print which depends on how you structure your price list and packages.
But the idea is to add some of your running costs within the portrait session fee and then you don’t have to push as hard to sell lots of products to make a profit.
The advantage of having a session fee is it that it also weeds out the people that are on the fence on booking you. But more importantly it stops people cancelling at the last minute which causes a lot of stress and can and also make it difficult for you to do business. As you can simply reschedule the session or they forfeit the booking, and from experience the customer will do everything they can to make the session.
So if you’re doing a portrait session, it’s a good idea to introduce a booking fee that includes print credit or a print to entice your customers.
4. Your local market will determine what you can charge for a photo session
Now other aspects that go into pricing is the local market. If a lot of people within your local market are selling large framed prints for $300 and you’re selling the same size print for $600, it’s going to be very difficult for you to convince people to buy your products, unless you can convince them otherwise.
The service you provide needs to be so much better or different than your competitors, basically you need a point or difference to stand out.
- It could be the quality of your work
- You may provide products that your competitors don’t
- You offer an in-home service and your competitors don’t
And if customers are still not purchasing your products, even though you have a unique selling point.
The customs are simply not your customers, and no matter what you do, they can’t be convinced otherwise.
Just be aware if you do convince them, they are going to be a headache. They’re going to want a discount or they’re going to try to get maximum value for money and make it very painful for you.
One important thing to note is that almost all markets have three Tiers. You’ve got the most budget photographers, the middle of the road and then you’ve got the high-end photographers that charge an insane amount of money for the service but there is a reason for that.
What you need to workout is which tier you want to belong to, and your quality of work, products and service need to meet those standards otherwise people are not going to hire you.
5. Listen to your customers, they will give you hints on your pricing
We all know we should be listening to your customers.
If your customers give you hints like “Wow, this is an excellent price compared to other photographers whose photos look similar to yours”
Your customer is telling you two things. Your quality of work is comparable to other photographers but you’re charging less than them.
You definitely should be raising your prices, and so do it straight away.
This is why you should always question your customers, why did they choose you? But more importantly why didn’t you choose me.
Pricing can also help you work out what your should include in your packages.
If a customer says “Oh I can only afford $1000.” Well then that’s fine there’s nothing wrong with that. It’s just if everybody’s coming and saying the same thing and you’ve got collections that are $2000 and $3000 and $4000 and you’re finding it hard to convert people then that’s something you may have to tweak because that’s the customer you’re attracting.
I had this happen to me and I simply removed products from my packages, and lowered my prices close to those price points, I didn’t match them because I still needed to make a certain amount to cover running costs.
I wasn’t losing money since It took me less work to produce and I could offer custom packages which most customers took.
The difference being is the customer felt the custom product was tailored to them, rather than me telling them what they needed.
6. Keep your pricing simple
Make it easy for your customer to do addition in their head. If you’ve got prints at $47.62 then you’ve got another print at $36.47. It’s too complex, put it to the nearest five or whole number and drop the cents, like $85, $295, $290, $299 or $300.
Numbers like that are easier to calculate in your head
There is a little bit of psychology that goes into selling and pricing your service.
Selling something for $995 or even at $999 as opposed to $1000. You’re practically at $1000 but customers see the lower price even though it’s only a few dollars off $1000.
Do you do need to test your pricing as some customers will try to haggle you and penny pinch. Question is do you want to deal with someone that looks at the dollar amount rather than they quality of work you produce.
7. What happens to your customers when you raise your prices?
Depending on the price range your photography is at the moment, when you raise your prices you might be putting yourself into a different price bracket for your customers.
So we talked earlier about the three different tiers of photographers, the budget, the middle and the high-end.
If you move from budget to middle and even from middle to high for that matter you’re going to be leaving some of your customer referrals behind.
That’s perfectly ok because you should be getting paid what you’re worth.
Just be aware if your referral base is from last year’s clients and you raised your prices. Even though referrals are the best type of advertising for your business they may not convert because you’re in a higher price range.
Which brings me to the point: If you raise your prices, The amount of paying customers will naturally go down, on the flipside you don’t have to sell as much to make the same amount as you previously did.
When I started my photography business I quickly increased my prices based on the feedback I got the first year. I then made it a point every year after that to raise my prices until I hit a balance between how many customers I wanted to service and the amount I wanted to make.
That’s 7 tips to get you started on working out what you should charge for a photo shoot. A lot goes into working out your pricing and it should all always start with your cost of doing business then your cost of goods. From there how much profit you’re going to add to your service will depend on the market and which price range you want to be in.