As I was reading THIS thread, it got me thinking about the many photographers who discount their services for various reasons. The last time we gave a discount was about 3 1/2 years ago and it was a mistake... but not for the reason you might think.
In this industry, there's a lot of chest-pounding from successful photographers. I'm sure that I've probably done it myself at some points. Many will advise things like not dealing with red-flag clients, not giving discounts or many other things that they do because they're successful enough that they can. However, I'd imagine that many reading this are like we were in our first few years: just trying to get jobs.
It's for this reason I wanted to go into why giving discounts is a bad idea. I totally do believe that it usually isn't a good idea from an 'happiness' perspective, but I wanted to at least lay out why it's bad from a financial perspective.
So, let's use the following fake example:
You have a package that is $3000 and includes 8 hours, engagement session, a DVD, online gallery and maybe a few other things. So, on this package your costs SEEM relatively low.
I'll be the first to admit that when I was starting I looked at something like that and honestly thought that I was getting $3000 and only spending about $5. But I think we all realize that this isn't the case...
So, out of that $3000, let's plan to pay for a portion of the following things:
So, after that, let's say that the we're left with $1000. Seem low? Check out TRR's post on this topic or the PPA benchmarks he mentions within there. I know many of us have the tendency to think that we run our businesses efficiently, but I'll be the first to admit that I do a poor job of tracking some of the minute expenses that really add up.
So, we have our $1000 profit. That' covers the following:
-Email consultations
-Meeting Prep
-Meeting
-Contract signing
-E-session Emails/Prep/Travel/Shoot/Edit/Blog/Upload/Mailing
-Wedding Emails/Prep/Travel/Shoot/Edit/Blog/Upload/Mailing
-Any other things that take your time
Ok great. That's done. Now, let's talk about what happens with a discount. Let's use the thread I linked for an example. Let's say we decide to give a client $500 off in exchange for not editing the photos. Now look back through those two lists and lets find all the things that would be affected by giving the $500 off.
On the first list we have: taxes, credit card fees. Both would be slightly lower
On the second list we have: Edit Time
The important thing to note here is that everything else in that first list is a fixed cost. That means that of the $2000 we have in fees and taxes, we'd only be saving approximately $100-$150 by giving the discount. So, rather than keeping $1000 to cover the time of all the things in list two, we're now keeping about $600 dollars.
The trap we often fall into is that by thinking that a $3000 package costs us $5 to perform, we'd have no problem charging much less. In reality we should be thinking that a $3000 package nets us about $1000 for XX hours of work. By giving a discount, all we're doing is cutting our pay and our hours.
We had an engagement session that paid a lot better than other sessions before it. Clients paid for the session, they bought prints, they even bought a canvas.
Except that as I got ready to shoot a freaking' ring shot and asked my wife for the 100 macro... stuff got tangled, fate intervened and the 100 2.8 ended up on the floor in pieces. Cost to repair was too close to rebuying so we rebought.
That night and for the next two days I edited the photos to the best of my ability (chick had a serious skin condition and I did my best to minimize it in camera and then edit it in post) .... knowing full well that at the end of the day after all was said and done I'd worked for maybe $6 an hour.
I agree the small stuff that we get nickel and dimed on adds up.
People who have been at this for a while will understand exactly where Tony is coming from. Just because we only actually shoot a few hours a week does not mean we are not working the rest of the time. I teach as well as do weddings and I spend 4-5 hours everyday doing business type stuff, whether its emailing, phone calls, submitting prints to the lab, organizing receipts etc.
That all adds up.
I share the "hidden cost of doing business" viewpoint with you Tony.
oh and you might want to edit your post it reads funny in a couple places due to grammatical and typographic errors...
Evan Baines wrote:
The mistake you are making Tony is that you are thinking of is like its a business and not like a hobby that happens to cover its costs sometimes.
This is kind of what I was contemplating as well. Non full-timers likely have a bit of a different perspective on the matter. I would assume that a lot of newer photogs who give discounts and don't charge as much as they should are doing so because they want to be able to just cover the cost of the gear they have/want. Anything on top of that is gravy, as far as they are concerned.
I totally agree that running a business like this is not sustainable when giving large discounts, etc. However, as a 'hobby', even a serious one, the financials sometimes take a back seat to other factors.
You are going to have them regardless of whether or not you shoot 10 weddings or 30 weddings. So to offer a discount on one or two weddings is not really going to negatively affect your bottom line in a meaningful way. I would still rather have a discounted wedding in hand than no wedding at all.
Nice post Tony, but Jim brings up an important point. Looking at your true expense base and understanding a basic balance sheet and cash flow statement is necessary to properly assess your business. By no means am I advocating discounting, but by performing cost accounting and understanding your fixed and variable costs may highlight what activities and what level of volume are the proper mix for profitability.
Jim,
On the surface you would seem to have a valid point but I still elect to disagree with you.
Shooting a wedding is an inherently VERY RISKY activity. You need copious backups, cErtain moments are either captured or they're not... No do-overs... Someone could get Hurt with your equipment, it's more likely that someone might damage your equipment etc etc etc.
You need to be compensated for these risks. Otherwise you might as well book a family portrait session instead. Nobody gets sued for being an hour late to a portrait session.
Instead of discounting offer reduced price upgrading
You need to include Opportunity Costs in there. When you decide to shoot a wedding one weekend, you are foregoing any other plans you may have. That means no day at the beach, family time, kayaking, game playing, or sleeping in. I think far too few people take this into consideration - especially part timers. When you've been shooting for a few years, it takes a bit more money to cancel other plans and get you out of bed.
This is also why we gladly take shorter weddings during the week. I'd rather shoot two three-hour weddings during the week than an 8-hour wedding on the weekend. I'd also rather charge more per wedding and take on fewer each year.
(I cross-posted this on my blog because I'd like to hear what those folks think too. Probably against the rules - mea culpa)
jcolman wrote:
You are going to have them regardless of whether or not you shoot 10 weddings or 30 weddings. So to offer a discount on one or two weddings is not really going to negatively affect your bottom line in a meaningful way. I would still rather have a discounted wedding in hand than no wedding at all.
You are referring to general expenses vs. COGS. It is technically true that the general expenses are fixed. This line of thinking is totally flawed in the long run, however. Discounting absolutely damages the bottom line, as well as the efficiency of the business and the sustainability. It does damage the business in massively harmful ways that are very evident over time. I speak from personal and research-based experience. ]b]My advice is to NEVER discount to get the wedding today. Take that Saturday you didn't book a wedding and improve your branding/marketing/value proposition in order to get the right wedding - that
s the sustainable path forward.
What I am about to say is mean, and I understand that so bear with me. If you don't care about profit as much or more than your "passion" you are a rank amateur.
I'll let the hate sink in for a moment...
The root of the word amateur (ama - amore, etc.) means to "act for the love of" meaning that you do the thing for the enjoyment of doing it. Amateurs ruin it for everyone else. Amateurs are way more concerned with keeping the photographic supply industry in business than they are about keeping professional photography alive and respected. They say passion is a substitute for professionalism. Bullshit. And yes, I am saying that if you don't charge a sustainable and profitable amount you are unprofessional. Professionalism encompasses a number of qualities, and I'm here to draw a line in the sand and say profitability is one of them.
If you are an amateur, then embrace it, be one, and take photographs FOR FREE. If you aspire to being a professional, stop baby-stepping, waffling, and pussyfooting around the issue and charge accordingly.
Now, let's put aside the meanness for a moment and look on the bright side - you can charge profitably tomorrow if you want to. The resources are out there to understand how to hit the right numbers and calculate everything correctly (if you can't find them let me know and I will point you there). Its simply a choice to do it. But, stop hiding behind passion. Passion is free. Passion has absolutely no value in this world without follow through and execution. Following through and executing are EASY. They are also scary, but nothing worth doing is without risk.
qwyjibo wrote:
Nice post Tony, but Jim brings up an important point. Looking at your true expense base and understanding a basic balance sheet and cash flow statement is necessary to properly assess your business. By no means am I advocating discounting, but by performing cost accounting and understanding your fixed and variable costs may highlight what activities and what level of volume are the proper mix for profitability.
The problem with this is word of mouth. Word gets out that you discount. Other
clients request discount. You deny. You get bad word of mouth.
All good food for thought. But let me present this in a different way,
I spent the last 18 years working for a very successful video production company. We charged more than the average production company in our area because we were one of the best. We had a lot of clients and we made a lot of money.
But we would often discount our prices during slow months or for trusted clients that needed a break on a project. We would also discount our prices at times just so we could land a new client. We were very successful. We were passionate about our craft. Discounting our rates was a business tool that we used when and where necessary.
The company has been in business for over 30 years while many of our competitors went out of business. This is the lesson I learned and this is why I will offer a discount at times.
jcolman wrote:
You are going to have them regardless of whether or not you shoot 10 weddings or 30 weddings. So to offer a discount on one or two weddings is not really going to negatively affect your bottom line in a meaningful way. I would still rather have a discounted wedding in hand than no wedding at all.
This is exactly the issue that trips me up. While I only discount very, very rarely, I still entertain the temptation of it all the time. When it comes down to it, I will ask myself would I rather be sitting at the office on that random Thursday afternoon or that Saturday a month or so away when nothing is on the calender, or would I rather work for 4 hours on this small wedding with another 4 hours editing and 1 hour for meeting with the clients and have an extra $XXX after taxes in our account? Let's say it was $900 after all taxes are taken out, and thus it would be an even $100 per hour for the total of 9 hours. Would I rather be sitting in my office answering emails, calls, working on other things or pulling in clear $100 for those 9 hours? I am fully aware of all the other costs, but as jcolman said....the gear, insurance, office space, et cetera are technically all ready paid for whether I take this job or not.
I know this is not the right way to view it...but there is a side of my brain that has a hard time letting this go.
lisy78 wrote:
Jim,
On the surface you would seem to have a valid point but I still elect to disagree with you.
Shooting a wedding is an inherently VERY RISKY activity. You need copious backups, cErtain moments are either captured or they're not... No do-overs... Someone could get Hurt with your equipment, it's more likely that someone might damage your equipment etc etc etc.
You need to be compensated for these risks. Otherwise you might as well book a family portrait session instead. Nobody gets sued for being an hour late to a portrait session.
While that is totally true, it again is one of those things that is very hard to keep in the front of my mind at times. I have never broken anything over $150 at a wedding....I have never been injured or had someone else get injured...I have never been sued or had anything other than trivial issues with clients. Yes, I know it can happen (especially the gear breaking), but I ever wonder how many people here have ever had to deal with the injury issue or being sued.
Yeah, I know I know...this is not the right way to view it. But...the mindset is having a hard time being eliminated.
