Special Request: Pricing
We're gonna do is we're gonna answer the question how much should I charge now? This was something that was way thought this would come up yesterday in fact they think have you asked this and so it's not in any kind of presentation format so I'm actually wrote an article a few years ago about this and so I'm cheating by reading I'm going to read my article too, you know? But I'm cheating on a few of the numbers that I have here, so please excuse the cheat sheet so really when we're talking about how much should I charge we're talking about you know, how much should I charge my client? So we had to sort of figure out our business and it doesn't matter if you're a photographer or if you are a uh on auto mechanic or a fury of shoe reseller it doesn't matter you have some kind of widgets to sell right? And you have to figure out how to properly price those widgets on dso as a photographer, you have to start thinking about business in those terms of what air the what of the costs associated...
with producing the widgets now there's widgets are going to be things like, uh your time is something that you're going to provide and your experience is something that you're gonna provide a standard of quality is something that you're going to provide so they're sort of they're very ethereal widgets that should be a quote, their ethereal widgets that you're going to be providing people but also they're going to be something like a media of some sort of it's going to print right or cd of proofs or banner or video something there's actually some physical stuff that you also going to provide but those are your widgets and the question is how do you properly price those widgets? And so what we'll do is we need to figure out a few things, so the very first thing that you need to do is figure out what your widgets are that's very important so one of the products and services that you are going to sell on then for each of these you have to figure out the costs that are associated with those things. So the first thing that we need to do is to figure out our costs so very important you have to calculate your costs and the only way to know what your costs are is to actually track them. So you have to have some sort of software um or a very good ledger book but that's ridiculous get quickbooks, quickbooks online or quicken we use quickbooks online and you have to track every single cost you have now I know that you're thinking about some costs like uh studio rental uh and you're thinking about things like maybe a model uh, how much you're paying a model and maybe some gear rental and things like that, right? It's all those costs are there, but there are hidden costs in every widget you sell that are probably mohr. Uh uh. You have to take in consideration more than just these. And those are things like retirement. And when I misspell a word, please forgive me. So retirement, um, you need to have a savings account of some type. So when you have that dry period of a year or so that's going to happen at some point, maybe two years, you have to have some savings to absorb that have a rainy day fund. There is insurance that you have to pay for its health insurance, right? And then you have to pay for insurance for your studio, and you have to pay for insurance for your gear, and you have to pay insurance for fill in the blanks. So when you're on a normal commercial shoot, you have to provide a certificate of insurance for different locations and hotels and cities and parks. Usually it's ah million dollar writer that you have to have for any traditional shoot or to brint most studios. Which isn't his expenses of a cz you think so you have to have all that insurance there are taxes that you have to pay so when you have employees there's unemployment insurance that you have to pay you have to play social security taxes, you have to pay taxes on it income tax on yourself and your employees state taxes, local taxes you have taxes on sales taxes if you, uh are selling things like dvds or workshops or any of that stuff you have to pay those taxes so taxes big deal um then you have to have yet to pay your sepa or your accountant to track all these taxes and make sure things legal because if it's not you're going to host so you have all that kind of stuff you have other things like depreciation on equipment so the depreciation on equipment use a dp on cue that means depreciation on equipment here, that kind of stuff you have off exits off office expenses. So what about that color printer that you have the toner that you put in that printer the paper that goes in there when that breaks down the wifi network, your airplay stuff, your routers, the cables that connect your computers, the computers, the monitors, card readers all that kind of stuff you actually have, uh, phone and you have your internet, your tubes uh you have all that kind of stuff you have travel costs, right? So you have costs in gasoline going to and from shoots you have costs on the tires that you just put on your car because you wore them out you have costs on doing the jiffy lube run you have all that stuff that's in there you also have to provide craft services and meals so food, what about the office coffee? But you have to pay for that if you have the cool curing machine awesome you gotta pay for those little packets you've gotta have the sugar and you have to track how much that'll coffee stirs aaron the cups and a little coffee mocha jacket things so you don't burn your hands all that stuff about the napkins that you bought to clean up the studio? What about the counter that you put that stuff on right there just like costume, costume, costume and so the only way that you can know what all of these costs are, there are hundreds hundreds of costs that, um I'm just looking at here this this list clothes I have to one of our costs I have to buy shirts because I'm constantly doing workshops and if I were the same shirts people comment about it you're wearing the same stupid shirt and so we have a budget for different stupid church things like assistant's things like have you paid licensing fees for whatever music that you're playing in you know, whatever but it just goes on and on and on that's what? You have to have a system for tracking all these costs and so quickbooks um or quick and something like that or c p a you have to have somebody like that is just like any other business and then you have costs that are directly associate id with a product and costs that are just there there static costs so all of these costs you roll up right and these costs that are just out there that you rolled up to do to do uh those costs are the ones that you care about most for right now okay, those are done so you have costs then you have production costs these are different so costs or the things that happen every single day regardless of if you have a shoot or not production costs are specifically tied to a client and project so it's the model that comes in it's the, uh, wardrobe that you're paying it's the gear that you're renting that kind of stuff so really you want to break these two things out um so you have all that kind of stuff this list is gonna get huge huge, huge huge okay then after you've done all of that, so we'll call this production costs well, you really wanna do you wanna take this costs all your costs and then you want to divide that by how many days per year you wanna work so how many days per year you want work so normally uh, working year is two hundred and fifty days that's uh five days a week two weeks off for vacation weekends off so two hundred fifty days is normally the number you can adjust this up or down based on how much you want to work um if you really want a week a month, a week a year, then your daily rate is going to be extravagant if you work three hundred sixty five days a year, you're right can be lower but you're never getting sleep so two fifty is a good starting point so you take all your costs, you divide it by how many days per year you want to work and then you get daily cost of doing business. D c o d b as your daily cost of doing business and you have to know this you have to know this if right now you're a professional photographer and you can't immediately say what your daily cost of doing business is, then you're in trouble you have to know what your daily cost of doing business is because if you don't know that you have no idea what to charge there's no way to know I can't guarantee so alan used to fly for can I say who you flew for detail right? Do you think the h l knew how much it costs every day to maintain their business? Yes they knew they knew how much it cost to fly a jet how much it costs to turn it around how long it had to be in the hangar how much maintenance was so much the tires cost they know all of that they they know how much a pilot costs who's a newbie and a pilot cost who's been around for a while in which one they want to work with I mean union all that stuff every business knows this so you have to know and if you don't know then there's your first assignment and uh the thing out of this workshop I would say if you're going to be a commercial photographer has figured this out you're behind if you don't know that okay, now that you know that I hope you're taking notes yeah that day the cost of doing business you have the basis to figure out how much to charge somebody you have the formula now, okay, so it works like this when somebody comes to me so hobby or let's say you come to me and you say I would like you to shoot it frog on a platter of something like that crazy right and you say, how much would it cost? I will say I don't know the reason I don't know is and I'm not sure exactly what you mean shoot a frog on a platter for what? Oh it's actually a figure of frog it's for fast food store and it's whatever it's a media campaign and we have that dialogue that I talked about earlier what's the reason that you want to do this with your purpose let's figure out exactly what you want to do and what I'm doing is I'm trying to figure out production costs a real frog is like the guy dressed up in a frog suit is on location is in the studio all that kind of stuff I figured that out when I take this and I add all those numbers up I figured out right then when I could do is I can say ok, let me go put an estimate together and I'll come up with the rate so the rate is my daily cost of doing business plus add on there I add on my production costs okay added those two things together now at this point have I made any money? No, I've made no money all I've done is paid for everybody else's stuff I haven't made any money at all, I'm done so I need to add a mark up or this is my profit and don't forget you have to put in these production costs you can also put in their pre production costs it's all the stuff it takes me to figure out you know, how the estimate and all that kind of stuff normally what we do is we understand that we have x amount of pre production costs at all time and we bake that into our daily cost of doing business that's how we do it, we know that we have always at any given moment we're going to do, uh, x amount of hours per week just to get business and we can't really charge clients for that because we're trying to get their business the ones forget them and we do some work then we add this pre production costs here, okay? So so those air sort of split up a little bit, so we add these three things together we get a mark up and that is what you charge and this is not the formula for commercial photography. This is a formula for traditional photography like a model portfolio or a, um maybe a wedding or something like that. Ok, there's another thing that we need to do but let's let's work through the math on this really quickly, okay, so you can actually I said we would actually have numbers and we will so what we're gonna do here is we're going to take a hypothetical situation and we're going to say that josh calls me and says hey mark I have a a collection of cars and I would like you to come out and shoot my collection of cars that's what I want you to do okay expensive corvettes or something I don't know something cool right so uh okay well it's gonna take me about how long how many cars it's said it's about two hours right and what I'm gonna do here is we're just for fun let's say that my daily cost of doing business is eighty dollars amusing eighty dollars because it's easy math I'm really bad at math so eighty divided by eight hours in a day equals ten dollars so do not fall into this trap my rate is not ten dollars an hour that is a very very bad way of figuring things and I'll show you why so if we use bad math we would say I should charge people ten dollars an hour we know that's a failing proposition because you didn't include all this stuff so you would go out of business if he charged ten bucks an hour but at least I know ten dollars an hour is a good place to start so I'm gonna do is I'm gonna say okay josh wants to come shoot is corvettes how long it's gonna take uh it's going to take about two hours so I know that I've got a twenty dollar charge, twenty dollars as part of my daily cost of doing business because I'm using two hours, right? That's really not right? Because I have to drive there have to drive back, I gotta prep everything. I gotta go to the rental store, I can't book anybody else during those two hours, so at the very minimum, I met a half day at a very minimum I need to charge forty bucks as my budgeting for that day, so I normally always I I never I never charge by the hour I charged by half day in a full day rate. So, um, usually these days they charged by a full day rate because they don't really have half days to give away, so but starting out, you might have a half day that you could do because you can't do anything else during that half day, so if you don't charge that client, you're losing money. So you're going to charge at least forty bucks as this budget right here to go shoot the corvette's, but they got to get somebody to help you unload all the stuff you need an assistant, right? So what we're going to do here is we're going tio, uh, add an assistant and that assistant. He's going to charge you let's say I'm cheating from the numbers here let's say they're going to charge twenty bucks for their half the rate that's two that's a two twenty dollars okay, so now we're up to sixty bucks we have to rent some gear so let's say the gears five bucks obviously these numbers are not good five bucks for the gear and then um I have to get to the location so that say that gas is a dollar and that also it was the other thing here. All right, we have to give them some widgets so we're gonna give him a cd of camps that's a dollar. Okay, so it's sixty five sixty seven sixty eight dollars all right, sixty seven dollars. Yeah, sixty seven bucks. So sixty seven dollars so far. All right, so the problem is we figured out the day the cost of doing business here with sixty seven dollars that's our starting point, we know that those road costs um that includes our production costs right there, right here. Um we've included in this that we're not going to do any post production it's just here's the shoot here's the cd you're done because if we had some post production work we would've had to include that here is well, so let's pretend we didn't do that the thing there is now um what is this how much do you marked this up? Well that depends it depends on a few things. So how experienced are you um what are you gonna bring us faras your creative vision how much? Uh how much have you worked with this client there's all kinds of things that go into that and so let's say that you're a great photographer people love you you're in high demand there are six other people that say I need you for that half day and you could come back and say hey, josh, you know what I've got six other clients they're willing to pay me uh twenty dollars mark up you wouldn't say that you'd say they're willing to pay me a little bit more than you and so to make this work we'd have to stretch the budget a little bit because I've already got some other things to do so um you can sort of judge that and if josh said, well, I really don't have the budget for that. And chris said, hey, I really need you for that morning and I'm willing to pay you two hundred dollars well guess chris wins unless there's a reason that I want to go in and shoot with you so that market is really dependent on supply and demand, right? So if you have uh let's say the opposite is true let's say that I'm a beginning photographer I haven't really done any work nobody knows me nobody there is nobody that wants me to come shoot them on that day nobody and I am very honored that josh just asked me to come and shoot his car collection. Um well then what I would do is maybe not charging me markham that is a mistake, guys, what will happen is if you keep doing that, you will go out of business and plus you won't get the experience from that. So what if, uh josh is saying hey, mark sixty seven bucks and maybe if it's the twenty dollar market eighty seven dollars really to shoot my cars that's that's crazy crazy talk that's too much money don't you know what you're doing? I could negotiate then I could say, you know what? You're right. Um I'm gonna haul my own gear so no more assistant sure, now it just went down to sixty seven dollars and I'm gonna shoot with natural light, so I just saved five bucks off that and, uh okay, so I just took twenty five dollars off that so I can start chopping those fees down, maybe have to spend a little bit more time um, you can also do things like my daily cost of doing business I don't need the fancy coffee machine I don't need the fancy studio I need to get some more experience under my belt before I go out by the new mac book pro I'm not really at the point where I can't afford to paid the depreciation on twenty thousand dollars of lighting equipment I need to start out in a different place, and so you really have to be careful when you start buying your gear and setting up your studio and figure out where you're gonna work in hiring assistance that is probably going to impact your how much you charge then these production costs so be really, really frugal with with those things, so you get that and then you, then you have this is how much you should charge, you know you know you've covered your production cost, you've covered your daily cost of doing business, you have a market that's going to help you pay your rent and that's what you charge for the other thing that you should do when you're figuring this stuff out is figuring out how many days that you are willing to work. But you also have to know how many days you're actually working, so let's say, I'm a new photographer and I say, well, I'm willing to work two hundred fifty days a year, but the truth is the demand on my time is not so high I'll be lucky if I get a hundred shoots in a year one hundred days that I'm actually working because I'm just not there yet well, you have one hundred fifty day gap in your system and so that means that your daily cost of doing business from your actually you're charging people more than doubled so this rate that was now forty dollars is closer to one hundred dollars because you have to pay for the days that you didn't work right you didn't work two hundred fifty days only work one hundred so this number is not two hundred fifty hundred, so even though you're willing to work that many days, you have to charge for the days that you actually work. So normally your daily cost of doing business has to be calculated on actual work that you're doing and that actual work that you're doing you'll get there over by tracking your actual hours and days that you work, you have to track all that stuff. So when I said earlier that we have analytics for everything, we have additional numbers on top of that that show how many hours are we working, how much of our employees are working? How many hours were they coming in? What kind of stuff? Where they're doing? Where are we spending money, how we were earning money what's not making money we have numbers and numbers and numbers and numbers and so that's how we track all that stuff so the bottom line is if you're the kind of person that doesn't know how to track numbers higher sepa it's worth it might seem worth it but it's it's worth that you need to hire somebody could do that all right? So after this let's keep going because I said there's another there's another layer on top of this so I'm gonna race this really fast so far first of all, before we go on, I can sense questions so once your questions from online question from anna g eight nine how does mark handle when someone asks why his prices went up from their previous shoot they had with you over a year ago? Um I'm in a fortunate situation that usually I'm not the one that's given the the bill to the client and so I don't tell them I have something else that tells them for me and that's a strategy that that is important to develop over time is to separate the face of the artist from the face of the business and so now we're in a position but well that that usually happens but years passed I would just have to explain the basics we're in a new studio, we have better equipment, we have new staff, the demand on her time is higher and uh the reality is it costs me more to do business now than it did uh a year ago also the visibility is higher, the quality of work is better and they have the option to hire somebody else and and we've had a lot of clients hire other other photographers in phoenix in fact, we've probably had a lot of high turnover and so what we're doing is we're we're replacing clients that were paying us lower numbers with clients that are paying us higher numbers and were able to grow our business and earn more money so it's inevitable that that's gonna happen that you're goingto lose clients um because you're goingto going price yourself out of those jobs eventually mark elvis costello would like to know how to calculate post production as well um or is that factored into the daily costs? I want elvis costello to see me all of his cd's um it's actually castillo oh, costilla okay. Sorry elvis costello sort of cool. But, um how do we calculate post production fees so uh depends right now we have staff that aaron salary and so we track how with hours per project and we way budget ours to projects and then if our staff goes over on those hours we try to figure out why on we try to automate things but the post production costs it's sort of it's a tracking by how many hours how much time is being spent on each thing and what we do is we budget that's what we do we say we have x hours and so michael guess what I needed to create pdf ce for creative live here's what I want you teo to do how much time do you think that will take? I think that'll take six hours or two days or whatever it is okay you have two days to finish it at the end of that two days are you finished? Yes I'm finished great, we got it are you not finished? No. Okay why not? What happened? Okay next time michael has learned something. I've learned something when we look at it hey, we have pds for uh whatever. Uh, how long is that gonna take it's going to take three days but we we've again by that generative process we learn that and also we have cards on this huge wall on dh so off to see if I have pictures of the chelsea. Do you have pictures of the wall? Can you look? Kelsey is going to look and see if she has pictures of the wall because it has just massive cards and what we do is we actually on that wall there three by five cards that have tasks and we write down estimates we say we think this is going to take three hours or six hours and then we we'll go back and say how much time that it actually take and so we we have this sort of check and balances system for that stuff so it's not part of the d c o d b it is the post production stuff um no it's part of production costs yes I'm sorry I didn't know if your yeah it's production costs just another clarifying question from sam cocks so ah is your salary in that salary of your employees in the daily cost of doing business? It is and so um my salary is here um not all salaries are here so we have some contracts that some of our employees are tied to contracts and so those those salaries come out of different contracts and so some of our large clients there there year multiple year contracts and so part of the contract with them is to pay salaries so we can bring in because it saves them lots of money teo actually allow us to hire somebody that's in full time working in for us to farm it out constantly consultants fees are much more are a lot higher and so were able t to show to them that that's gonna work so what? We've moved away from that quite a bit so right now what we have is we've taken multiple clients and with those long term contracts, what we have is the ability to boil salaries into those contracts and so they a sort of slip over here into production costs, production costs for specific clients. So it's it's a little it's it's ah can get a little bit confusing as you're you're growing but that's that's how that works question from sc studios um, question is, I've heard people say that once you start, you have ah, you have a low price just to attract business and to get established that you should increase your rates every six months until you get to the rates you want to be charging what's your thoughts on that mark um, I don't agree with that, so I think that the the principal is good that you are, um they're increasing your rates every six months, but that doesn't track with reality, the reality is supply and demand and so if your uh if your supply is high and the demand is low and six months later, your supply is still high and the demand is still low there's no economic reason for you to raise your rates you haven't accomplished, you haven't done enough to justify that, and so it's the same thing is if you go back to which is to say I make the witch it of making pens and this pan is twenty cents and nobody wants to buy it well six months later just because it's six months later it doesn't mean people wanna buy this yet so I can't raise the price when I have to do is self promotion and so self promotion is extremely expensive you have to justify that price increase by making yourself more valuable either through the products and services you offer or your perceived value on that could be a lot of different things that you can do but there has to be a reason to increase that price you can't just raise it because you feel like it we have a ton of questions but do you want to move on let me get to the next section because we haven't talked about licensing fees and if those air in those questions I think this will help a little bit on will get that uh we'll nail that down a little bit more so it sounds like people really want to know about this yes. Okay always marcus is fun because we didn't plan on this at all. I knew it was sort of coming all right so way have all this stuff here and the uh there we have a little bit different formula for this and the formula for this uh says that we make sure I get this right yes so we have daily cost of doing business and this is for a commercial shoot. We have a daily cost of doing business. Plus, we have our production costs. Someone say pc for production costs. We have that. Then we have something that's different and that is licensing. Plus, the markup equals the charge to the client. Okay, licensing they spell licensing, right? Doesn't feel like it. Okay, yeah, I did. All right. Um, I'm emotional speller feels like it's, right? It's, right. Um, anyway, so daily cost of doing this business we already covered, plus production costs plus licensing that's what we need to talk about plus markup equals the charge licensing. Normally, what happens? Say I shoot a, um a promo for clear water bottle brand, right? Whatever brand that is, and they want to use that in stores they want to use that on trucks they want to use that on television ads all that kind of stuff, they have to pay licensing fees for that and there's a contract that says, you can only use this for these specified things, and we're charging you for the right to use our work. This does not apply if you are a consultant. So if you're a consultant to a company, usually the company owns the copyright to that, um, or if you're an employee at a large company in your photographer for that company. That company owns that work normally not to check your state laws. I'm not a lawyer, but normally that's how that works. But when we do things, we have a contract that says here's, what you're charging and here the licensing fees, uh, that we're charging you and licensing fees get really sticky. And so we use a very simplified model it's a sliding scale. And so so let's, let's do this. I want to make sure I get these numbers right. So let's say that we have a, um a medium size advertising campaign from a company came medium size would be maybe forty thousand dollars that's the media by that's what it's called so they're buying advertisements in newspapers. Maybe they're buying a local billboard, and maybe they're buying. I don't know the little mailers that you throw out in your newspaper, something like that. So we ask, we require are our clients to tell us what the total media by is? We want to know what it is, um, and if they don't tell us, we don't work with them because that's, how we figure out our licensing costs so once we get that um for something like that what will you do is we would charge a percentage and these percentages there's something that I won't tell you what they are but I'll give you a nice idea of how we do this so and our percentages changed based on supply demand and our marketing strategy and the strategy for hiring somebody but let's just say for sake of argument that a medium sized campaign ten percent that means that we're charging licensing fees of four thousand dollars it makes it super simple for clients to understand what our licensing is we just say hey it's ten percent of your total media buy if it's forty grand the licensing is four thousand dollars just it makes it so easy but what if it's a small company okay a really really small company and so let's say it's it's something like um you're putting an ad in the newspaper and that the ad is uh it's not forty grand saves three hundred dollars ok well three hundred dollars um if we charge ten percent only getting thirty bucks right thirty dollars for us that's not worth it it's not it's not worth it because we can buy you know three mochas and we're done so our percentage goes up we increase our percentage we say well if you're spending small numbers well then you owe us sixty dollars euros more so some of that spending three hundred dollars on an ad to pay sixty dollars for licensing that's reasonable right it's it's not not that not that big of a deal. So what if it's the opposite though? What if it's a large national they have a media by of a million dollars for several million dollars right it's a national ad campaign it's a really big deal um we wouldn't charge twenty percent I wish that'd be awesome it's going to be something much lower the one two three percent range something much, much lower right and that's that's then going to be a net of thirty thousand dollars licensing so you can see how that that sliding scale makes it reasonable somewhere that spending three hundred dollars isn't gonna have another three hundred dollars to pay your licensing fees. They'll have sixty bucks somebody's spending forty thousand they'll probably be able to pay for thousand licensing um in a million dollar ad campaign they're going to expect to spend, you know dollars like this tio license this and then what? What happens is you still have a mark up on top of that so you still have that uh be careful with that because if you said here's our daily cost of doing business which is a few thousand dollars and a production costs which are for something like this is probably gonna be, you know, fifty or sixty thousand dollars something like that uh here's another thirty grand for licensing and oh by the way I want another hundred thousand dollars on top of that you probably lost the job so you have to be really careful to make sure this is a not just a ego trip make that something that is that is reasonable again based on supply and demand um so that's that's something that's very important. Okay, so um let me before we do questions let me finish this by saying a few things there are some principles that you should know as a business owner and I think of myself as a business owner first and a photographer second and I think most people don't think that way they think of themselves as a photographer first and business owner second um I would say that about eighty percent of my time maybe a little bit less than that is dedicated to running the business. I mean his payroll up to date have we filed taxes when his quickbooks looked like what our analytics looking like today is your insurance done? We have to talk to this epa going to make sure this contract is done I'm going to do this it is ours and ours may be a little less maybe sixty percent but it is the majority of my time and the time that I'm actually in the studio shooting is probably thirty percent something like that so it's ah wish it was different the way this number is going down and it has gone down significantly now is that we're hiring on staff to do that we've got a great sepa we've got a great agency that does do our books, they were taking care of all that kind of stuff, but we are only doing that as we can afford it. So, um, we're sort of shifting that stuff, so the other thing that I have, um, that I'm fortunate to have is I worked at intel for nine years and my roll it until I started as a software developer, but they put me through a about three years of training through basically business school, um, management practices, business school estimating determined are away, and I was a man for the majority of my time at intel, something I'm ashamed of the middle manager for years, and so I had to do all those kinds of things and projections, and so I learned how to do things like calculating our ally return on investment and rough orders of magnitude and all those documentations that you hate and I brought all that with me after the fact most doctors don't have that training, and so if you don't have that training, what I suggest that you do is hire somebody that does or get it, so go get a business you'll go to some business school takes some night courses get some training read some books get quickbooks find some places that will help you out and there's um there's something specific places that will help you out so one of them the government actually when you file for your limited liability corporation status or s corp when you're getting your alien numbers they have websites that will train you on that process the irs actually has classes that will help you out you should take those if you don't have a c p a professional photographers of america people has a whole class system it's a studio management courses that tells you about the business and the principles of this it's well worth it their magazines like pgn and picture magazine that have real things there's another magazine called how that I love how h o w that talks all about self promotion and this is for graphic designers but the disciplines across with no problem so check out how magazine listen to planet money on npr very important to listen to on the media npr that's a radio station for those of you are unknown national public radio so listen to those podcasts get some education the other thing that we have around us is we have a board of advisors it's an unofficial board of advisors so we have some we have our epa that firm that we meet with we also have several people that own their own businesses and we have a guy that has actually several that are have their mbas and so we ask for advice and feedback on some things we don't share specific numbers with them we share some high level strategies and stuff and they help us out so my spiel is this is an entirely different education that you should get or hire somebody else that has it if if if it's not available to you all right now questions questions georgie would like to know how do you calculate the price when the customer wants to buy the whole copy? Right? Okay, um we never ever sell the whole copyright we just don't do it. So what we do is we grant a, um unlimited lifetime license and we grant exclusive usage and normally that is a huge number huge and so what we do is here's how we say say okay, so alan says I just shot my whatever on I want the copyright, I would probably say, well, I don't think that's what you mean I think what you mean is you like exclusive lifetime rights to the images you want to use them you know what anybody else to use them and you want to use them for life normally that solves the issue and we say, okay, we'll do that and all we do is we increase our licensing rate up by a couple notches and we get a little bit higher number um depends on the scale but usually will double it that's normally what you do um we wouldn't double it for a million dollars to sixty but we might depends on the client. Um but if alan says no, I want to own them then we charge that will say okay, we'll do that it's going to cost you six hundred thousand dollars we just throw out some figure that is so ridiculously large that they're like that's insane I would never do that were like no, we have the same solution for you its lifetime exclusive rights and here's the real price that's what you want um really, the people that ask for that it's not enough advertising agency usually it's something that's new to the business um we're really sticklers on that we rarely rarely ever, ever do that. I want to say we never do it, but I can think of my my had one instance where we've done it recently. So yeah question from erroneous is if a client has an initial media by, say of ten thousand dollars and you charge x percent if they subsequently want to use theo I p again do you recharge the license costs and if so, do you calculated again based on a new beat media buy or does the license at first by cover all the uses at that level of media by perfect question. So exactly we had he has a right so client says here's what? I'm gonna do it in two hundred thousand dollar media buy and we say, okay, here's, your rate it's, whatever thirty thousand dollars you say thanks and they and it's it's written you have the rights to publish these in this newspaper during this date you have in caps during this time at this door and this region in this city and this state at store ten twelve fifteen it khun b on raps on six cars for this amount of time is extremely specific and then after that time they come back and go, you know what the car wraps were really working for us and we want to keep those in caps up and we really want to leave these in our store for a long time. We'd like unlimited usage rights, etcetera. Yeah, then we re calculate that and then get a new licence fee. So the thing with licensing is residual income. Residual income is key to your success specifically when you're trying to figure out how to pay for your retirement if you don't have residual income uh, you are only paid for the work that you do and what you want to try to do in stock photographers have done this for years for years and commercial photographers is you want to build a library of work that continually pays you money and so that's how you grow your income is you build a library of images or videos or whatever that's paying you money over time and so read the long tail that is a phenomenal book. So um yeah, we written by chris andersen thank you of wired magazine so kelsey used to work for me so that's how we know chris anderson the long tail so it's like that a phenomenal process. This is how itunes annapolis made all their money it's how it works but the principle is you're gonna make a lot of money at first not so much money but you gonna have a lot of these different things and those are going to add up over time. So in the future you have all these very low paying things but they stack up and those pennies add up and when your time to retire you have residual income coming in and so that's why licensing is so important to commercial photographer because that's how you pay for your old age more questions we have we have a few minutes? Yeah, okay, syd valerio would like to know how do you deal with it when your clients still continues to negotiate on your overall estimate. We continue to negotiate. And so what we do is we'll, um, watch pawn stars guessing pawn stars that's sort of how we we do this is on history channel. So what we do is we negotiate very similar to the guys on pawn stars will say, uh, here's our estimate based on real costs, and somebody might come back and say, oh, no, we want to we want to pay ex. Well, what we're doing is the only place that we really have any leeway is in our markup and in our licensing as the only place that we have to negotiate. And so we also know what other clients are coming in and we know what priorities we have. So if we have some other client let's, say this one, the total charge say the total profit on this one is ten dollars, okay, and a total profit on this one is twelve dollars, and these guys are negotiating with this and these guys, they're not ok. We have two competing clients. They weren't the same week, uh, way have to determine which one of these guys is going to be better for our overall business because your clients will help you get more business. That's an important thing to understand so let's say these guys they're not so important but we'd really like to work for them these guys aren't existing client that we worked with for years and we have to maintain that that relationship will these guys are saying no twelve is too much how about eight? Well, we know we can't go to eight because we could make ten so that doesn't make sense for us we'll come back and we'll say no twelve is good but we could go to eleven well no how about eight fifty nope eleven is it that's our number? We know our number because we've done all the math and once you do the math it's easy to negotiate because you're not guessing if it's right or not you do you just know so that's how we deal with it. So another question is c I lost it for saying um from philip rawson when travel is required for a job, how do you calculate an ad on the related costs? Is there a different markup method for this type of cost of doing business? Some some photographers I know do mark up travel fees we don't we just keep receipts and we actually show our receipts to our clients we do that is part of our integrity principles so we want to tell people we're not overcharging you we usually show into that or most companies require receipts that's more often than not so they'll reimburse you so little say hey, for example creative live show us your receipts and we'll pay for you know your burger that you had an airport but no receipt sorry that's on you so m s nolan would like to know how do you handle a situation where client uses your images that they did not have permission to use? We have lawyers so we, um we have we don't have lawyers we have lawyers that we can hire and so we have a season two s'est letter that um you know, if somebody's using we have this all the time we have people colleges, universities still content and high high rate I hope that nobody is watching this in a college class that they've paid to attend but yeah um colleges across the country still uh workshops and dvds and use them in classes which is highly illegal please don't do that. Um so what we do is usually we find out from students said hey, I saw your work when I was attending you know so and so state university and I took a photography class and he showed your videos for the semester and then we okay, so we asked our lawyer we get a cease and desist letter and that goes to the university or the individual and then um they have to quit so we're we're not into suing people we just wanted teo you know stop taking advantage of us so we've never sued anybody don't think we ever would unless they just really blatantly did something so we have, um that's how we handle it we send a cease and desist if it continues, which we have right now we have to think teo two individuals that were still conversing with this will say that they in trademark violation the little form letter isn't working with them so we have to measure is it worth actually paying a nutter ni four five hundred dollars per hour teo write another letter to call them and then to get back to us because it could probably cost us six or eight thousand dollars to get people to stop using our name, but these people aren't actually profiting from because no one knows who they are and I can't tell you because I don't know where they are but that's another decision is it worth it for us to shut him down and usually it's not, but we will find you I will conquer you if I have to okay, a question from uh lead song it's just a practical question how do you keep track of all the licenses that you have out we have, um quickbooks we have kelsey we have, um there's a thing that we have so we have a database of aa lot of things but one of them is the licensing for us it's sort of easy because we have we don't have many, many small clients we have like two or three large clients and so for us it's we'll have to keep track of those um and our clients are really good. Um they normally keep track for us. I know that seems a little naive, but, uh, these are companies that if they took advantage force we would sort of know and it's sort of like, um, your photos in this project's they turn into your children and so, you know, when it shows up somewhere it shouldn't, you know hey, that's not right don't describe them, but, you know, and so we have automated searches that go out and every day we look and say who's using the name snap factory, mark wallace, digital photography one on one and a number of other keywords and we have automated searches and we're constantly scouring to see where are people talking about us? In what ways is our corporate identity still positive? Have we expectations? Is somebody abusing us? Are we abusing somebody else? We have a constant, you know, pulse on it is best we can with the internet feels about us and if somebody is taking advantage of us so that's how we do that josh has a question you register your images at the copyright office in batches of to prevent against so, um we register not all but we register things that are usually national ad campaigns and most we should register all but honestly we don't and so um diane does all that she takes images and she sends him in batches on cds to the copyright office and it takes months for that stuff to come back and actually at the airport on the way out we discovered that there's a new site uh that you can do this all electronically so I don't even know much about it. Michael and kelsey and diane feared it out while we were getting starbucks sky harbor only out. So um but the stuff like the materials that for this workshop they have all been submitted or we'll be at the end of the class because their copyrighted we know things that have high potential of being reused inappropriately way protect ourselves yeah, but model portfolio probably not. So mars is about a hundred more questions? You have a question? Yeah uh so when you send out your quote or your invoices uh do you separate your licensing itemize the production cost bring your profit into your creative fever? How do you separate all that stuff for the client um we separated at several levels man I feel like tomorrow lackey check that out um take that lackey so I am uh by the way she stole our idea she wear goingto have a cool big board has all kinds of stuff written on it and workflow for this class and then we saw that she had the cool work thinking like a camera so I tweeted our texted I'm like yeah you're still my idea uh when she's awesome or friends with um anyway so uh how do you say divide all that out so hearsay and police online please give a shout out to tamerlan key she's a good friend of ours tell her that I care we're all thinking about her so the deal is uh we normally have a line item that says one uh mark's day rate two million dollars all right it's a million it's not teo it's a day rate and it's nowhere near that um so after that we have it depends on what it is well let's say it's your frog shoot right? Is that what we're shooting frog then we have um this this by the way let's make it something that's more realistic right? So let's say it's uh this isn't the actual number okay let's say it's uh six hundred dollars right now if you want to know what this number is hire me you'll find out so say six hundred dollars then uh we have uh we shooting in the studio yes, we are studio rental is it at my studio? No, not big enough we're gonna get lost nineteen which is a studio in north phoenix they charge is three hundred dollars an hour how many hours we're gonna be there with ten hours minimum was three thousand bucks. So three grand all right, I don't have the gear to do this I do but I have to pay for that gear so I'm charging you for it so there's a gear rental even though I own the gear I am charging you to rent it from me. How much? Not much because I like you one hundred dollars I haven't told you something because it's gonna break and have to replace it. Okay, we got that then preproduction costs do we have some meetings? Yes, we did. How long did they take? They took half a day. How much is that? Three hundred dollars. How do we know half my day rate was kelsie there? Yes, she wass that's not the right amount then I gotta pay kelsey salary so we up that a little bit was michael there? Yes, he was there gosh now had to pay for two people that were there so guess what that preproduction day it just went up to six hundred dollars client is me they're going to say what the heck that's a half day that's a full day you're charging me six hundred dollars why is that because two other people were there that's why we'll go that's the deal so we have that we'll have licensing thank you john c terms and conditions that is written on the invoice licensing I don't know what it is on this one but let's say it's sixty dollars see terms and conditions that invoice goes out with a big document that says here's what you're buying here's the licensing that we've agreed on its this its in writing very specific and so after that's done if they say no I want more we can say these air connected you change this document therefore we're changing this that's the that um we have a model fee normally if whoever model shows up they're charging this for a commercial shoot twelve hundred dollars for the day or six hundred dollar whatever it is we're going to mark that up I want to make a profit off of that so the modeling fee whatever it is usually you know whatever I'll say three hundred dollars so that's uh that's a it's a hidden market we don't tell them we're marking that but we are if we had to rent gear say hi to rain gear and it cost me one hundred dollars well this is going to be one hundred fifty dollars I'm gonna market up I'm marking up everything because I have to make money and I know that sounds selfish, but we have to wear those air normally that the kinds of things that we would have you might have craft services, which is food um any kind of proper wardrobe stylist makeup artist is something I didn't put on here so you'd have a makeup artist on there, etcetera this all goes out as an estimate there's your estimate okay, so I send this to you I don't know what this is in my head somebody else could add it up but it's money, right? It's x dollars x dollars right there it is. So I come back to you say it's x dollars to shoot your frog and ugo it's crazy too much I need you to negotiate that I don't want to do that. Okay first let's make sure that we're shooting exactly what you want because maybe scale things down uh, no has to be this I think you just eliminated my ability to negotiate studio gear, rental preproduction model fees and craft services costs that's why we we'll put those out there because we can say, hey, we have wiggle room on these things and if you don't want to pay that much, this is where you can change the amount that you're paying us and you say no, it has to be super frog whenever I know I'm saying this is stupid but super frog um somebody please make a shirt says super frog um and yeah, I know frog is just sort of there you say no, this isn't gonna work okay, well let's talk about your licensing are you still doing level block yes, I still am. Okay, give me something to help you out. I give you nothing. All right? That's the number I can't do it all right, thanks so much. It's been good, right? But if you say no, I can give you something I realized these they're sick set costs um you know what let's let's do no model let's do whatever we you start saving money or if I know that it's a long term relationship I could go you know what? I have a mark up here and this is why you do a market not only to make money but to make future money. I marked this up fifty dollars. I just saved you somebody there, you know, I know I khun bite it a little bit on this because maybe when josh hires me for his cars I'm going to charge him a little bit more to make up for the money I just lost there so that's going to be four hundred dollars and I know josh is loaded and he's got a big corporate, you know, presence behind him, he's not gonna blink when I charge him a thousand instead of six hundred, so I could do that. And so and this, I think, is why people never discussed this, by the way, is they don't want people to know the little manipulations that are going on behind the scenes. They don't want people to know the numbers, and that they're marking stuff up and cancelling stuff out. But that's, stupid, everybody does it. Every business does it every business, so go to any retail business, negotiate on price of shoes, and I bet you they'll negotiate with you.