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Find Your Cost of Doing Business with these 4 Steps
I’ve been there: you’ve set up your Facebook page and website. You made cute posts about starting your business. And then it happens—you get your first message saying, “how much do you charge for this, this, or this?
” At this point, you probably have some number ready for them. But what does that number really represent? And better yet, does that number actually cover your bills?
The four steps below will help you understand your costs, determine your worth, and increase your efficiency. Once your know your true cost of doing business (CODB), your business can start to thrive.
1. Gather Those Receipts
The most important step is figuring out how much money is ACTUALLY leaving your hands. The time and effort you put into your work (culling, editing, and sharing your photos, for example) is money, of course, but you never have to pay someone outright for that. That’s why you need to start by accounting for everything that you physically pay for.
A good way to do this is to open up your bank account statements or review the preceding year’s taxes. You need to gather all of the costs associated with your business, find a good way to categorize them, and track them for every single booking.
2. Punch That Clock
We didn’t get into business to give away our free time. Your costs are not just physical things or monthly subscriptions. There are costs associated with things such as driving to a session, snapping away, driving home from that session,
culling through thousands of photos, editing all those frames, doing administrative tasks, and so on. In the end, this is all time you’re taking away from your family and friends. This is VALUABLE time.
So how can you clock and manage this time? First, estimate how many hours you’re spending on each activity related to your business. Then, once you have an estimate for those times, put them to the test.
The next time you work with a client, track the time it takes you to do each task. More often than not, you’ll find that you are UNDER-estimating the hours you work and essentially giving away your time.
3. Set Your Rate
According to the Bureau of Labor Statistics, 50% of photographers make $15.62/hour, with around 10% of photographers making less than minimum wage. Don’t be a statistic. Once you have your hours calculated, it’s time to decide your rate. This is different for everyone and every region, and it’s by far the hardest part of figuring out your bottom line.
There are a number of factors that influence how you want to price your hourly rate, such as experience, style, equipment, schedule, demand, knowledge, and brand reputation. A good starting point for me was setting up a scenario in my head of having free time versus shooting, and then asking myself, “what would price would be worth me missing out on free time?”
This is not the only way of doing things, but it’s what worked for me at the time.
Your hourly rate won’t be set in stone and there will never be a “golden” number, but yours should definitely be above minimum wage. It’s different for everyone and comes down to what you’re happy with. But remember—you are talented, and you need to pay those bills!
I recommend doing a little bit of market research. For example, if you’re a photographer, find other photographers who seem to have the same style and experience as you. Look through those photographer’s websites to see their starting price point. And if you’re friendly with some photographers in the area, meet up with them and try to get a feel for what the market will bear.
It’s important that you don’t devalue the trade in your area, but also that you’re not overcharging your clients. At the end of the day, if you’re covering your costs and earning a rate that you’re happy with, that’s all that matters.
4. Do The Math
Once you have your expenses laid out, your hours calculated, and your hourly rate set, it’s time to crunch some numbers. The essential formula for figuring out your bottom line (aka your CODB) is:
Expenses + (Hours Calculated x Hourly Rate) = Bottom Line
This is the absolute LEAST amount you should be charging per session/client. If you’re over that number? Great, let’s celebrate! But if you’re under that number? It’s time to up those prices.
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