I was talking to a photographer friend of mine last night she’s always asking me for pricing advice. I usually tell her to charge her daily Cost of Doing Business (CODB) and then mark it up from there based on the scale of usage. She told me she’s never calculated her CODB and I scolded her big time. I told her they next time we meet, we are sitting down and doing this together. As I refresher, I thought I would write this blog post and hopefully you find it helpful.
Being in business as a photographer, you have to know your CODB, because that’s how you set your Baseline Creative Fee (BCF). If you take jobs that are below your CODB, you are operating at a loss. You should also do your CODB every year to make sure you’re staying on track and to set sales goals.
In a very simple formula, this is how you calculate your CODB:
(YOUR SALARY + YOUR EXPENSES) ÷ SHOOT DAYS PER YEAR = DAILY CODB
Fortunately, there’s an easy way to calculate your CODB and it takes less than 30 minutes to do. You will need two things: Your Profit & Loss Statement from last year and NPPA’s Online CODB Calculator. If you use accounting software like Quickbooks (PC / Mac) or AccountEdge (Mac), it’s really easy to generate you P&L report. Make one and print it off. Then click over to NPPA’s Online CODB Calculator.
For this exercise, I’m using some numbers that I would consider to be average for an emerging photographer in a medium market (i.e. not NYC or LA) and is making a living solely from their photography. This photographer wants to make $50,000 a year, has a small office, no employees, no family to support, and someone who shoots a mix of editorial, commercial and stock. Let’s assume they will shoot 50 billable days in a year (that’s around 4 shoots a month). Here’s how there CODB breaks out. Note: CODB should be calculated on business expenses, not shoot expenses. So leave out any reimbursed expenses like assistants, travel, food, etc.
Click to Enlarge
If we plug these numbers into our formula, it looks like this:
($50,000 + $44,930) ÷ 50 = $1,798.60
$1,800 is their CODB. So, if this photographer shoots any job that pays less than $1,800, they are losing money. Pure and Simple.
So, now that we know the photographer’s CODB, here are some methods to create a fee structure.
Creating a Fee Structure Based on CODB
It’s been my experience that every assignment is different and your fees need to flexible to accommodate the needs of the job and your client’s budget. I have found three good ways to create your creative fee:
- A Day Rate
- A Sliding Scale Per Shot Rate
- A Project Rate
There’s no one way that works better than another. If the number of shots is very specific, a per shot rate works best. If the number of shots is unknown, but you’re going to be on location for 10 days, then a day rate is more suited. If the shoot is documentary style project where you’ll be shooting a small number of times over various weeks, then a project rate makes more sense.
Using the example photographer’s CODB of $1800, your Baseline Creative Fee (BCF) would be:
- $1800+/- project
The day rate is pretty straight forward. You shoot three days, you charge for three days. The project rate is trickier to figure out because you have to predict how much time you will spend doing the project. Make sure you get as much info before you start shooting. *The per shot rate would get very expensive if you did 20 shots in a day. So, that’s why I do that on a sliding scale:
Using any one of these methods is how you create your Baseline Creative Fee (BCF).
Baseline Creative Fee + Usage Fees
I like to think of the BCF as your local rate. The usage included with that rate would be something like the following:
Use in any marketing materials distributed to a targeted audience. Includes use in printed brochure, catalog, annual report, public relations and sales material. Also includes electronic (PDF) versions of the original printed uses. Use in any web and electronic media for advertising and promotional purposes including website, web banner ad, promotional email and mobile ad.
Side note: check out PLUS Packs if you need help writing your usage terms.
The usage above is basically everything a local client is going to use your photos for. If they do advertising as well, you may want to charge a little more, like 10%.
There are four basic types of clients: Local, Regional, National, and Global. Here’s how I would handle the usage fee markups based on a BCF of $1,800.
- Local Web & Marketing Usage: $1,800
- Local Ad, Web, & Marketing Usage: $1,800 x 1.1 = $1,980
- Regional Web & Marketing Usage: $1,800 x 2 = $3,600
- Regional Ad, Web & Marketing Usage: $3,600 x 1.5 = $5,400
- National Web & Marketing: $1,800 x 10 = $18,000
- National Ad, Web & Marketing Usage: $18,000 x 1.5 = $27,000
- Global Web & Marketing: $1,800 x 20 = $36,000
- Global Ad, Web & Marketing Usage: $36,000 x 1.5 = $54,000
So, there it is in a nutshell. Please remember, this is a guide and it’s more to illustrate that doing your Cost of Doing Business is vitally important to being in business. Use this example as a way to wrap your brain around what your creative fee should be and why it costs more for Pepsi to use your photos than it does for the local mom & pop shop. There’s always room to negotiate, too. Don’t live and die by these numbers.
I will say that ever since I standardized my pricing, I’ve gotten more jobs that pay better. It’s also made creating estimates a lot easier, because I charge what I need to charge to stay in business. I also feel good about passing on jobs that don’t pay my CODB, because that gives me time to market to jobs that will pay 10 or 20 times my CODB.
Have a great weekend and DO YOUR CODB!!!