Putting a Price on Business
I used to be so uncertain about pricing for business because it seemed like it was a lot more complicated than simply slapping a number on a package. And then there were taxes to consider… and I’m not even talking sales tax. If you run a business, then you know that your business pays taxes on your income and you pay taxes on your income. So your tax percentage is double that of the person who is not self-employed. That can be a huge mental hurdle to jump when you first open shop.
Business finances have become one of my favorite parts of running a business. I think it’s because I am managing the finances instead of the finances managing me. I want to share how I have created my wedding and portrait packages so that hopefully it will bring some financial freedom for you
1) YOUR BASIC EXPENSES - Make a list of every expense that you will have for the year. This includes business insurance, website & blog fees, equipment maintenance, equipment upgrades, new memory cards, camera bags, mileage for your accountant meetings - any and every expense that you will naturally incur as a business goes on this list. Make sure to note the exact cost of each expense as well.
2) YOUR CLIENT EXPENSES - Next, make a list of every client expense that you will naturally incur: gifts, albums, film/hour of coverage, prints, coffee for meetings, mileage to and from the wedding location. Make sure to note the exact cost of each expense.
3) WHAT WILL YOUR MARKET HANDLE - This might take some work to figure out. If you are getting inquiries but not booking any weddings because you are too expensive, then you need to change your market or change your pricing. Markets can change, but that kind of change takes a lot of time and a lot of hard work. In the same way, if you are getting inquiries but not booking any weddings because you are too cheap, then you need to change your market or change your pricing (hint hint, change your pricing). Figure out your market minimum and maximum and evaluate what your think your market will handle.
4) MARKET VALUE FOR EVERY EXPENSE - Once you have figured out what your market will handle, start writing down the MARKET value for every client expense. This will help to make sure that you are still earning a profit regardless of customizations made to the wedding package.
5) DECIDE ON THE NUMBER OF PACKAGES YOU WILL PROVIDE - I prefer to offer four different packages because I want my clients to have options. I also allow my clients to make customizations so that we can create the perfect package for them.
6) GROUP PACKAGES TOGETHER - This is the fun part! Start pulling together items from your client expenses to create different packages. I organize my packages based on hours of coverage and add extras from there. I like to include the high resolution images in all of the packages and include an engagement session in the top three packages. If you notice a trend in what clients are asking of you, then adjust your packages to include what they want! For instance, I used to include an engagement session in every package but I have a lot of brides who would prefer to have an extra hour of wedding coverage instead. So now, my packages include an engagement session OR an extra hour of wedding coverage.
When you notice a trend in what is being requested of you, make changes!
7) PRICE YOUR PACKAGES - Using what you have learned about what the market will handle (step 3), price your packages.
8) SET ASIDE 20-30% FOR TAXES - Talk with your accountant to see what you should withhold from yourself for taxes. I prefer to withhold 30% because, given my expenses, I should receive a return at the end of the year.
9) SET A PERCENTAGE FOR EACH PACKAGE THAT WILL COVER YOUR EXPENSES - I like to keep things consistent throughout my business model, so I use a 30-40-30 model. I set aside 30% for taxes, 40% for business expenses and savings, and 30% for personal income. Once you decide on a percentage for expenses just make sure that that percentage will cover your actual expenses from steps 1 & 2.
10) SET A PERCENTAGE FOR EACH PACKAGE THAT WILL COVER YOUR BUSINESS SAVINGS - I group this percentage in with my business expenses for that client.
11) THE REMAINING PERCENTAGE IS YOUR INCOME - Hopefully you will see this number grow overtime. Because unless you make a major business structure change (like switching to film), your business expenses will level out quickly. You will have the equipment that you need and you will know exactly how much each type of album costs. And even though there will be a slower curve on personal income when you make the switch to film, it will grow quickly once film is incorporated (and valued) in your brand.
12) ADJUST - If you can tell that you aren’t going to be able to cover your client & business expenses with step 9, then you need to adjust your expenses or your percentage. The same goes with your personal income. If you aren’t going to take as much personal income as you initially thought, then you might need to get more bookings