Building Wealth as a Photographer
By far one of the most influential and yet devastating things I ever realized in my career was that Photography alone is not a viable path to become wealthy or even truly financially independent. In fact a few days ago CareerCast.com released a list of 200 jobs, ranked from best to worst, and photographer came in at #172, beaten soundly by garbage collectors.
We’re going to start with the question that was posed to me by a business professor a few years ago: Can you think of a business with no leverage, no barriers to entry, no ability to build equity, no benefit programs and no ability to scale? Go ahead, give it a shot. I’m sure you can assume the answer here. Let’s talk about why I’ve come to believe photography is a terrible business to build wealth, based on each of those qualifiers.
Leverage – This is the use of a small initial investment, credit or borrowed funds to gain a very high return in relation to one’s investment, to control a much larger investment or to reduce one’s own liability for any loss. In our case this could be something like stock photography where you can sell the same image several times over. Well, it could have been before micro-stock all but killed that income stream. Now we would look at this in the realm of commercial licensing and image royalties.
Scalability – The ability of something to adapt to increased demands is certainly capped for the individual photographer. There are a finite number of hours in the day and only so much work that can be accomplished in that time. Photography is a service where you are trading time for money. Unless you are building a franchised chain of studios there is a limit to your growth.
Equity – Is the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc. Accepting this, we have to ask ourselves if we could sell our photography business without continuing to take photos for the business. Would someone buy your business if you didn’t come with it? We as photographers don’t run an operation that holds value without us being involved in it. This means that when we try to sell our businesses the only real value lies in the equipment and building (if we haven’t been renting).
Benefits – Here we are talking about insurance, retirement plans, wellness programs, etc. As you well know, when you work for yourself…you pay for these things yourself.
Barriers to Entry – Is defined by George Stigler as “a cost of producing which must be borne by a firm which seeks to enter an industry but is not borne by firms already in the industry.” So what does that mean? It means anything that would prevent you from taking part in an industry that you aren’t already a part of. This could be lack of capital, resources, predatory pricing, or customer loyalty to name a few. The photographic market has nearly zero barriers to entry, making it come very close to what economic theory calls “perfect competition.” Since the intricacies of economic theory are well beyond the scope of this article let’s just say it like this. Most people already own a camera and the jump from hobbyist to revenue-producing amateur is fairly easy to make. You don’t need a degree or certification. You can spend an hour with Google and learn whatever you need to know. After that, you spend less than $100 on getting a website going and you’re all set. Why do you think so many people attempt to become professional photographers? On paper it’s easy money, so it’s no real mystery why there is a steady stream of competition.
Now that you’re thoroughly depressed let’s talk about what to do about this predicament because this career path does have some truly wonderful benefits. Freedom is the first that comes to mind followed immediately by the creative outlet.
There are those who will continue to whine and moan about the over-saturation of the market and newbies undercutting them left and right. That’s not you though so let’s talk about what to do to become financially independent and free.
1.) Stop spending so much money!
This will be the thing that keeps most far away from their goals. Here’s a news flash for you. You don’t need the latest greatest gear to be good at what you do! The exception to this is of course the sports photographer that needs the fastest frame rate. For the rest of us, a 24mp camera won’t make you any more money than a 21mp camera. Stop being a gear junkie and save your money.
The same goes for software. I’ve been an adobe user since Photoshop 1.0 when I was 7 years old and although I’m a diehard fan of the software I know that’s it’s not always necessary to upgrade to the latest version. Believe me, it pains me to say that and even as I write it my mind is reeling with all of the reasons it could makes sense to upgrade. Fact is though that more often than not you can skip a version and make due if you must.
2.) Invest your profits
Along side with spending less money you’ll need to invest the most that you are able to. Learn everything you can about investing. Take a class, read books, find friends that are savvy investors, do whatever you can to learn this skill. Spending time educating yourself here is far more valuable to your future than browsing Pinterest looking for inspiration or whatever you do to waste time. It doesn’t matter much what you decide to invest in either. It could be stocks, mutual funds, real estate or even other businesses. Pick something, educate yourself about it and start putting money towards it. I am not recommending a specific method, nor am I saying where to put your money. Just that it is an extremely important tool in your financial arsenal.
Gear is not an investment; your incredible lenses will depreciate and are not always the best choices to purchase anyway. Doesn’t make sense? I’ll explain…
Several years ago I purchased a Canon 70-200 f/2.8L (non-IS), which retails for $1,300. I basically never use it, and haven’t after the first year I owned it. So let’s do some math here on what that lens really cost me.
Even if that money were sitting in a plain savings account at a credit union earning 5% (government bonds average nearly the same) it would grow to $5,619 after 30 years. If you spend some time and find develop a portfolio that yields even 8% that number grows to $11,781. Now if we consider the 5% calculation and add back in what we would have spent on the lens we come to the conclusion that buying it actually cost me nearly $7,000.
What if we use this same concept when it comes to upgrading from something like the Canon 5d Mark II, to the Mark III? Both cameras’ original retail price is the same at $3,600. When you chose to upgrade maybe you go to sell the older model and get something like $1,500 for it. This means your upgrade cost you $2,100.
We’re going to use 8% as the primary this time because that is a below average yield for long-term stocks (at nearly 10% since 1926).
2,100 over 30 years at 8% comes out to $21,132.
I don’t know about you, but skipping one essentially frivolous upgrade to gain over $20,000 seems like a pretty solid decision to me. Most people don’t look at things this way though and that is why I say that many people (even outside of photographers) will never see the kind of financial freedom they want.
3.) Advertise via networking instead of print media
In the years I spent working as an advertising creative I learned one major lesson. Word of mouth is the absolute king of advertising. No magazine ad can compete with it, period. Stop spending your money on full page ads at thousands of dollars an issue and spend some time building a solid referral system. For two years I wrote a column in a local magazine and every article was accompanied by a full ad on the opposite page. Basically this was a free two-page spread for me and even then I can’t tell you that it was worth the time spent. In those two years I maybe booked 3 jobs where I could identify the publication as the source of the lead. If I have to I will, but I think after my last point you can see what a $2,000 ad could gain you if used elsewhere. Spend your time and effort on networking; it’s basically free.
4.) Maximize Profits
To start, there is no way to cover this point in one article. It’s far too broad a topic. In summation, you have a finite amount of time and your market can only bear so much when it comes to your rates so you need to make the most that you can with the time you have. If you’re not shooting, make sales calls. Take a hard look at your pricing structure. Are you leaving money on the table or are you selling everything you possibly can at the best margins?
If you’re a wedding photographer, are you attaching an album to each gig? Senior photographers, are you selling standard prints or offering a signature-framed piece at a premium? Commercial photographers, how are you handling markups on your bids?
This is where the business of photography is extremely important for your future. There is no better way to put it. You have to make sure each sale is as profitable as it can possibly be. Do I mean you should nickel and dime your clients? Absolutely not! You don’t need to be a jerk either. It’s ok to give out images sized for things like Facebook. Your wedding clients aren’t out there reselling the images you took of them; give them something to share with their friends and family. Properly web-sized images print like garbage anyway. What’s the harm? Sales is easily my least favorite part of photography but it’s an absolute necessity. If you’re weak in this area invest in some sales courses and study them until it’s second nature.
5.) Stop Operating on Credit
Get your business fully capitalized. That means that you have enough in your business account to operate for at least 2 months on cash, with nothing on a line of credit. If you’re just starting out and think you need to spend $10,000 on gear to get going…think again. You may not want to but you can do just fine as a professional photographer with inexpensive base-model gear, even used gear. Buy everything that you can in cash. If you can’t afford it yet, save for it. Buying on credit is a losing game. The interest will cost you a ton and in the event you miss a payment, penalties and increased APRs will just compound the problem.
6.) Find a spouse with a good job.
If all else fails, find a sugar-daddy/mama! Ok obviously I’m not serious abut that, but having a spouse with a steady job and insurance can make life as a photographer loads easier. Think about it, if your family can live off of your spouses income then whatever you bring in from photography can be invested wholly.
Is it possible to have real wealth as a photographer or artist? Of course, and it’s actually pretty simple. You just need to dedicate yourself to investing intelligently and spending only when it’s wise to do so. Does that mean you can’t go out and take a vacation or buy new clothes? No, but you work it into your budget and keep the ultimate goal in mind. I took a break from writing this piece to go buy a pair of shoes I didn’t really need. I’m able to do so because I’ve worked a random “fun” account into my monthly budget and I don’t spend outside of that. You can still have a life and enjoy it while you work towards wealth.
We just have to realize and accept that as artists we are at the bottom of the financial food chain and it takes a hefty dose of dedication to build wealth from the bottom rung of the ladder.