The Arithmetic Of Real Estate Photography Pricing

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:

  1. 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.
  2. 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.

 

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8 Responses to “The Arithmetic Of Real Estate Photography Pricing”

  • One way to analyze the cost is just adding them while they go when they have a shoot. There are tons of apps that can help you. There you have the cost if that is a very big task. In my fixed cost I always add an extra piece of equipment to buy every month. This year I am getting a new body and I’m doing it part time. It’s not that difficult, Lohrman’s book really nailed it when I read it.

  • I do the math a different way. Realistically, the market I’m in is “hot” a maximum of 6 months out of the year, so the figures are going to be based on 26 weeks.

    First question: How much do I want to gross in the year?

    Let’s say that number is $100k

    100,000 ~ 26 = $3850 ~ 40hrs = $96

    2nd question: how long does it take to shoot a house? A: 2hr time slot

    So, the show-up price would be $192, because if I actually show-up, it means I haven’t scheduled anything for the next 2hrs. From there, you can figure how much more you need to complete the assignment.

    And finally, does my initial goal for gross, minus my expenditures, provide me with an adequate income? If not, raise the the gross and refigure.

  • @Kelvin, I think doing the math over 6 months is a good idea in your market, but if I’m not mistaken, I think there is a flaw in your assumption that you can consistently have 40 billable hours per week. In my experience, the numbers of billable hours is less more like 25/30 hours. Also do you not include driving and processing in the cost per shoot?

  • The question of price is very fascinating and I love learning about it.

    In my experience, charging too little backfires in many ways. Clients don’t value a service that is too cheap, and they tend to have us shoot ridiculous stuff like closets full of junk or messy tenant-occupied properties where no one speaks English. You’re also viewed as a commodity and are competing with others based on price alone. Sure, this will keep you busy, but it takes a toll on your body and equipment.

    After doing Larry’s cost analysis spreadsheet, I raised my prices and limited the number of shots in each package. The level of respect I’m now getting is so much more. I feel like they are treating me more like a trusted expert rather than a peon with a camera.

    I feel like the reason why so many people aren’t charging what they’re worth, is because that means venturing out of the photography aspect of the business and go into the scary and rejection-prone world of sales and marketing.

    Along with increased prices, I am developing a high-touch service by being uber-professional every step of the way. This includes up-selling clients with other services such as floor plans and property websites, and following up my delivery with a phone call to make sure they are satisfied.

    I know I’m doing something right when I lose some people who are objecting on price alone. On the other hand I’d be interested to find out if anyone in this group has developed sales best practices and objection-handling scripts. Anyone?

  • Another real simple test is: relying on your spouses income to pay your expenses means you are not charging enough and are operating a hobby, not a business.

  • @Pierre Actually, my billable hours during that 6 months is double. I generally work that season from 6am to 10pm, 7 days a week, and all the hours are billable. It takes a client list of 60-70 realtors to supply me that much work. I have to change my diet to fruit and vegetable smoothies just to have the energy to do that volume.

    I’m also centrally located in my market, so the longest drive is 20 minutes, and I try schedule properties in pairs in the same area. My office is a pole barn building on the same property as my house, tied into the same mortgage. The thermostat is a Nest, a smart device that knows when I’m in or out of the office. The building is well insulated, and Nest reports that the HVAC runs less then 2 hours a day with a target temp of 67. All of the bulbs are being switched to LED, and many of the switches to motion detected. Costco now sells a 10pak of 60Wequiv LEDs for $25. As low as overhead is, it’s all 100% expenced at tax time.

    The next thing to consider is the definition of how the hours bill and for how much, and that is somewhat dependant on the market you’re in. Right now, my hours are bringing in right around $115 each, but I don’t bill each job based on it’s actual hours – I already know how long a given job will take to shoot & process, so I bill out each job as if it took the maximum, and then try to shoot and process for the minimum time. I know I can shoot the average house in 1 hour, and process it in 1 hour, so the goal is to shoot in 45min, and process in 45. Every day, trying for better, faster efficiency. That means a very rigid predictable workflow, looking for ways to save time. PS actions can litterally shave time, and so can LR profiles and development recipes. Shooting a house in the same order, moving lights with fewer steps between moves, and considering which is faster: to absolutely nail the shot in camera may take longer then shooting 3-4 brackets which can take seconds to paint in, and the final result shows little difference between the two methods. My videos are also all identically shot & processed. In that sense, I’m more of a Visual Contractor then a photographer. 🙂 My moderate pricing structure is set for higher volume, because I found my gross does better when I concentrate on volume over high pricing, and my priority is to gross higher, not to make every hour worth as much as possible.

    An analogy might be, which is harder to achieve?
    – to ask one person for a million dollars
    – or to ask a million people for a dollar

    So the bottom line is that I set my gross goal high enough that I can’t realistically reach it, but in doing so, I exceed my expectations. That goal is a roadmap, a basis to predict growth, and it works for me. I don’t buy gear because I wear it out, I buy it for the write-off. Bank acct grows faster then bills accumulate.

  • “I feel like the reason why so many people aren’t charging what they’re worth, is because that means venturing out of the photography aspect of the business and go into the scary and rejection-prone world of sales and marketing.”

    IMO you hit the nail on the head. Great point.

  • Everyone is different in the way they see the world. I throw this out there as an example of something that has worked for us, and may work for others.
    We started our business a year ago. We started with very low “introductory” pricing. My immediate goal was just to improve, get some clients and (within 2 months) cover my assistant’s payroll. IIRC, our pricing packages were $59/$79/$99. As we have grown, improved our skills and developed a good reputation we have increased our prices 4 times, typically at $10 (or $20) each time. We are now at $99, $129 and $159. We have some add ons, like twilight stuff. And it’s still “introductory pricing”.
    Our business plan is to keep improving, and to keep steadily raising our rates as our quality steadily improves.

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