getting started PHOTOGRAPHY: THE BUSINESS SIDE
VIVID SPARK © 2010
PASSION + TALENT + BUSINESS SENSE= SUCCESS!
CONTENTS
Portraits + Weddings
Getting Started: The Master Checklist (Stay on Track!) ...................................................... 3 Passion + Talent: Am I ready to open a business? ............................................................. 4 Viability Worksheet #1 ......................................................................................................... 5 Viability Worksheet #2 {Playing with numbers} ................................................................... 6 Market Viability + Customer Profile ......................................................................................7 Technical Viability .................................................................................................................8 Management Viability ...........................................................................................................9 Worksheet #4 Revenue Potential .......................................................................................11 Worksheet #5 Capital/Start-Up Costs ...............................................................................12 Worksheet #6 Business Overhead .....................................................................................13 Worksheet #7 Working Capital ...........................................................................................14 Worksheet #8 Can I afford to open a business? ................................................................15 Worksheet #9 Breakeven ...................................................................................................16 Wrapping up .......................................................................................................................17 Action Plan! ........................................................................................................................20 Resources ..........................................................................................................................21 Page 2
PASSION + TALENT + BUSINESS SENSE= SUCCESS!
Getting Started: Master Checklist DATE
ITEM
COMPLETED
Questions to ask yourself worksheet Viability of the business (this isn’t scary either-just follow the steps in this workbook) Determine your financial + capital needs Creating a positive cash flow worksheet Determine your Revenue Potential (this is the fun stuff!) Estimate your capital/startup costs Estimate your business overhead Calculate your start-up costs + fees Can I afford to start a business worksheet Calculate your business overhead + expenses Calculate your Break Even Point (this is crucial!) Review “Next Steps” Create your own Action Plan!
TIP! Print all the worksheets + this master checklist before you start the workbook so you can record your answers as you go!
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PASSION + TALENT + BUSINESS SENSE= SUCCESS!
You’ve got passion + talent…. Now what? If you’re here, you’re considering putting your talent + passion to workfor you! That’s awesome! This workbook is here to help you figure out if NOW is the time and what the next steps are if it is! Can I afford to start a business? This is a KEY question in our quest to getting you the foundation you need to have a successful business. Take some time to thoughtfully consider these questions. While we will be covering specific worksheets to tackle the numbers, it’s important to simply begin with asking the questions and honestly answering. Am I willing to be a business owner? Sure, you’re great with people, love to photograph people and just all around enjoy what has been a hobby until now. So the question becomes: am I willing to become a BUSINESS OWNER instead of a photographer who has a business? The success of your business lies in this subtle distinction! You must be willing to run a business, like a business to have lasting success. Your talent + passion are necessary too but it is imperative that you consider yourself to be running a business first and foremost. Is my idea viable? There are many factors that go in to answering this question from what is the competition in your area like to what is your personal style and how saturated is the market? Using the worksheets on the following pages,
I’m going to walk you through determining if your unique perspective and location along with other factors will be a viable business for you. Things we will be considering…. Is there room in the market for my business? Will I be able to make a living at this? How much capital investment do I need? Will I be able to maintain this long term? Do I have a sustainable, competitive advantage?
TIP! Tackle each worksheet in order, one at a time. Be honest with your answersthis is crucial to determining if you’re ready to be a business owner. It does you a HUGE disservice if you convince yourself you are because you increase your chances of failure exponentially by doing so. BE HONEST! You’ll save yourself heartache and headache if you answer honestly. Page 4
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Viability: Worksheet #1 SURVEYING THE LANDSCAPE + PERSONAL SKILLS MARKET VIABILITY
TECHNICAL VIABILITY
MANAGEMENT VIABILITY
Who are my competitors?
How many sessions per week/month/ year can I handle? (I.E. Do I want to shoot 100 per week/1000 per year or just 4 per month?)
Do I have the knowledge + skills to manage a business?
What can I offer that they don’t?
Am I technically proficient enough to consistently deliver quality images + products?
Am I willing to get additional training to learn how to run a profitable business?
What is the average pricing for my area?
Do I need to invest in additional training?
What products does the competition offer?
Do I have the skills necessary to fulfill client orders?
Do I have experience in: branding, marketing, accounting, management, website design/upkeep, time management, project management, risk management, PR, advertising, networking and other functional business areas? What areas would I need assistance in?
How many competitors are in my market?
Do I know how to use the programs necessary to edit + deliver images/ products?
Who will be my customer?
Do I know how to use the programs necessary to run a business?
What do I estimate the average customer in my market to spend on my product/services?
Do I have the knowledge + skills to deliver consistently, day in, day out?
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Viability: Worksheet #2 PLAYING WITH NUMBERS!
MARKET VIABILITY
TECHNICAL VIABILITY
Add up all the minimums (session fees plus minimum order requirements) from all of your competition Write that number here ___________
Copy how many weddings/sessions you think you can handle PER YEAR here: ____________
How many competitors did you get numbers from? __________
Write how many weddings/sessions you’d LIKE to do here: ______________
Divide the minimums by the # of competitors in the box above Write your answer here ___________
Take the average spent you found in the box on the left and multiply it by the number in the first box in this column (how many you think you can handle) Write your answer here: _____________ (This is your GROSS REVENUE POTENTIAL-we’ll need this number later!)
This is the average spent by customers in your area
Now take the average spent and multiply it by the number you’d LIKE to do for the year Write your answer here: ______________ (This is your IDEAL shooting Gross Revenue Potential)
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Congratulations! You’ve just finished the first step in determining whether you’re ready to launch a business! Now that you’ve taken the time to answer all these questions, let’s take a look and see what they mean for you.
Market Viability The answers you’ve given here are important in determining whether the market can handle another photographer. By knowing who your competition is, you can begin figuring out where you’ll fit in. If you find that there are hundreds of photographers in your city or county and your style, service, and products will be virtually identical, you’re going to need to consider carefully whether this is the right move for you. Just because there is a great deal of competition or similar offerings doesn’t automatically mean it won’t work-It simply means that you’re going to have to work hard to make sure that your business is DIFFERENT and stands out among the crowd! If you’ve found that the market is over-saturated with mediocre photographers, ask yourself “What can I do better/faster/more brilliantly/ different from everyone else?” What do you bring to the table that NO ONE ELSE DOES?
The goal is to create a SUSTAINABLE COMPETITIVE ADVANTAGE over the competition. You want to create a business that is so unique, it won’t matter if there are photographers on both sides of you! If you need help finding out what the market looks like (i.e. how many photographers are in your area) start with the US Census. The NAICS for the portrait/wedding photography industry is 541921
To find out more about the customers in your area, head to http:// factfinder.census.gov/ and enter in your city, state or county for detailed results. You can use this information to begin to get an idea of the people who live in your area. If your target market is families with children and you want to sell to affluent customers, you’ll want to see a large portion of your community with college degrees or better, owning their own homes and a median household income of over $55,000 (the higher, the better!) Profiling Your Ideal Customer When we talk about “Who” your customer is, I want you to think about where they already shop, what they drive, what music they listen to, what magazines they read, etc. Create a complete picture of who your customer will be! This includes reviewing your competition's pricing and making a
TIP! Review your competitions websites and blogs to ascertain approximately how many weddings/sessions they do per year and multiply that by their minimum rates to find out what they typically earn in GROSS profits. (This does not tell you how much take home salary they earn!)
guesstimate of what the average customer is spending on your type of services/products. To find out the AVERAGE spent in your market on similar products/ services, add all the minimums from all the competitors in your region you can find then divide by the number of competitors you found.
EXAMPLE: 10 photographers in my town, each has a minimum of $100-$500 (combine sitting fee with minimum order) for a total of $3200. $3200/10= $320. In this example, $320 would be the average spent by a client in my area. (All numbers are fictional by the way)
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Viability Worksheet demystified... Technical Viability Volume! So first off, we’re going to look at how busy you want to be. This will factor in later as we figure out whether you can make a living with the volume you indicated in the first square of the technical viability section. If you want to run a high volume studio, it’s going to require a different type of business plan than if you want to run a boutique style studio where you only do a few sessions per week. Either way, you’ll need to do enough sessions to pay your bills and yourself. Also, the number you’ve placed here will be critical for determining whether you can make a living at the average’s you indicated in the market viability section. This is where the rubber meets the road, so to speak. You’ll be entering the number’s you’ve written down on the following worksheet so you have some idea of what you can expect. None of this is guaranteed but it does help you get a picture of what is possible.
Technical Ability Do you feel like you’ve gotten to the place where you can consistently, regardless of conditions, deliver a product in line with your previous work? As a business, you are held to a higher standard both by the client/ customer and the law. It is imperative that you be able to consistently deliver a quality product to your clients. They are paying you for a service and it is your responsibility to deliver. If you feel like you’re not to this level of proficiency yet, don’t worry! If, after completing all the worksheets, you determine you’re ready to start a business with the exception of this piece of the puzzle, there are several options. One option is to introduce a ‘portfolio building phase’ with discounted pricing for those willing to help you out. Another option is to seek additional education whether through a community college, art university, workshops, books or hands on training.
The best option is probably a combination of the two-continue shooting to build up your technical proficiency while learning so you can be the best photographer possible! Delivering Products Okay-hopefully you’re on the right track and feel like you can deliver awesome results consistently. Remember, there are ways to remedy any lack in skills so don’t fret if you’re not there yet. Next, do you feel comfortable in editing the images you create as well as creating products? If not, it’s time to get some additional training before you launch your business. Remember, you’ll only take this step if you determine that going into business is the right decision for you! Am I ready? Only you can answer this question and remember, be honest! Do you feel like you have the variety of skills necessary to get your business off the ground? Or are you willing to invest time and possibly money to gain that knowledge?
TIP! Get learning by enrolling in a community college course to shore up your knowledge in any area from technical things like exposures, apertures and lighting to business skills like accounting, finance and marketing! For learning how to use key programs (like Lightroom, Aperture, Photoshop, Adobe Bridge, ACR, etc) check out http://www.lynda.com Lynda offers fantastic online ‘workshops’ where you can learn how to use a myriad of applications for a small investment of around $30 per month. It is well worth the money! You can learn retouching, post processing, and more!
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PASSION + TALENT + BUSINESS SENSE= SUCCESS!
Management Viability Are you ready? When you think of earning money from your passion, it’s easy to overlook the functional aspects of running a business. As a business owner, you’ll wear MANY different hats-you’ll be the secretary (answering the phone + sending emails) you’ll be the PR person (sending out press releases and going to networking events); you’ll act as the accounting team (reviewing sales, costs, and making sure you have a healthy bottom line); you’ll be the marketing team (you’ll identify your target market and ways to reach them); you’ll be the project manager (It’s up to you to make sure everything gets done in order, on time and in a quality manner); you’ll be the photographer (you’re favorite part!) and so much more.
The 80/20 Rule If you’ve never heard of the 80/20 rule, get ready because it applies to EVERYTHING in business! The 80/20 rule is this: 80% of your profits come from 20% of your clients.
As I said, this applies to just about everything in business-including how you manage it!
When it comes to managing your business, you’ll spend 80% of your time working on the business and making it run and 20% of the your time photographing clients. This is so true-ask any photographer! In fact, this is so important to understand, it bears repeating: 80% of your time will be spent on MANAGING your business while the remaining 20% will be spent on photographing clients. Got it? We all get into this business because we LOVE photography but the truth is, to succeed in this business you’ve got to LOVE BUSINESS even MORE! If you don’t relish the thought running a business, you should consider one of two options: 1) Remain an amazing, growing amateur (there is NOTHING wrong with this!!! There are TONS of photographers whose skill outranks
to do what you LOVE and without all the headache!)
Moving Forward! Okay, so I’m assuming that you’re still interested in running a business and you’re ready to march on. :) On Viability Worksheet #1, you took a few moments to identify what managerial areas you might need assistance in. Now is the time to consider where you can get that assistance from. Do you have friends or family members who may be willing to share the knowledge you need? Or would you prefer to take a small business/entrepreneurial course at a college? If you’re a real bootstrappin’ “like to do it on your own” kinda person, you can head to your local library and learn TONS for FREE!
TIP! Get all the knowledge from a traditional MBA (Masters of Business Administration) by reading all the recommended books at http://personalmba.com While you can buy the books, you should borrow them from your local library-a SMART investment!
many pros but simply desire to keep photography as a passion and not a job) 2) Find an amazing photographer who needs amazing photographers working for them! (This is seriously an awesome option because then you truly get paid
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PASSION + TALENT + BUSINESS SENSE= SUCCESS!
YOUR THOUGHTS SO FAR…. WORKSHEET #3
PROS
CONS
Now that you’ve completed the first set of worksheets, how do you feel? Are you ready to tackle the next set? After looking at this first set of numbers, do you think this will be in line with what you need earn? This isn’t the whole picture yet but you should still have an idea of whether you think this will be a viable option. In the area to the right, take some time to write out the pros/cons of pursuing photography as a business instead of a hobby or for someone else in.
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Revenue Potential: Worksheet #4 YAY! PLAYING WITH NUMBERS... ITEM
ESTIMATE
1
Number of clients in one year
2
Average client investment/money spent with you
3
Subtotal
EXAMPLE 96 $1000 $96,000
Multiply lines 1 & 2
4
Average cost of each client
$300
(prints, albums, product, disc, time to edit x hourly rate, time to shoot x hourly rate, packaging, etc) 5
Total Cost for clients for the year
$28,800
(multiply line 1 by line 4) 6
REVENUE POTENTIAL
$67,200
Take line 3 and subtract line 5 from it to get this number
7
Assuming you want to take home your revenue potential, multiply line 6 by 15.4% (.154) This is the amount you’ll need to pay in self employment taxes
$10,348.80
8
We also cannot forget that profits are taxed! We’ll need to subtract an additional 15% (.15) (For easy math, just use the number from line 8 again! It’s a small overestimation but that’s good)
$10,348.80
9
Okay-we also need to save 30% to run the business We’ve got to cover overhead (like utilities, equipment repair, insurance etc) Take line 6 and multiply it by 30% or .3
10
Okay now for the bottom line! Take line 6 and subtract line 7, line 8 and line 9-enter the final number in the box to the right This is what your salary *could* be
$20,160
$26,342.40
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Financial Costs: Worksheet #5 CAPITAL/START-UP COSTS (AKA CAPITAL INVESTMENT) ONE TIME EXPENSES IN YOUR 1ST YEAR
ESTIMATE
Complete set of back up gear: Office Equipment (Printer, computer, hard drives, off site back up) Business Licenses: Permits: Professional Association Membership fees: Business Collateral (Business cards, website, etc) Logo/Brand Design Initial Rent/Lease deposit Training costs/workshops Product/Album Samples Educational Forums Trade Shows Props, Accessories
TOTAL {ADD THEM ALL UP!}
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PASSION + TALENT + BUSINESS SENSE= SUCCESS!
Financial Costs: Worksheet #6 BUSINESS OVERHEAD MONTHLY BUSINESS EXPENSES
ESTIMATE Advertising
Utilities {Gas/Electric/Water/Garbage} Shipping/Freight Salaries Insurance {Equipment + Liability} Lease/Rent Loan Repayment Packaging Payments to outsourcing Postage/Printing/Stationary Repairs/Maintenance Phone/Fax/internet Email Marketing Studio Management Online Proofing
TOTAL {ADD THEM ALL UP!}
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Financial Costs: Worksheet #7 WORKING CAPITAL WHAT YOU NEED TO RUN YOUR LIFE
ESTIMATE
House/rent/mortgage Car Payment Fuel Car Maintenance Phone/Internet/Cable Utilities {Gas/Electric/Water/Garbage} Insurance Taxes {property & income owed} Groceries Clothing Entertainment Loan Repayment Medical Insurance School Fees Child care Recreation Dining Out Gifts Investment (401k, Stocks, etc)
TOTAL {ADD THEM ALL UP!}
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Viability: Worksheet #8 CAN I AFFORD TO START A BUSINESS? AMOUNT
EXAMPLE
1
Total Start-up costs from worksheet #5
2
Total Business overhead from worksheet #6
3
Multiple line 2 by 12 to get yearly amount needed
4
Total working capital from worksheet #7
5
Multiple line 4 by 12 to get yearly amount needed
$36,000
6
Add lines 1,3, & 5 This is the amount you should have saved to launch your business without borrowing any money. If you have this much set aside, you’ll be able to afford to support yourself while your business grows!
$87,000
7
Now take line 10 from Worksheet #4 and subtract line 5 on this worksheet
-9,657.6
8
Ooh, if you end up with a negative number like our example, you’re going to need to do either more sessions/weddings or charge more in order to support yourself!
$15,000 $3,000 $36,000 $3,000
TIP! Want to play with the numbers to see what will work best? Print out multiple copies of them and play away!
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Breakeven: Worksheet #9 AT WHAT POINT WILL I BREAK EVEN? AMOUNT
EXAMPLE
1
Total MONTHLY Business overhead (total, worksheet #6)
2
Total YEARLY Working Capital (total from worksheet #7 multiplied by 12) In essence, your minimum salary requirement
36,000
3
How much annual profit for growth do you want to earn per year?
$5000
4
How many sessions/weddings will you photograph per year?
40
5
Add lines 1-4
6
Divide line 6 by line 5
1,100
7
This is how much you need to earn per session/ wedding to breakevenThis is your bare minimum to not lose money!
1,100
3,000
44,000
The classic break-even formula Breakeven Point = Fixed Costs/(Unit Selling Price - Variable Costs) Fixed costs=Business Overhead $3,000 in example Unit Selling Price=Average area sale $320 in example Variable cost=$100 in this example $3,000/ (320-100)=13.63 This means you would need to shoot a MINIMUM of 14 (rounding up) sessions/weddings per MONTH if each averages a sale of $320. Fixed costs: These are costs that are the same regardless of how many items you sell. All start-up costs, such as rent, insurance and computers, are considered fixed costs since you have to make these outlays before you sell your first photo. Variable costs: These are recurring costs that you absorb with each unit you sell. For example, when you purchase a print from the lab for $1, then that dollar represents a variable cost. As your business and sales grow, you can begin appropriating labor and other items as variable costs as is standard in the photographic industry.
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WRAPPING IT UP... So, what did you find out? Take some time to review all the info you’ve researched and entered here on the pages of this workbook. Now that you have a better understanding of overhead, taxes, and your local market, are you feeling confident that you’re ready to launch your own business? Remember, this is just the beginning! We’re building a STRONG foundation on which you’ll build an amazing, SUSTAINABLE business. Our goal is to help you set achievable goals and set reasonable expectations. We want you to succeed! Planning + research are an essential part of building a successful business. This workbook is just the first step in making the journey towards that success! Play around with the number’s you’ve written within the pages of this workbook. See if you can find a happy place that you feel is achievable. Work on lowering your overhead to increase your bottom line. I’ve left this next space blank so you can record your thoughts and ideas! For instance, what areas do you need help in? What ways can you address those areas? Write it all down while it’s fresh in your mind!
Notes
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NEXT STEPS... IS A BUSINESS IN YOUR FUTURE? EXCELLENT! START THE NEXT PHASE BY WRITING A BUSINESS PLAN USING OUR “BUSINESS PLANS + STRATEGY” WORKBOOKS! ★Write a business plan with Business Plans for the Creative Heart
★Start your business right with Business 101 Includes worksheets + vital information to forming a business that’s legal! ★Pricing for Profit: Learn how to price to earn money from the start ★Branding 101: Building your brand identity ★Marketing 101: Reaching your ideal customer (and identifying who they are!) ★Selling 101: Don’t leave money on the table ★Paying yourself ★Company Policies ★Product line-up: how to decide what to offer your customers ★Communication is key: what to say, how to say it and streamlining communications ★Workflow Workflow Workflow! ★Contracts: What you need to know in writing your own or customizing a template ★Gear + Equipment: Recommendations, Gear Maintenance + Repair and more ★Words that sell: Filling your website + paperwork with content that sells ★Portfolio Building Mode ★Creating a marketing plan
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USING THE ACTION PLAN When you’re ready to begin the process of launching your business, you can start to set goals + milestones using the included action plan. Simply write down 3-5 goals to achieve per quarter (though you can modify the schedule to meet your needs!) and then set specific steps to reach those goals under each month!
My SMART Goals:
Specific Measurable Achievable Realistic Timely (Smart!)
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Launch: Action Plan!
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
GOALS
GOALS
GOALS
GOALS
January
April
July
October
February
May
August
November
March
June
September
December
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RESOURCES PHOTOGRAPHER’S IN BUSINESS RESOURCES Vivid Spark http://www.vividspark.com Designed to aid photographers in going pro and beyond! Banana’s EDU http://bananasedu.com/ Run by the fabulous Liana Lehman-Hall, you’ll find a great resource for building a successful business through her blog and products PPA http://www.ppa.com A fantastic resource for all photographers!
GENERAL BUSINESS RESOURCES The personal MBA http://www.personalmba.com The Small Business Administration http://www.sba.gov
Great “Starting Your business” links: http://www.business.gov/start/start-a-business.html http://www.business.gov/industries/self-employed/
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