Recently we had the opportunity to estimate on a job for a single exterior shot for a national hotel chain with web and print rights, in perpetuity. Not knowing what the firm’s budget was, I could only do my best at pricing the job to my own standards. It was a very fair estimate, considering the liberal rights requested, however, we lost the job with an email that basically said our estimate was way off the client’s budget. And I smiled.
I smiled because the the last line of the email said they would keep my info handy for future projects. Maybe it’s a blow off, but more than likely, the firm’s rep probably realized the estimate was fair and actually does plan on bringing us in on future projects when other client budgets’ permit. That’s great, but the part that really makes me smile is that, despite losing this one job, I’ve now set a pricing standard that keeps me in the running for their higher-paying gigs. I’m sure they found someone else in the Vegas area to go shoot that job, but that person has traded a low-ball paycheck for being pigeonholed as a discount shooter. Ultimately, they’ll have to work many times harder for the same amount of revenue.
I don’t have an MBA, but I’ve managed to run a successful small photography business for years now, so I’ve learned a few things. I’ve taken guidance from professional organizations, peers, books, software, etc, but in the end it’s up to each business owner to run things the way they see fit. In this down economy, I’ve managed to pay off all business debts and cash-flow major equipment upgrades and such. 2009 saw a 13% increase in sales over 2008, and 2010 has already seen a 73% growth in revenue from this same time in 2009. I don’t say this to brag, but to show that there is money to be made, and it’s usually not in cutting prices.
So, here’s how you too can lose photo gigs and smile about it:
Know your bottom line –
You can’t run a business without knowing what your expenditures are. If you don’t know how much you need to make to stay afloat, you have no way of knowing what you need to charge. Plenty of great artists will never be seen because they don’t know how to run a business. On the flip side, lots of hack photogs are making killings shooting mundane stuff because they know bookkeeping, marketing and client service. Set aside a couple days to calculate and then improve your bottom line. How much overhead do you have? Are there places to trim expenditures? How low can you go to secure that one really cool, but damn near free shoot every year without going broke? How long can you go without work if you stick to your pricing guns?
Pay off debt and start paying cash –
In a previous post, I talked about Radiant paying off all it’s debts, which then landed us in a feature article in Entrepreneur Magazine. Paying off debts and using cash to pay for expenses has many benefits. First and foremost is the peace of mind and amazing night’s sleep you get from knowing that you don’t owe anybody anything. The second is that once a large percentage of your invoices aren’t predetermined to go to your credit card company, you start to build wealth quickly. After paying off our debt, it was just a couple gigs later that we had a couple months of operating expenses saved up. Talk about breathing easy. When you’ve got a real financial cushion built up, you can start to feel better about not winning every estimate that comes across your desk. You can also afford to shoot that long-overdue photography project, or start doing charity work. Broke companies that live hand-to-mouth can’t afford to donate time nor money, because they have little of either.
Don’t finance client projects –
Refusing to finance most client projects has made a world of difference for being profitable. I started this business to be a photography provider, not a bank. If a client doesn’t have the budget to carry out their vision, I take great strides to offer solutions (e.g. – trimming total shots delivered, shooting without models, reducing licensing requirements). However, I know what my bottom line is, and that I don’t use credit anymore, so to finance production of someone’s project would require me to dip into savings and jeopardize Radiant’s financial health. The common solution is to require a retainer (not a deposit..those can be refunded if the client backs out). Oftentimes they can’t pony up a retainer, so I try to work with them there too. However, there are many times per year I have to let clients walk, simply because the numbers don’t add up.
Set the bar comfortably –
The client looked at your website and digs your work, but won’t share a budget with you. Don’t offend them by assuming it’s low, so price what you want to make on the job. Price right so you don’t get pigeon-holed as a discount contractor on all future gigs. Even if you lose the first gig, when they come back for future estimates, they know your price range already and will be ready to negotiate at your starting point. You WILL sticker-shock some potential clients. That’s fine. They know where you stand and if they really like your work, they’ll save up money to hire you next time. If they’re all about the cheapest vendor, then you probably don’t want them as a client anyway. Those types of clients will not recognize the true value you bring to the project, and will give you the boot as soon as they find a cheaper vendor*. This recently happened to us with an architectural firm who needed some shots of work they’d done on a large project in Vegas. Fifty to seventy-five shots with rights was the estimate criteria, due within two weeks. They wouldn’t share their budget. By not sharing a budget, it tied my hands to create an estimate based on standard licensing fees, researching the quality of previous photography jobs from that client’s website portfolio, and analyzing the shoot location to gauge how many days it would take to get 50 shots. They seemed to hire decent photogs before so they certainly should know that each shot takes a few hours to compose, capture and edit each shot, right? I certainly wasn’t going to offend them by assuming they had no money “in this economy”, and I wasn’t going to let them think we couldn’t get the job done right because we were priced scary low. Apparently, we were not on the same page. They allotted $1200 for the entire shoot, basically wanting professional images for snapshot prices. They didn’t realize the true amount of work, knowledge, and value that a professional photographer would bring to project. Let ’em walk. They will find someone to shoot at that price and probably be happy with the results. If not, we’ll hear from them again, but on our terms this time.
*Make ends meet disclosure: If you’re struggling to keep the lights on that week, by all means, get your power bill paid with a cheap shoot, but don’t expect to raise rates on that client later. We’ve all taken low paying gigs to pay the bills. However, afterward go back to step one and two and audit your business then pay off debt. Something isn’t working in your plan and you need to figure it out, or move on to greener pastures.