Friday, 30 December 2011

How to Set Your Pricing and Generate Profits - The question on many photographer's minds

Pricing your photos is one of the greatest hurdles for photographers looking to turn their passion into a business. We are often insecure at this point in our personal photographic growth and may not believe we are as good as others believe... so how could we ever believe people would pay good money for our images?

It can be especially nerve wracking when a client asks you why they have to pay so much for your photos and services. Especially if you have not done your homework and you just stole some pricing from some other local photographer’s website as a quick fix.

You HAVE to understand that you are now a small business owner, you have to separate personal feelings and let go of the personal connection with your images, then charge a fee where you are generating a profit margin. You need to calculate and understand what you are charging; and be confident that you are worth what you are charging.

You see, you need to not only know the worth of the services you are providing, but you need to know how to articulate what you’re worth and why you’re worth it. Make sure you’re equally versed in the business practices as you are in your photography skills. If your images are of a certain quality and you have the confidence to negotiate the value proposition of your company with confidence, you give your client confidence as well.

The following should provoke some thought and give you some ideas on how to better price your images and services and generate a profit.

Know What You are Worth

Before we go any farther... you have to know and believe what you are worth.

Scenario #1... This is your full time job
The first step is to do your research and find out what the competition is charging for what they are offering. This will give you some confidence at coming up with your own prices. But do not just cut and paste their pricing. People do not only buy on price alone... they buy relationships and value.

The first step you could do to determine what you are worth is by calculating your Cost of Doing Business (CODB). Your CODB is what it takes at the end of every month for you pay your bills. Be realistic here, you’re likely not going to be bringing in a lot of money during your first few years of business.

You could reach your CODB by a few simple calculations. Take all the expenses you need to run a business for the month – website hosting fees, insurance, rent, insurance, food, travel etc., add a salary, and then divide that figure by the number of jobs or images you think you’ll book or sell during any given month. Keeping in mind that you may have to lower your salary or overhead in order to achieve new business.

Scenario #2... You have a full time job and you are also in the development phase of building a photography business
I have a full time job that I love doing at this point. But I am also a nature photographer by heart and sell my images and run workshops for people of all levels looking to be better photographers or need help growing their business.

When I first started out I would determine that an image will be for sale, I took into account what it cost me to take a specific image. For example, I drove 50 miles, slept over at a hotel, had breakfast and dinner and came home with a couple hundred images. It took me one hour of editing time, and the result, I have one image I deem good enough to sell. So my hard costs were:
$25 in gas,
$15 in food
$75 in hotel accommodation,
$40 for my one hour of editing time
Total hard costs to produce image was $155.

I then determined that i will sell this image no less than 10x. That leaves a hard cost of $15.50 per image sold before I print. I then add a cost to print which could be $75 for a canvas print. That leaves $90.50 as my hard cost to produce the finished print. On top of that I always ad $50 for my profit and that leaves the price of that particular image at $140.50. A few different variables may come into play with lowering my hard costs, things like, I did not stay overnight, I came away with two images that I could sell... you get the point.

Now that I have been doing this for a few years and I can now average my prices by size and know I am generating enough profit for every image I sell. I also use a formula that determines ROI from my marketing efforts and you can read that in my blog posting about converting clients using social media.

For my workshops I simply charge what I believe my time is worth. I offer three different types of workshops. The first a quick one hour camera tutorial for people that just received their camera as a gift and want to know what the camera does.

The second is a four hour workshop where i give a price break on my time for multiple hours, but maintain a decent profit margin based on my experience and tenure.

The third type of workshop is a mentor program. I know how many hours it takes to be a mentor and I price it out based on hours spent with each client.

For any workshop I can justify the expense by the added value that I offer and the quality of my own work. As I do more workshops and my images elevate to another level, I will increase my price and be able to justify it easily.

How to Articulate Your Worth

Now that I gave you some sort of idea on how to charge for your images and services. The next thing you have to be able to do is to be able to articulate why you charge what you charge. A good way to do this is to create marketing materials that can be described as a “sales pitch”. It is simply a page of the features and benefits of doing business with you. This is the “why are you worth it” document.

A good example of this is the following... I have been to Paris six times in my life. I have stayed in 4 different districts and know people that live in the city. I know what time of year is good to visit certain attractions and how to get deals in order to get into a maximum amount of venues for anyone attending a photography workshop in Paris. I also know where to stand to get better images and what times of the day work best for specific attractions.

Is that not more appealing to a potential client than simply going on a Parisian photography workshop with another photographer that does not know the city like I do? I offer a lot of extra value by coming with me.

Another good way to get the price you want from a client and subsequent referrals is to under promise, over deliver. I’m not telling you to down play what you bring to the table and definately not exaggerate what you can do for a client. Negativity can spread like wild fire. Just go the extra mile to really deliver on your promises – you’ll not only create a happy client, but the referrals will already come to you sold on your services.

Here is a real world example of mastering this art form. I sold two images to a gentleman and he paid me the price that I was asking. I also had a third image from the same series of images he wanted. Understanding that the images were for his father for X-Mas, I sent him a third image in digital format as added value. He had to print the third image, but he got more bang for his dollar by buying the images from me than he would have if he bought from anyone else.

Listen to Your Clients and Watch For Buying Signals

OK, so now you know your worth, you’re prepared to articulate it with confidence, and now it’s time to discuss the importance of listening to what clients are telling you. This is important step in being able to adapt your photos and services to your clients’ needs.

Every client may be different, so you need to be able to adjust your offerings. Especially today in a very competitive market. Your clients know more today than they ever had, and even some may be amateur photographers that have their own opinions.

You also need to understand buying signals... watch for the body language and not so much their words. People are conditioned not to say “no” when you are sitting down with them. People generally hate confrontation. You may walk away from a client meeting and think you sold them, when really, they just didn’t say “no” to your face and save it for a phone call of email when you follow up.

You have to learn to recognize the hidden signals and not just the verbal ones. If you’ve got a client leaning forward, engaged in what you are showing them and nodding a lot while you’re talking, chances are you’ve sold them. If you find them leaning backwards in their chair, hands crossed ... or even taking phone calls, chances are they are just going through the motions with you.

Engage them, ask questions, overcome objections and ask for feedback. God gave you two ears and a mouth for a reason, listen twice as much as you are talking when selling a client... If you give them what they want and can agree on a price... then show them how you are going to over deliver on what was discussed. I guarantee your chances of success will increase.

Last, ask for the order. Never be afraid to ask the client for their business more than once. If you don’t ask, you are never going to get!

Say it Ain’t So...

Yep, sometimes you are going to have to walk away from a client. You will have clients that want everything for nothing

It’s never fun to have to know that you walked away from work. It goes back to those inner thoughts, “Am I good enough to be charging this?”

If you are this far, than I would say you are good enough, and you should walk away. Unless of course there are strategic reasons to do something for little money, or business is so bad you have to take it.

Compromising on price is a slippery slope. If you discount too much, people will find out about it and the next client that walks through the door will come expecting a discount instead of seeing the value in what you offer. Why, cause the referral they got was that you were talented and your prices are inexpensive.

What I offer here are guidelines and examples... food for thought if you will... The lessons here are... (1) to know what you are worth, (2) be able to defend it, (3) give value and be smart about what clients you do take.

I wish you all luck in your own photography business. If there is any way I can help, please contact me through my website here.

Good luck in 2012, and I thank you for all your continued support over the past year,

Kevin