How to be Profitable
This is the part you've all been waiting for. Drumroll! The returns, what can you expect from your investment? This is a big deal. This is when you would go in for a job interview. Okay, tell me how much am I going to make from this job. Right? It's the important part. So this data comes from the Professional Photographers of America. They've done benchmark surveys starting in 2005. They've done three of them, and they surveyed all kinds of studios from across America, and they have compiled what they call benchmarks. And so this is averages based on what has actually happened across the country. They looked at rural studios, suburban, urban, they looked at husband wife teams versus single owners, they've looked at retail spaces versus home studios, so pretty much any kind of data they have extrapolated information from that. And so when you join PPA, you can see a really expanded version of what I'm going to give you, but this is what I think is the really important part of all of tha...
t data. So they broke it down into a home based business, which even though I live in an RV I fall into the home based business, and a retail location. So that's if you have a retail store front. So here's the home data. The average home studio will have $100,000 of gross sales. So what that means, that doesn't count sales tax, because you're just holding that for the IRS or your department of revenue. It means that without sales tax, you bring in $100,000 worth of sales into your business if you're a home based business. If you do that, you should expect to earn 45% of that for your personal salary and wellbeing. So $45,000 is the average salary for a home based photography business. So when you get that question of is this the right job for me, is this a reasonable amount of money for you to earn for the work that you're creating? If you love it, maybe. You're not going to be going out having sushi every night on this kind of salary though, right? Okay, and then these general expenses are how much it costs to operate your business on a day to day basis. So this is rent and advertising and accounting and all of those things. And then your cost of sale you would spend about $25,000 to produce your product, okay? This is what's happening out there right now. Now, there is this other set of numbers down below that are the numbers that are much more preferable to me, and these are the best performing studios across the US. And so this is the top 10%, right? You got to be the best of the best to fall into this category. And these home based photography studios are bringing in $187,000 of sales, okay? They're almost doubling the average. And when they do that, they are earning $100,000 a year as their salary towards their personal wellbeing. This is a much more livable, comfortable wage, right? Probably starting out, this would not be a reasonable expectation. This would be a more reasonable expectation, but there's no reason you can't get here very quickly if you do all the right things. So these top performing studios spend about $45,000 to run their business and about $40,000 to product their product. I want to point out a couple of nuances here. So the best performing studios are keeping 55 cents of every dollar that they bring in as opposed to the average, which is only keeping 45 cents. Okay? How do you think that's possible? Why is there a discrepancy between these two percentages? You would think it would be the same, right? It's not. Remember, money and time have a way of disappearing if you don't keep an eye on both of them. So these guys are really watching their expenses carefully. You only have so many dollars that come in, and if you are careful, the way those dollars go out you can actually take control of. We've had years in our business where we've kept 70% of every dollar that comes in the door. Why? Because I didn't buy a new camera. Why? Because I didn't buy that marketing campaign that somebody called and asked me about. So keep an eye on that. So this is lower. Their general expenses are 6% lower for the top performing studios, and how much they produce their product for is 4% lower, and that comes across in that salary. So basically, they've shifted those dollars to keeping it in their own pocket. That's pretty cool, right? This is why it is exciting to be creative in your business. You don't have to say, oh, I'm going to settle for 45%. No way, I want to keep 60%. Here's how I'm going to do it, and then figure out the path. It's like doing a puzzle, figuring out the path to get where you want to go. So let's talk about retail businesses next. So retail business, the average retail business brings in $250,000 of sales. That's way more gross sales. If you are going to have a commercial location, you have to do a lot more sessions, right? Almost three times, two and a half times as much, but they're making $87,000, $88,000 a year as a salary. So that's double, right? Twice as much money as the average home studio. They're spending $100,000 on their general expenses. This is what it costs to run your business on a day to day basis, and a lot of this money is going towards rent of that commercial location or a mortgage, either one. And then the cost of sale, the amount to produce their product, is 62,000. Look, same percentage though. Interesting, huh? Okay, so let's talk about the top performers, the top 10% of retail locations. $322,000 of gross sales, holy moly, another $70,000. That's a lot of sessions, right? This is going to require staff to help you. This is not a one man show that's running these things. And then look at the salary though. The salary is $100,000 more than the average home studio. So you're working hard, you're managing people, you're watching those dollars, you're doing lots of sessions, but the payoff is a lot more, okay? So it just depends what kind of business you want to run. And when we had our business in our home, sometimes we had employees, and sometimes we didn't, and there were trade offs to both of those things. We did a lot more sessions, we had a lot more gross sales, but I spent a lot of time managing employees, more time than I was willing to spend. And so we actually scaled back from that, because I really wanted to focus on building our business and creating images. So these are all decisions that you get to make as a business owner. This is the really cool part. You get to decide. You don't have to do what I've done, you don't have to do what anybody else has done. You get to do exactly what you want to do, because you are totally in charge. And it's funny, when Peter and I talk about what we want to do in our business and where we want to go, we often talk about things that we've seen somewhere else. And I always have to pull us back out of that and be like, okay, wait a minute. Why are we doing it this way? Is it because we've seen it somewhere else and we think that is a path to success, or is it because it's actually what we want to be doing? And oftentimes, the answer is it's because it's what's familiar to us, and when we step back out of that familiarity and say, okay, what do we really want here, we come up with a very different strategy and a very different protocol. Does that make sense?