Professional Photographers Of America Benchmark Survey
Let's talk about what's going on out there across the industry. Professional Photographers of America have done three separate benchmark surveys starting in 2005 and what they did, is they collected data from the tax returns of hundreds of studios across the country. And they analyzed those, and they looked at those numbers and they tried to see what was going on out there across the industry. And what they did is they came up with benchmarks of what they were seeing industry wide. And I just wanted to share with you a couple of the numbers from that survey. If you're not a member of PPA you should definitely think about joining because they have all kinds of wonderful information like this. But they also offer insurance, as part of being a member so if you shoot weddings it's a really good thing. But on to their benchmark survey, here's what they found. And they broke it down into home studios versus retail location studios. And what they said is that businesses should be spending 25%...
of every dollar to make their product, that's where these numbers are coming from that I've been sharing with you. And they should spend about 35% of their dollars on general expenses, the running a business expenses. And they should plan on keeping about 40% of every dollar for themselves. Okay? So, what that looks like out there for the home business is, with $100,000 gross sales target, which is kinda what they're seeing right now, $25,000 to make your product, $35,000 to run your business, and $40,000 to pay yourself. So that's what's happening. So you guys are already ahead of the game, because you're here, and you're learning about business. And there are better performing studios out there, that are making more money. But I want you to know as you think about doing this full time or taking this to the next level, this is kinda what's going on. Let's look at retail studios. Oh my gosh, look, the numbers are the same. Wow, that's interesting. Same amount to make your product, same amount to run your business, same amount to pay yourself. Except here's the difference, the gross sales target is way different. And when you're bringing more money into your business, then you can pay yourself more. Now does this mean that I am telling everyone to run out there and buy a studio? Absolutely not. I believe that you can run the same, successful, have the same success level as a retail studio from a home based business. We've done it, so it's possible. So I want you to know what the possibilities are, I want you to know what's going on out there, and then pick your strategy to fall where you want to, and do it intentionally. Okay? Whenever I discovered this, these numbers, that this is what people were doing out there, this gave me power to say yeah, I need to make that salary, that's where I'm going. So if I have to make this much, to make this career worthwhile for me, then I have to bring in that many dollars to make it happen. So when I wrote my business plan, and I said, here's how much time I have to dedicate, here's how many dollars I have to make, here's what I have to do for each session. All the numbers were there, and then I just had to figure out how to make it work. But with anything that's hard, once you set your mind to it you'll figure it out. (laughs) So let's go back and look at some expense data now. So we looked at the income data on a very similar chart, now we're gonna check out expense data. So I've got this in two different slides, because it wouldn't all fit, so that you guys could read. But we're gonna start with owners compensation because it's the most important part, that's why we have this as a career. So, we set up every month what we project to happen, and then what actually happens. This is not a good scenario in a business, to have $4,000 as the goal and actually pay yourself $1,300. This is when you don't get to eat, or you get evicted, this is a big deal. Health insurance, oh my gosh yeah. How many of us have seen health insurance go up up up right? So this is a very common thing that we see. Taxes, well the good news on taxes is, if you make less money, you pay less taxes. So at least that one was in our favor. And then often what happens is the retirement gets totally wiped off the table. So that isn't a sustainable lifestyle. So this is based on the June income data that we looked at earlier. The expense data obviously had to be adapted because we didn't hit the income goals that we had set right? So if we get to the bottom line, the owners compensation total is less than half of what we projected. Now you can look at this and you can feel that in the pit of your stomach and say, defeat. But what's happened when this has happened to Peter and I in our business, which it has from time to time, it lights a fire under us, and we are like, we are not stopping, we are charging, and that's when I pick up the phone, and I call everybody that I know, and everybody that I can, to generate any kind of business that I can. We use that as inspiration to light a fire and charge. And change something and do something differently. So do you see how having these numbers can make a huge impact on how you act in your business? It's critical. So, and then oh my gosh, look at year to date! Holy cow, if we're looking at one month that's one thing, this is a trend in this business. Whoa. This requires immediate action. And tomorrow we're gonna talk about marketing strategies so when you get to this situation, we're gonna give you all kinds of ideas of things that you can do to bring clients in the door right now and change those sales right now. So if you've seen this in your business, hang in there because soon we're gonna talk about what to do when this happens. Because it happens to everybody. This isn't a sign of failure, this is a stumbling block, and this is a call to action to change something. That's why it's important to track these. So now, let's look down here and keep going. Cost of goods sold, $1,100, and they actually spent $1,300. So now, what else is going on in this business? Not only is out owners comp down, our cost of sales is up. It could've been that a lab changed prices on this business owner and they didn't even know it. You know, maybe they missed the email that said oh by the way, we're having a price increase this month. So when you can see that, you can say, oh my gosh if I got a price increase then I need to pass that along to my clients. And adjust your prices a little bit and that'll fix it right up. Okay and then here's the last part, the general expenses. So we've got the employee expenses, this business doesn't have any employees, phew, cause they would be having a hard time paying that. And then overhead, overhead's right what we thought it would be. Advertising, they planned to spend $800, they only spent $200, that's a smart move. If you don't have the money to spend, don't spend it, do guerrilla marketing. Go out there and pound the pavement and talk to people and get clients in the door that way. Don't take out that ad in a magazine or whatever it is that people are calling you saying hey spend money with me. So that was a great business decision here. Administrative costs are down, so they're watching costs here. And education they decided they couldn't do that. So they spent money earlier in the year, and now they're using all of that information and applying it and saving money there. Okay? Alright. So general expense total what's the word? Good, cut it in half. Smart business owner. Good actions. When you know what's happening you can act appropriately. Alright, so, here's the bottom line. A lot of accounting softwares will give you an income and expense statement, or a balance sheet, that has all of the information. So it has how much income has come in, you'll want to compare that to sessions, most accounting softwares don't do that, unless it's photography specific. And then you need to know how much money is going out. Okay? So when you look at this business, you can see they were planning to have a surplus, and in fact they have a loss. This is power. This means I have to change something. So as a business owner, you gotta be saying, okay. I can do this in person sales session I know that I can. It'll work, Cathy told me that it'll work, I'm gonna try it. (laughs) And so you go in and you say hey, I'm gonna try this. I'm gonna shore up my pricing strategy, I'm gonna offer a new product, I'm gonna market to a new client. You know there was this kid's boutique right up the road that really has the kind of people I'm looking for, I'm gonna give them a call and say hey, I would love to collaborate with you, and change things. So here's a math problem for you. Enough with the numbers already, let's look at something graphical. How many triangles do you see in here? A lot. Keep looking. So here, I'm gonna tell you what they are. The more time you spend with your data, the more you're gonna see, just like this crazy contraption here, so as much fun as it would be to leave you hanging, wondering how many triangles are actually on there, I'm gonna tell ya. There are actually 35 triangles. So if you look there are big ones, there are little ones, there are little ones here, they're all over the place. And the data in your business, as you look at it, is going to start to appear before your very eyes, and it's going to tell you things about your business. And most of the things are gonna be great, and exciting, and you're gonna be like yes, I did it. Some of the things are gonna be alarming. And you're gonna be like, okay, I can change that, I can deal with that, I've got the skills, I've got the energy, I'm gonna go after that. Okay, so, on that note, you guys are gonna go have wine Wednesdays, and track your numbers, so you're not that business that's $10,000 in the hole because you're gonna know what's going on, and you're never gonna let yourself get in that position, right? You're gonna track it, every week. What questions do you have?
Do you recommend using only one method of payment for your expenses, like getting a credit card that you use exclusively?
That's a great question. We have a business checking account, and a business savings account. We have a debit card tied to that account and we use that for everything, the debit card. So we don't use credit cards in our family or in our business, it tends to get us in trouble. So if the money's not there, we don't buy it, and that's always served us very well.
First of all, I just, I wanna say thank you. About so much of what you're giving us is permission to try things, I don't know if you guys are hearing this as well, but when you're saying, like, oh okay so you were at a loss, which doesn't mean you're a failure quit now, it's let me figure this out, and that you keep saying, knowledge is power, knowledge is power, that you have to know the numbers, before you know what to do with them. So thank you for that sort of permission. We do have some questions that are coming in from folks at home. This one is from Tereca who said there's a, what if the difference between home and retail studio the owners compensation is less for the retail studio?
I think that was backwards. So a home based business is what Peter and I ran for years, and so we had our offices in the basement of our home, and we had a sales theatre in the front of our home, that was when we were really dialed in. Before that we worked out of a condo, which was also a home based business. We had our offices there, and then Peter met with clients at a coffee shop, and so a home based business doesn't mean that you have clients coming to your home necessarily it just means that you don't have a commercial space that you are dedicating exclusively to business. And so a retail studio is going to be in a commercial location where you go to work every day. You unlock the business, turn on the open sign, and have your clients come to that place of business. And I believe that the home salary average is $40,000, and the retail salary average is $78,000.
This is from Adrian Linear Wooldrop, who says, is asking about business equipment insurance, are those two things separate, liability coverage, where do you factor those things into I guess either here or those sheets that we've been talking about are the cost of doing business?
Yeah absolutely. So there are a couple of kinds of insurance that you might want to consider. The first one is indemnification insurance, which is if you screw up on the job, particularly if you're a wedding photographer, this is critical, it covers lawsuits and legal fees, and takes care of you in the event that there's malpractice. That's indemnification insurance. For weddings you gotta have it. For portraits it's recommended, but weddings critical. Then you also have equipment insurance. And so if you have a huge amount of equipment, and you want to have insurance on that so that you're not just out if something breaks or is stolen, you know. God forbid your camera bag gets walked away with while you're shooting on location. That would be equipment insurance that you could purchase as well. So there are different ways that you can go about doing it. You could go through an insurance agent, some professional organizations offer insurance of both types, and so there's a lot of different ways to go about doing that.
Yeah, go ahead.
I'm in the unfortunate position of working for myself, but also being married to someone who earns a decent living and as such am lumped in with his compensation, so tax-wise, here in Washington State I'm both taxed as an employee of myself, my LLC, and an employer of myself, which is how it was explained to me, by a tax person, and that is I'm taxed at 50% which is insane.
Oh my goodness.
My question to you is, I've been filing already, for many years, and I go through Turbo Tax, I've had accountants just wondering if there's anything that you've come across in years of doing business that might be a helpful tip for all of us in so far as a deduction that's maybe not so commonly known?
Oh my goodness, I don't even begin to claim understanding taxes at all. It's a complete enigma to me, and we have always hired a CPA to help us with our taxes, because there are so many different laws, and it's different everywhere and every business is different, so I really can't address that. I would just recommend going to a really experienced CPA and asking their advice cause it's so complicated. Yeah, I'm sorry I can't help you on that one.
We have another question from Crazy Chick online, who says, I have an in home studio, the perception is that my prices should be cheaper, cause I don't have the overhead of a real studio, do you have any advice on how to deal with that?
Absolutely. Yeah, so I had an in home business, and I had clients come to my house, I had clients come to a coffee shop to meet us, and our sales average was the same for both. And I would challenge that it was probably just as high as a retail location as well. And the reason that I think we were able to do that is because of our entire persona about our business. It was professional, it was the best quality that we could provide, the best quality that anybody could provide, and so, and we went in with confidence, and we said here it is. And when you say, here it is, people say, oh okay. When you say, well, what do you think? You don't usually like the answer. And so when everything, it's what we talked about earlier, whenever you're brand, alliance with your pricing structure, and your pricing structure aligns with your professionalism and the quality of your products, when all those things come together, then you can do whatever you want. And to add another layer onto Peter and I's business, we moved out of this beautiful home location into an RV, we don't even have a house anymore. And we still have the same averages that we've always had, our business is booming more than ever, so I would absolutely challenge and say that it has to do with how you run your business and what you offer and how you convey that to your clients that makes all the difference.