So I’m a Professional. Covering the Costs of Having Your Own Business

So Im a Professional Photographer. I still find it hard to call my self that at times, part self confidence part always learning. But its more than my skills and knowledge that make me a professional (although thats a big part) its also how I conduct my business, the parts that have nothing to do with photography. Like what goes into pricing your service  and behind the scenes.

I often get asked by people why do you charge $30 for a print when I can get it at costco for.15, or $120 for a session while sears is free. We will set aside service and quality arguments aside for another day. Today we will talk about the real costs of doing a business and therefore why my fees are higher. There are many costs that go into running a business and these costs need to be covered in the various products and services you have.

We can start with a photographer that works out of their home. Most would state that they really don’t have any overhead but there are a lot of items that they just don’t think about or care to cover.

Working From Home

Insurance If you are running a business of any sort you should have business insurance. Not to just cover the obvious equipment losses but the biggie, liability! If you are doing a wedding or a location portrait session and someone trips over your equipment and is injured… you better be covered.

Sales Tax No mater what you do if you take money for a service and/or product you had better be collecting Sales Tax, unless of course your state dosent have sales tax (be hard to explain that to your client). I believe there is a dollar amount that if you are under it is still consider a hobby but that number is not that high. A lot of photographers dont know that here in California your session fee’s are also taxable. You wouldn’t think so since in my mind its just labor but the state sees it differently, so be sure to check with your states tax board to find out what you should be collecting taxes for.

Licenses and Fees Yes if you are taking money for that service you are expected to have a business license. In some areas and depending on how you operate you may have to have more than one. When I worked as a service technician the company had to have a business license for each city that I worked in (San Diego is made up of lots of neighboring cites in the county). Not sure about photographers, such as wedding photographers but would I wouldn’t put it past the cites in these times.

Equipment Well as a photographer we have our cameras and lenses as a minimum but we also have ou computers for processing. Besides the initial layout for the gear you have to take inconsideration upgrades, repairs and replacement. Part of your income should be set aside to handle these situations. As a photographer I also have back ups for almost everything, incase something goes wrong during a session. I was not able to get everything at once so a portion or my income was set aside to buy the back up equipment as I was able to.

Retirement If this business is now your source of income (and you should treat it that way even if its not) you have to be thinking of yourself when you retire. No company to provide a matching funds retirement account, that is now YOU. So be sure you are setting aside money in a SEP IRA or a IRA. Dont just take what ever is left over on a good month, plan for it in your pricing.

Medical Insurance Like above you no longer have an employer to provide you with a medical insurance plan as part of you compensation. You are your own employer now and as such have to provide your own insurance. Just like your old employeer these costs are figured in the cost to do business and is part of your pricing plan

Taxes Uncle Sam, your State and your local agencies all want part of your income. Dont make the mistake of waiting till April 15th and discovering you actually owe taxes on that money you were given for taking pictures. Set a portion aside each week into another account for income taxes and when you are figuring out your pricing figure 25% at least is going to go towards taxes so adjust accordingly. Also remember you are now responsible for your own payroll taxes (Social Security and Medicare). Before your employeer paid half and the other half was deducted from your check, you are now liable for the whole amount.

Salary When all is said and done you are in business to make money, yet this is the one item that is often overlooked. PAY YOURSELF A SALARY. Set an amount that you would like to earn each week or month (to cover your personal bills and then some). This along with all the above and other overhead items need to be taken into account for your final pricing. All that together plus cost of goods (for your products) and a 10% profit should get you to your final pricing.

I didnt really mention things such as marketing, advertising, professional fees, cost of goods, educations, office supplies but these are also items you need to consider and we will touch upon in other posts.

Retail Location

In a retail location you have a few more items to consider. Increased overhead means a decreased profit margin but it can also mean more income in general.

Insurance Yep you’ll be increasing the insurance coverage to cover your landlord as well. Also if you do work from home and a retail location like I do be sure you list BOTH addresses on the insurance as covered locations. I had an issue with a hard drive failure and because it was and the home office it wasn’t covered

Utilities When you work from home you really dont think to much about these as they are part of your home bill. In a retail location they are now separate and you need to cover the costs in your pricing. Electricity, Alarms, Water, Internet and phone are just a few.

Taxes When you operate out of a retail space you get a whole new set of taxes to deal with, Business Property Use Tax. Now I wont get into how totally unfair this tax is, Ive blog about it before, but for every physical item you have in your business you have to pay an annual use tax. Yes I know you already paid a sales tax on it when you bought it but you still have to pay 1% annually on its value. All furniture and equipment as well as supplies. ALso any improvements you made to your space is taxed as well.

Last but not Least

All the above is just some of the items, there are many more but there is one other that is the most over looked item. YOUR TIME! Yes your time is worth something and is often overlooked by everyone, your clients and yourself. As a photographer when you price out your print most stop at the overhead items above and the cost of the print when figuring out the cost but what about your time it took to create the print. Photography time, downloading, backing up, editing, sending to the lab, unpacking, and packaging for client. That adds up to a chunk of labor that you should be charging for in your pricing. If you weren’t doing it you would be paying someone to do it so cover the cost as if you are an employee of your own business.

My examples are of course from my experience as a photographer but you can translate it to what every you want to do. Be sure all your costs are covered as well as your own salary and a profit (these should be separate items) when you start pricing out your services or products

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