December 10th, 2015
I’ve talked about this before, but it’s super important so it is useful to keeping coming at the subject from different angles. It’s clear a lot of folks don’t understand this. A couple of days ago I did a high-level discussion of all the pricing factors you should consider. Here I want to look closer at making sure your shoot price is recovering all your costs of being in business.
First of all your shoot price has several components:
- Your fixed costs: These are all fixed costs of being in business. It’s called fixed because it doesn’t depend on how many shoots you do a year. Fixed costs are things like your gear, replacing your gear periodically, Insurance, your vehicle, your computer and software etc.
- Your variable costs: These are the costs like gas and vehicle maintenance. They are called variable because the more shoots you do the bigger this cost is.
- Your profit: Not much explanation needed here. You probably want to look at this from the point of view of how many hours you are putting into a shoot on the average so you know what you are getting paid per hour so you can compare it to what you may get doing something else.
So with this terminology here is the arithmetic:
Shoot price = (Fixed costs)/(average shoots per year) + Variable cost per shoot + Shoot Profit
In real estate photography, the variable costs and profit are easy to understand. Everybody understands gas and oil costs. The fixed costs are where everyone seems to have difficulty and people get confused! If you are running a sustainable business (one that will support yourself and your family with over a time frame of years) you have to recover all your fixed costs of being in business or over time you will actually loose money and perhaps you’d better find a different job. When I calculate (Fixed costs)/(average shoots per year) + Variable cost per shoot for me personally the number comes out to $60.86. In past posts and in my Business of Real Estate Photography eBook I call this the cost of showing up because that’s pretty much what it is, your cost to show up at the property before you start doing anything.
When I see someone with a shoot price near what it just costs me to just show up at a property, it sets off alarms in my head. Sure there are variations in cost of living but I live in Salem, OR and even though it’s the capital of OR it’s a pretty rural, backward little town and the cost of living here is literally half of what it is in Seattle where I’ve spent most of my life. I now go out of my way to talk to real estate photographers who have what appear to me to be crazy low prices. Here are the situations I always find:
- They are not recovering all their fixed costs. The don’t include costs like gear replacement every 3 or 4 years or vehicle replacement or professional insurance etc. This means that the longer they stay in business the bigger an economic hole they are getting into. So being in business is actually hurting them economically in the long run.
- They are for, various reasons, not including all or any of the fixed costs of doing business. So they are behaving like they have low or no fixed costs. Reasons I hear are things like a) their spouse has a real job and is paying all the fixed costs, b) they are retired and don’t have to include all their fixed costs or c) they have another real job and are only doing real estate photography part time and don’t have to recover all the costs. In these cases they are picking up some extra money and are able to make their phone ring by just keeping their price unrealistically low.
Even though #2 is not hurting the photographers that do it is hurting all the other full-time real estate photographers in their local market both now and in the future. They are effectively breaking the local real estate photography market because a) they are competing with unrealistic fixed costs and b) they are establishing unrealistic price expectations in their market. Sometimes you can spot photographers that are engaging in item 2 above because their quality is low, but not always. Once a few photographers using low prices like to make a few easy bucks it doesn’t take long before it becomes difficult or impossible for a full-time real estate photographer to recover all their costs in this broken market.