Mark Up Factors On Products

 

Creating Your Ideal Photography Business

 

Lesson Info

Mark Up Factors On Products

Cost- based pricing. This is where there's a right or wrong, yes or no answer. So this one's the easiest way to start. It's based on the relationship between pricing and the cost of running a business. So whatever your cost of running a business dictates, how much you have to charge for your products. So, the higher your cost, the higher your prices have to be. It's very simple, it's cut and dry, and sometimes when you know this information, you can charge into that sales room and say, "This is what you should do," and it works, sometimes. Most of the time. So here's how it works. You have something called a markup factor. This is probably something you guys have seen in a retail market somewhere. So your markup factor is a number by which you multiply your COGS, your cost of goods sold, to determine what your price should be. So what your COG is, your cost of goods sold, is how much it costs you to make your product. So if you're talking about an 8 x 10, let's just say, for easy math,...

it costs you $10. By the time it's shipped and all of those things. So if your 8 x 10 costs you $10, you multiply it by a specific number that's relevant to your business, and that tells you how much your price should be. We typically see in retail, everything doubles. You multiply your cost of good by two. So, in the photography industry, there is a magic number. And it is typically at least four. So you want your cost of goods sold to be about 25% of your gross sales, the total amount of money that you bring into your business. So as you're thinking about calculating the price of your products, how much it costs you when you buy them, you take that number, and you multiply it by a markup factor, which I recommend to be four, and that's the minimum that you have to charge for that product. Did you hear the minimum part? That's really important. Because, remember when we talked about demand-based pricing? That's when you can multiply by bigger numbers. So as you set yourself apart, you can start multiplying by bigger numbers. So, let's go through this cost of goods. For an 8 x 10. Let's say that you have print, mount, finish. We're gonna make a really nice 8 x 10. It costs us $7, it costs us $2 for shipping, and $1 to put it in a pretty package. You guys will see as we go through this workshop, I like to have happy math, so that we can have easy numbers to work with. So we're gonna say that an 8 x 10 costs us $10. Alright, so, now this guy, right? How much does this one cost? Cost of goods, what is it? Where do you go with this one? We're gonna just draw a line here. We're gonna say that you're gonna put it on some kind of disc or jump drive that costs you about $4. You're gonna put it in something pretty that costs you $1, so your total cost of goods is $5. You might have a $40, beautiful disc that you get from a custom lab. That's all up to you. We're gonna go with happy numbers here. So we're gonna say that that digital file costs you $5. So when we go to cost-based pricing, what should we do for an 8 x 10? $10 times the magic number, four, so we have to charge $40 for an 8 x 10. Same thing. Cost of good for a digital file. Cost is $5, we multiply it by four, $20, right? I hope all of you are pulling out your hair right now at home. What? You can't charge $20 for an 8 x 10. So digital files should be half as much as 8 x 10s, right? (gasps) I hope all of you are cringing right now. Remember that life cycle of an image that I told you about. When you sell a digital file, that sale is done. Period. Forever. When you sell an 8 x 10, they might need four 8 x 10s. One for the grandparents, one's for you, one for the office. So when you sell an 8 x 10, you're selling one unique thing. When you sell a digital file, you're giving away the farm. Okay? So how do you deal with all this? This is where it gets so complicated. So there's our numbers. This is our starting point. But then, what do you do with this? Can you make a sustainable living like this? If you did a portrait session and you created 30 images, and you charge $20 each, and that was the whole sale? Wow, that would be really hard. You wouldn't be in business very long. So, there's this other thing called work. Labor. There are all these other things that go into creating these things, it's not just your hard costs. And this is where things get really tricky when you're both a manufacturer and a retailer. So when you think about these things, for either one of these, you've got phone calls, you've got meetings, you've got driving, you've got shooting, you've got editing, selling, processing, all of these things. Archiving, production. Time-wise, they take the same amount of time per image. So we've got to figure out a way to deal with this whole time thing. Because it's a big deal as a manufacturer.

Class Description

"If you're struggling to figure out the business process of photography, this class is one of the clearest and most concise I've ever seen. If you're experienced but the business side and pricing are eluding you, you will find clarity here. I own at least twenty CreativeLive courses and hands down, this one explains pricing and strategy better than any others I've purchased or watched live." - Julie, CreativeLive Student 
 
Join Kathy Holcombe as she shares techniques and strategies to develop the photography business you desire. Whether you’re making the leap from part-time to full-time or starting your very first business, the amount of work can be overwhelming. From what products to offer, how much to charge, how to pay yourself or the legal considerations - start ups often sink before clients are even booked. Kathy will show you the ways to grow your business from the start. This class will cover: 

  • Defining what product you are selling and how much you should charge to make a living 
  • Photography business basics and how to track your income compared to other businesses 
  • How to write and create your business plan 
Kathy Holcombe and her husband Peter built one of the top wedding portrait studios in Colorado, then jumped in an RV with the entire family and began traveling the country full-time, and added a successful commercial division. Together they have built multiple successful businesses and have honed in on the important factors that every photographer should consider when building a business. 

Lessons

1Class Introduction 2How To Price Your Products 3Which Products Will You Offer 4Methods For Pricing 5Mark Up Factors On Products 6What Is Your Per Hour Figure 7What Is The Feasibility Of A Product 8Target Sales Average 9Session Fees Pricing Strategy 10Minimum Purchase And Incentives Pricing Strategy 11Bundling Pricing Strategy 12Pre-Design Pricing Strategy 13Album Pricing Strategies 14Example Pricing List 15Business Basics Overview 16Tracking Product Lines In Your Business 17Track Your Session Counts 18Know Your Sales Average 19Importance Of Data Analysis 20Overview Of Costs 21Professional Photographers Of America Benchmark Survey 22Creating A Vision For Your Business 23What Do You Want To Accomplish 24Take A Leap Of Faith 25Refine Your Vision 26Products That Sell 27Identify Pricing Strategies 28Portrait Pricing Strategy Example 29Album Pricing Strategy Example 30Online Pricing Strategy Example 31Fine Art Prints Pricing Strategy Example 32Packages Pricing Strategy Example 33Sales Strategies Overview 34Portrait Sales Session Overview 35Sales Strategy for Portrait Sales 36How to Present Images to Client 37Sales Strategy for Wedding Sales 38Album Pre-Design 39Marketing: Define Yourself 40Who is Your Ideal Client? 41Who is Your Ideal Partner? 42How to Start a Partner Business Relationship 43Marketing Strategies that Work 44Product Lines: Business Plan Part One 45Workload: Business Plan Part Two 46Sessions: Business Plan Part Three 47Expenses: Business Plan Part Four 48Clients: Business Plan Part Five

Reviews

Lindsay
 

I started my business a year ago with little formal technical photography education. It's hard to admit but I've been winging it, figuring out each small task that goes with photographing a session, editing one, and working with clients as I go. I may be doing things backwards, but now that I feel like I'm more comfortable in those small, specific parts of business, I need to figure out how to make this business sustainable and profitable. Kathy's class felt perfect for this time in my business to take a step back and look at the bigger picture of what I want to focus on and where I want to go (and how much I want to pay myself!). She uses realistic, specific numbers: something that's SO helpful and I feel like I rarely see in the photography community. And she breaks everything down in an organized and easy to understand way. The classes were easy to follow along with and Kathy's positivity and patient manner is inspiring and motivating. The fact that she used to be a school teacher is clear. Thank you so much Kathy (and the rest of the Holcombes)!

Jenny Farrell
 

I am so glad I was able to attend this course in person and receive all the wonderful and practical information Kathy shared with us. I also really enjoyed the connections with other audience members and side conversations with Creative Live peeps as well as the Holcombe family. What an inspiration this family is--lots of practical info, but also a great pep talk to not sell yourself short and get out there and do what you love, but use sound business practice while doing it. Thanks so much for these incredible two days.

Vanessa
 

Fantastic course! Very helpful instruction and how-to guide for anyone considering starting up a photography business. Kathy was an excellent instructor, with a wealth of knowledge and experience. I gained a good understanding of the practical everyday aspects of running this kind of business, and how to create my own vision.