What am I worth? This is a question every new photographer ultimately asks himself. If you’ve ever wondered what you should be charging your clients and what the best way to go about it would be, keep on reading. I will go over how to determine your personal creative fee and how to present it to your client in a way that makes sense.
Last week we discussed production charges and how to include them on your invoice. Production charges as you may recall are all those out of pocket expenses that you will need to add up, itemize, and bill to your client. One expense we left out of our production charges is the cost of our time to provide photography services. We do this on purpose because this expense will be filed under a new category called “Creative Charges” or “Creative Fee”.
What Is A Creative Fee?
The creative fee is simply the amount of money it will cost to hire the photographer to do his job. However it is neither a wage nor a salary. Wages and salaries are paid to employees. You, on the other hand, are running a business thus the creative fee is more so a representation of your cost of operation. An employee might make a salary of $50,000/year. This employee doesn’t have to rent their work space, doesn’t need to buy office supplies, doesn’t need to supply equipment, and doesn’t need to pay for any marketing campaigns. Those are the costs of operation the business that hires the employee must endure, and as a photographer, you are a small business owner and entitled to all those same expenses.
As you can see it would not make sense to simply base your creative fee on a “salary” or a simple “wage”. You would not be accounting for a huge portion of your day to day cost of doing business. Those costs would ultimately be coming out of your “wage” or “salary”, leaving you with less than minimum wage, and a very angry significant other. What we need to do is figure out our personal cost of operation.
What Is Your Cost Of Operation?
At this point we don’t care about the quality of our work. Maybe we will make fine art and our prints will sell for millions. Maybe I can buy that yacht I’ve always wanted and sail off into the sunset. Daydreams are great, but maybe, if I figure out what it costs me to run my business they can actually become reality.
Everyone will have a slightly different cost of operation. Your monthly studio expense will be FAR higher in New York City when compared to Timmins, a small town about 3 hours away from me. Insurance premiums will vary by individual and by region. The amount of electricity you use will depend on how large your studio space is. The cost of travel will vary greatly if you are a local product photographer versus an international landscape photographer. The amount you must spend on repairing your equipment will vary if you’ve got specialty equipment that is expensive to upkeep. The point here is we need to be extremely thorough and account for EVERY expense related to running our business that we can think of. We need to be truthful and honest with ourselves because ultimately you will be cheating yourself. So let’s get to calculating!
Step 1: The Expenses
Your first step to figuring out your cost of doing business will be to add up all the expenses associated with running your business. As with everything, some of these might be unique to you, and only you will know to add them into the calculation. That said, this CODB Calculator provided by the NPPA, has a pretty good break down of just about all the expenses any of us would encounter.
The first step will be to fill out all these expenses as they pertain to us. For example:
Step 2: The Income
The expenses are only half of our cost of doing business. If all you did was add those up, you would be omitting the biggest expense, yourself. You have to make a living right? Again this will be something that will vary by individual. The cost of living is so different from one region to another. LA will not cost as much as Berlin, which won’t cost as much as Toronto, which won’t cost as much as Istanbul. In addition, some of us can live on a modest income, while others prefer to live like rock stars.
If you are planning to move to a new area to start up your photography business and are unsure of the cost of living, here is a fantastic Cost Of Living Calculator. Not only will it allow you to find out how much you can expect to spend in a new area, but it will also show you how that compares to your current location.
Hopefully at this point in your life you know how much income you would like to make in order to sustain yourself. If not, there are a TON of budgeting tools out there for you to use that will allow you to add up your personal spending and saving habits. For the purpose of this article we will keep our focus on the business expenses so the only number we care about will be the final yearly sum you want to make. Whatever that number is, hold on to it, and add it into the NPPA CODB Calculator as follows:
How Many Billing Days?
This will be the last piece of the puzzle to figuring out your creative fee. How many days of the year are you ACTUALLY shooting? If you added up all the above mentioned expenses and your income, but then divided that by all the days in the year, you would be assuming that you are shooting EVERY single day of the year. This in fact will not happen, trust me.
A photographer’s life is full of things he would rather not be doing. There is sales, networking, scouting, cleaning, delegating, answering emails, and so on. The list of things to do never ends and easily dwarfs the amount of time you will be spending on set shooting. This is the reality of running and maintaining a business.
For my own personal business I have found my tasks seem to break down into a 20/40/40 rule.
These are all the administrative tasks that need to be done every day. It can be as simple as answering a phone call and delegating tasks to my team or as complicated as invoicing and preparing accounts receivable. These are all vital tasks for the support and smooth operation of my business and I find these tasks take up about 40% of my month.
The next set of tasks seems to fall into the sales category. Throughout the month I need to network with prospective clients but also with old ones to keep myself top of mind. Any marketing campaigns and advertising get lumped into this category. This is a very important category to me as it creates new business and it easily takes up another 40% of my month.
That leaves us with a mere 20% of all our working hours being dedicated to actually photographing anything. Some months this might be less, and some months we will see more, but the average for me seems to be right around 20%.
So What About Those Billing Days?
Well there are in fact 260 working days in the year assuming 52 weeks in the year and 5 days per week. If we are shooting 20% of the time, then our billing days will be 20% of the 260 working days in the year, which works out to 52 billing days. Feel free to alter this number to suit your business, but this is how I have arrived at my own numbers based on the experiences of running my own operation.
By calculating our creative fee based on only the shooting days we can make sure that the income we receive during those shooting days will cover our expenses on all the other days when we are not shooting and instead taking care of all the sales and admin tasks.
Once we input this final piece of the puzzle into the NPPA CODB calculator what we are presented will be our total cost of doing business including our expenses and income, and we will also be shown our overhead cost for each assignment day.
This Is What You Are Worth
That last number is your creative fee presented to you in a day rate. That is how much you are theoretically worth and the minimum you should charge to achieve your goals. I say theoretically because if you decided to pay yourself more then your market can bear, or more than your work is worth, then you won't be landing any clients. There is some strategy involved here, and as a new photographer you may wish to take a bit of a pay cut when entering the marketplace initially. However, as you become established, you will notice your demand goes up, and you will need to alter your income portion of this formula to raise your day rate. That is how you can begin to charge more for your services as you gain experience.
Adding It To The Invoice
Now that we know our day rate we can begin to add the creative fee to our invoice. There are many ways in which you can structure your creative fee. You can present it as a day rate or for smaller projects you can opt to charge a half day rate. You can take your day rate, divide it by 8, and you will have yourself an hourly rate.
For projects that include product I have often found it best to charge by the piece. The reason for this is that clients really like to see how the cost of your services will impact their final retail price. It is much easier for them to do their own calculations if they have a unit price rather than an hourly or daily rate which leaves them unsure as to how it affects their bottom line. To figure out your per piece rate simply divide your day rate by the amount of product you can shoot in one day.
Regardless of how you choose to present your creative fee, it is always going to be based on the numbers that you calculated as part of your cost of doing business. One thing you may wish to add is a markup on your creative fee if it is not being charged as a day rate. For example, if my day rate is $2000, instead of charging $1000 as a half day rate, I might charge $1200. The reason we do this is because very rarely will you book any back to back gigs. The markup allows us to charge a little extra for the loss of opportunity to work a full day gig.
If we go back to our sample invoice from the last article, we are now ready to add in our creative fee in addition to the production charges. I like to include a little description underneath the creative charges to put down in writing what I am expected to produce for the client. For this invoice I opted to charge the creative fee as a day rate. Based on our calculations from this article, my personal day rate came to $2000/day, so that is what I will be adding to the invoice like so:
There you have it! We now have the production charges and creative charges of our invoice completed. The last portion, and probably the least understood, are the licensing charges which we will be covering in depth with the next release of our commercial pricing guide. Stay tuned, and as usual, feel free to visit us at Peter House – Commercial Photographer to follow our work.