How Much Money Do You Need?
So how much money do you really wanna make? Do you need to make him wanna make let's talk about that? What? Your expenses. Okay, how many sessions do you want to do a month really that's a big question teo asked personally how much you can handle and what you really want to do do you want to do fifty sessions a month? We're teo that's a lot you want to do three to four what's your kind of magic number that's in your head what's your magic number molly week three four week ok, so ten to twelve months. What about you, lou? What's your dream number like a couple of week could be dr stan sorry a couple of we could be like curly. Fantastic. Okay, okay. And what about you? Right now I can only handle for months that's it for a month, form one a week, okay? With in person sales and shooting and investing my time and my client that I want to invest the customer service factor four for four weeks is about as much as four men for a month. Yes, one one per week. And what about you, dana? Wake thr...
ee away. Okay, so he's kind of in a similar mindset, john has something to consider she's only four sessions a month, then we got to really look att I mean, we're going to save everybody but your averages they're going to change based on that, okay, what you need to make in each session what I'm going to do is take you into this break even worksheet in an excel spreadsheet and carrie's gonna help me out here as we get into a cell. This is like I said a little bit different but basically the spreadsheet of such that the yellow boxes air changeable okay, so when I have you do is are you know what I do for any business is I look at these expenses okay? So this is a general spreadsheet it is not all encompassing but what I can do like for my market expenses I can type in how much marketing I'm going to spend in one year marketing it typically should be about five to ten percent of your gross sales, okay, so if you make one hundred thousand dollars in gross revenue, you should be spending about five to ten thousand dollars in your annual marketing costs. Okay, so this is hard to determine when you don't know what your overall revenue is yet, but I'm just gonna go ahead and put like a ten thousand that's pretty you guys want to be a one hundred thousand revenue or more don't you gross gross revenue? That would be nice, right? Okay, so in the administrative an office expenses included it's the day to day operating costs so everything from loan payments, education seminars, office supplies all the little nitty gritty stuff you know the paper that you buy for your studio and also convinces an administration can add up if you guys have done your taxes in the last couple years, you probably know that you spend a lot of money here and you have to be pretty careful so I'm gonna put a conservative number in twenty thousand is a is a pretty conservative number for the overall administration office expenses of your studio, okay accounting and legal and insurance. So these are the liability insurance to pay legal fees, bookkeeping and all that stuff and some of you major your own book but keeping right now. But as you start to get more and more into this process of building a business, you're going to be outsourcing this stuff out, which means you're going to pay for it. So I want you to consider yourself paying yourself for it is that makes sense. So it's important to bring in automobile and travel. I travel a lot in my business because I teach so nine thousand is extremely conservative for me four to five thousand and automobile expenses is pretty good, especially if you're in on location, photographer and driving around a lot using your car and mileage and all that stuff for operating your studio your studio space and overhead and utilities now I rent a studio space okay, so I have a monthly rent I also have utilities for it those of you who run your business out of your home the square footage of your home accounts for a cost there so in your tax structure you can actually read your house back to your studio and pay rent. So how that works is basically you can write off on your taxes if you have a thousand square foot house and you're using one hundred square feet for your studio, you can that's ten percent of the total square footage you can write off ten percent of your mortgage as being what you paid to pay rent for your studio does that make sense and the same thing with your utilities? You could take ten percent of all your two utility bills, so even if you think you don't have rent, you do if you're at your home studio ok it's all factored in your studio maintenance improvements I just put like five thousand dollars this is like new furniture that you bought or repair work that needed to be done somewhere or a new sign that got put up just so you know, random stuff that goes throughout the year and five thousand's a pretty conservative on that equipment purchases I put ten thousand that's actually really low for most studios I probably spent about twenty to thirty thousand dollars a year on new equipment between growth with new computers and printers and camera gear and lenses and lighting and all this stuff that we buy you all know your guilty out there buying stuff at trade shows this is where that costs comes into play. Okay, your salary you need to pay yourself in your business, ok? I know that seems like far fetched for you those of you who are just starting out but the goal here is to create a business that's profitable and functioning in a way that's legit like you want to be a legit business, right? So that means you need to pay your employees and you are your own employees. Okay, so how much money you want? I hear what you wanna bring home in salary be realistic. What for he's like a hundred thousand dollars? Seriously, what would you what would meet your needs at home? How much money a year? How much money a month would meet your needs for your family, molly three thousand a month. So thirty six thousand a year about does that seem reasonable? Anybody want higher? Lower what? It's courtney one cruz meet carla current looking together I want seventy you want seventy? Okay, no, I need it, but I wanted that's what you want, but what about you well, I did just want to break in and ask people are having trouble seeing what the word man there so if you could zoom and julia okay, so you have your marketing expenses administration office legal accounting, automobile and travel studio space and overhead your studio may incident proved mints equipment purchases you see what I see all that right there okay now owner salary carmen said seventy molly said thirty six let's make it forty we'll be on the conservative side we don't need much money just enoughto be happy, right? Okay your benefits I haven't set up here so that automatically changes your benefits are about thirty five to forty five percent of your salary since his health insurance life insurance all that stuff now if you get that through your spouse great, but what if you didn't you gotta factor that it okay? And if you do get it through your spouse that you could just look at that is your taxes and you begin getting what you want to make enough money your employee cost now some of you don't have employees ten thousand dollars a year for part time employees very cheap okay, I'm just going to factor that in because you want to get there right? You'd love to be at a point where you're making forty thousand dollars a year and you have a part time assistant or a part time studio manager or somebody who runs your business or helped you run your business gets all that stuff done and as you grow and take on more sessions you're going to need that okay because and think about this you want to make forty thousand dollars a year that's a hot lot higher hourly wage then you can pay somebody to help you so if you can pass over tasks that you could pay somebody twelve bucks an hour for versace you doing them at your twenty to twenty five dollars an hour salary where does the logic play here it's much more valuable and profitable to pay somebody twelve bucks an hour to do it than for you to do something trivial at twenty five dollars an hour when you could be focusing on marketing and making more money for the studio and shooting follow okay so that means your total fixed expenses are one hundred thirty nine thousand dollars a year that's her fixed expense that is not changing okay this has not even taken account what you pay for products to give to your clients this does not even take account you're variable expenses you're available expenses are on ly you only spend them when your client hires you so things like contract labor cost of goods time to edit sessions all that stuff is variable stuff you're not doing it unless you actually have a client coming to you paying you right that's your cost of sales industry standard state the p p p p p a p p a benchmark survey say that five times really fast suggests that you have a twenty five percent or less cost of sales now is it different if you're in your own home for studio? Yes, however, no, I look at it as if I had the maximum expense is possible because if I do that, make more money, right? So low cost, high dollar, low cost, high dollar, low cost, high dollar that is my mantra. Everything should cost less than I could charge more for it. So I factored in a twenty five percent cost of good, which means point two five, which is my gross park profit margin. The amount of money that I'm gross profiting off a sale is seventy five percent or point seven five you follow all following me. Ok, that means to break even in my studio to break even. I have to make one hundred eighty five thousand dollars in gross revenue a year first song that I wanted to prove my fans like what are you kidding me? I have to actually make that much money that was intimidating as all get out to me and I totally understand I'm going to scare you anymore even more. So studio profit if you're like any other business in the world and you want to make a profit actually in your company of just ten percent that's an additional eighteen thousand dollars in revenue you need to make a year in order to grow your business so here is a number that's changeable how many sessions do you want to do a month don said four you have to average three thousand eight hundred sixty one dollars per session in order to just break even that's a lot procession so what does that mean about how you price your products you better price them to get there okay what does that mean about your package is you have to structure and strategize your packages so that your middle point or your package that everyone buys is three thousand eight hundred and sixty one dollars okay that's intimidating and I feel bad for doing like totally picked on her but she's like like I could do it look at her I love that I love that covered it but also I love these numbers if you want to do ten sessions a month your average needs to be fifteen hundred dollars a session just to break even but it's not unachievable okay it's not unachievable it all but what you realize when you do this is oh my gosh I cannot even look at the shooting burners I cannot compete on price that it's futile stupid exercise they will kill me I will take I will go out of business if I try to match them or compete with them and they do go out of business left and right every day if you're shooting a session for three dollars a session and giving me the digital files you are going to go out of business period end of statement may take a while if you have a husband or somebody or a wife or a family or inheritance that's supporting you great. You could do that all to all you want okay, but you're not going to make any money doing and you're not gonna have a truly legitimate business that's profitable and I want you to be proud of your business I want you to stand up to go yeah, you know what? My numbers are good and I'm proud and I did this and it can survive on its own then when you create systems that allow you to walk away and look at that thing I did cool it's a really good feeling and it's a feeling of constantly build your self esteem and then you can go on to other projects projects and then with that business being profitable and showing good numbers you can start to get loans for things the world looks at you as as legitimate okay, you start building your credit if something happens to your spouse, you can survive you'll be okay and when it comes time to retire you can sell that business for money because it's profitable and the person coming in to buy it will see that and go so I could make this work. Now I have some mixed feelings about artists selling their business because I am the artists were really hard to replicate what I d'oh but there's lots of different models if you choose to have the model where you are just kind of the photographer you have associate photographers underneath you it's very easy to sell and move on like a franchise type thing. Laura novak is doing that with little nest portraiture. She has a franchise called little nest porter and she's banking it right now it's awesome she's got all these other locations and she leaves it alone she's not the artist the other photographers are and it's this boom in business but she's going to be able to retire off that's cool it's really neat to see so yeah, I hate to depress you but that is that is a good thing. Okay, so we can go backto keynotes whenever you guys already. So I think what this whole exercise really teaches you is that it's a little bit of a it's a little bit of a reality check isn't it kind of makes you go who okay that's the number I need to make I need to make is not just a number. I want to make it's a number I absolutely have to make to survive. It puts things in perspective a little bit, doesn't it? Makes you think, oh, my gosh, I I need to get my pricing right. I need to make sure his clients are coming back. I need to make sure I make my numbers at each session, so let's, talk about how you can get there.