Finally, time to look at the business plan again. My timing for these posts is a bit off, but that’s more to do with trying to pace my progress here in an inverse way with what’s going on at work. A few months ago all indications were that we would wrap our projects up and be gone by now. Today, it’s more likely we’ll at least get to complete the projects, which satisfies my techno-geek self. Will I still be there in the new year? That’s still not clear, so while I have time I need to complete a bit more groundwork here.
Last time I left you with some jobs to do:
– Find out what others in your area charge for what you want to be doing. Here the range is $2k – $6k per event
– Gather costs – for yourself and your business. It will help set a realistic monthly budget for both, and you can estimate a good monthly salary.
Really, it can be as simple as Income – Costs = Profit
I think a lot of folks screw this step up and make it more complicated (and unrealistic) than it needs to be. For example, you could make some assumptions about a new business, like Profit = Zero, and the math gets much simpler:
Income = Costs
If you compare the results of the homework, it should be obvious that your monthly costs are going to need to be balanced by your income. I don’t know why, but this is a surprise to some people, and they make a bunch of arm-waving noises about how this doesn’t apply to their situation, or some sort of magic should happen in six months, or they plan to land some big deal in Year 2…. … yeah, whatever. Ain’t happening. Not in a solid plan, anyway.
Specific to photography I see lots of ways to spend money; gear is the obvious choice, but so are conventions, printing marketing materials (business cards, photobook samples, glossies…), auto expenses…. and accountants and lawyers to help you with the leftovers… remember to jot those down too.
Now, one thing should stand out, at least it does for me … all of the things that hobbyists wince and whine about, like the cost of good equipment, are much less than the #1 line item of cost in the plan: your own needs! Your cost of living is going to vary, but if we pick a round number as an average, I bet $5000 a month is about right. I could go to $10K, and use more rough ‘order of magnitude’ estimation (a true life skill … taught to me in university, in astronomy class, of all places!). But $5k splits the difference between $1k and $10k, and it’ll make the math easier later on.
Let’s add up some costs.
Salary (or repayment of shareholders loan, or dividend, or whatever your accountant wants you to call it): $60K
Gear: New body, new glass, new computers, software, monitors, printers, that wireless thingy…. oh, allright… $15k. No? Ok, $20K. Believe me, it won’t matter, it’s rounding error.
Taxes, fees, insurance, various and assorted bloodsuckers: $10k
Conventions, Marketing, and ahem ‘fun’ stuff: $5k (it’s year one, so suck it up!)
Where are we? About $100k. Now, slap 50% on that, because one day you’ll want (or need) to retire. See, I told you that $1500 lens would start looking like rounding error!
Are we done yet? Well, not quite. We don’t have the actual shoot costs yet; the ‘cost of good sold’. Assistants, consumables, travel, food, disk space, print / production items that are bundled into the package prices…
Package Prices? Say what?
Ah… and there is where all these costs go – into quotes based on uplifts to the package price. So you can develop a package price, but it’s going to be a ‘no frills’ package, in fact you may never tell anyone what it is, because really, it’s the base cost of a shoot that you MUST cover, or go broke.
For example, if you know that you are going to have 50 ‘Event Cards’ for guests to take home, so they can find images that they can buy prints of online, or even buy the photobook of the event from… there is a fixed line item of cost. But if you don’t shoot events, maybe just a hundred cards a year is ok.
How does the math work then?
For something like $160k of annual fixed costs (notice how that number keeps creeping up?), spread over 10 months (because you won’t be working for two of those months… remember Wayne Cotton, and his Success Calendars!)… you have simply $160k / 10 months = $16k per month, as a base cost.
Since months are handily divided into four weeks (of about 4 days), you are looking at about $4k per week, and about $1000 per day. If you really wanted to, you could estimate this as $100/hr (including travel) as a minimum.
But that’s a bit eager, don’t you think? How about if we only shot 50% of the time? After all, you won’t be 100% booked (and shouldn’t be…. that’s another post…!). That would DOUBLE your shoot costs. So really, $4k per event might cover a small wedding. But a bigger event, with a 2nd shooter, some ‘included’ things … that could easily be an $8k shoot. And how does that stack up with Homework item #1… what others are charging? For me, it’s right in the ballpark. I love it when a plan comes together!
And when you realize that your costs are covered you won’t be thinking about paying bills or eating cat food.
You’ll be mentally free to take really rockin’ images. After all, that’s why you got hired, right?
So, are we ready to go get our Amex business card and buy everyone a celebration dinner and write it off?
This isn’t a business plan… at least not yet.
This one is much easier; given you know what you could charge, and how much you cost, lay out the next 24 months. For each month draw your salary, but be realistic on income. I’ve done this step, and it’s frightening. If you don’t have a war-chest now, my advice is don’t start until you do.
As a template, I did this for my projection:
Month 1 (January 2010): Zero income
Month 2 (February 2010): One event
Month 3 (March 2010): One event
and so on. I ramped up my income from zero to ‘normal’ over the entire 24 months, and even in the 24th month I didn’t assume to be 100% booked, because of the cyclical nature of wedding date selection.
And 24 months @ $16k/month cost …. Yikes! Yowza! That’s $384k!!! And I haven’t booked a single wedding yet! No wonder so many small businesses fail!
Well, without some spit and polish it’s still not quite a business plan, but it is an eye-opener!