Track Your Expenses And Understand If You Are Making Money

August 23rd, 2016

REphotoChallengesThere are beginning real estate photographers that don’t know what the lower limit is for what they can work for. $99/shoot may make sense in rural Iowa but it may not make sense for New York or Southern California.

Over the years I’ve talked to photographers are doing shoots for $30, $50 and $99. The cases where the photographers were making $30 and $50 a shoot were for large nationwide companies. So they didn’t have marketing expenses or post-processing expenses but still, everyone should keep track of their expenses and do the arithmetic or they could actually be losing money.

Beware there are nationwide companies that will try to contact real estate photographers to shoot for them for prices that the photographer makes little or nothing. My experience suggests that there is not enough profit margin in real estate photography to allow a national company to be making money on a shoot AND the photographer doing the shooting is making a decent wage. Real estate photography works the best when the photographer gets all the proceeds from the shoot.

An essential part of being in business (for yourself or as a contract photographer for a company) is understanding what it’s your expenses are. That is, you’ve got a bunch of fixed costs that are the same no matter how many shoots you do. Costs like:

  1. Car payments, maintenance and insurance costs for the vehicle you use to go to shoots.
  2. Marketing costs: Your portfolio website and money you spend on marketing clients.
  3. Taxes: State and local taxes, federal taxes
  4. Business insurance that covers your equipment and liability insurance that covers you if you inadvertently break some homeowners priceless artwork.
  5. Health Insurance: Yea, this is a cost of showing up, in the old day’s employers used to pay for this but most don’t anymore. It’s up to you nowadays.
  6. Computer hardware costs: you are going to have to replace it every three or four years.
  7. Computer software costs: you are going to upgrade Lightroom and Photoshop.
  8. Personal development costs – this is training costs for publications and workshops that keep you current and help you improve your craft.

I don’t claim that this an exhaustive list, you may have more or less. These are just typical examples of expenses that are applicable for most real estate photographers.

My point is any business person needs to carefully track ALL their expenses and understand what they have to do to break even and make money. At first, of course, you won’t make money but understand what you need to do to make money.

 

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9 Responses to “Track Your Expenses And Understand If You Are Making Money”

  • Perfect Timing Larry!
    My assistant and I have been looking over ALL our expenses from Quickbooks, to Tourbuzz to Pixiset to Frame.io to Everything. And the amounts that get out each month to these and many more small and large supporting firms really adds up – for me around $1,600 per month. So we are looking hard at where to cut and what. First off, I will go to Sprout for our video hosting and no longer use Tourbuzz, but then have to pay the fee to my local MRIS to syndicate our tours for our realtors ($750 per year) but that’s almost what I spend per month on Tourbuzz. Then we are considering PASS for our photos gallery and download since if you’re under 100 photos per “event” then it’s free and they also have apps and password protection and best of all 10years for housing the photos – no fee. These few steps should take care of the larger expenses we have. But then Quickbooks, I like it since it tracks EVERYTHING and allows my realtor to pay via credit card or check, but it is not cheep. I run around $300 per month to Quickbooks. But yes, look at your expense to make sure you are actually making money – we did and will be making changes!

    Thanks Larry –

    Cindy

  • @Cindy – Yes, It’s easy to get swept up in the crush of business and not pay close enough attention to accounting. Accounting isn’t very exciting but it’s very important!

  • Highly recommend the app MileIQ for your milage

    Knowing your costs of doing business is the very first brick of your business foundation
    Mess that up and you are not getting the most out of your labor

    Another thought is why some eat the costs when they should be passing them along…

  • @Jerry Miller, I personally found MileIQ to be cumbersome in the sense that it would always track my daily walk to the gym as a “drive” and would erroneously split up trips during traffic jams (a daily occurrence in LA). There were things I really loved about it, but I switched to Automatic, where my drives are recorded by way of a dongle plugged into the OBDII socket on my car. Not only does the app track my drives more accurately, but it also estimates my fuel cost based on averages in my area, and I can check and clear service/engine codes if needed. I believe the cost for my adapter was about $70, and their new one with built-in 3G connectivity (free for five years, I believe) is somewhere around $100.

    @Cindy James, I wish TourBuzz had more discount tiers or perhaps options for high-res images to be retained for less time in exchange for lower prices. I currently utilize them for RE photo delivery, and am mostly happy with the system, but you’re right—it gets really expensive really quickly when Dropbox and other simple delivery services are pennies on the dollar by comparison. You might check out a service called View Shoot. I had a trial account but never took advantage of it because it just seemed like too much work to move all my clients to the new system. Assuming you like the way it works, though, it may provide a less expensive solution for you, with similar features.

    I’ve been looking for a good solution to track profitability/effective net-expense hourly rate “per job” and Studiometry seems to be a good solution as you can track time spent on various activities without having to actually bill it to the client.

  • Cindy, if you have standard web hosting, you should already have space to host files for your customers to download. I send my customers a link for their photos and they cannot see any of the other files in the directory so there is no issue with them downloading galleries that don’t belong to them. There is no value in paying for another service provider to do something that you already have capability for. Why so much every month to Quickbooks? I use Paypal for CC/debit payments. Their rates are competitive and I only pay for what I use. The extra bonus is that with a PayPal debit card, I have immediate access to the funds without having to wait several days to transfer money to a checking account. I use AccountEdge for my accounting and it’s completely offline. I don’t need to access my books remotely and it’s more secure. I can always create an invoice through Paypal and reconcile it later with the accounting program if I absolutely must. There has never been an issue with sending an invoice later to a customer. Question the value of every third party service you use. Ie: what would be the effect on your bottom line if you dropped Tourbuzz? Would your customers revolt? One or two? Half? If it’s only two, would the savings be more than what those two clients spend with you? Would they be willing to pay a premium?

    5. Now that health insurance is mandatory, it’s more of a personal expense than a business one.
    7. Photoshop and Lightroom now being subscription items means they become a monthly expense rather than a capital expense every year or so.

    I’ve found it helpful to consider my finances in two parts. The business is one part and needs a certain amount of money each month/year to operate. I’m the second part. I am the sole employee and I get paid a living wage or at least a certain hourly rate for the work I do for the company. From a tax standpoint, the company and I are one entity, but by splitting them internally, I have a better grasp of how the business is doing and what the costs are.

    Brandon V, My OBDII dongle is Bluetooth and connects to my phone. It cost about $6.25. I haven’t tried a mileage app. I just mark down my mileage when I leave and get home on a page in my folio. Every couple of weeks, I transfer everything to a spread sheet and the accounting program. Sunday evenings get used to catch up everything on the computer that I haven’t input during the week. Accountedge lets me create a job number to use to track income and expenses, but I don’t use it for RE work. There comes a point where one might spend so much effort tracking every little item that more time/money is spent on the accounting than on the job. I know a couple of manufacturers that don’t inventory components under a certain price. They just require that their suppliers make sure they have a set number available at all times. They found that counting the parts cost more money than they were worth. Spot check the amount of time you are spending on each job and divide by the number of photos you have delivered over the course of a few days or a week to get a time/photo average. If it takes you 7 minutes per image and you deliver 20 images, that’s 140 minutes for the job plus your travel and prep time. If your travel and prep time are 60 minutes, you have 200 minutes into the job and at $50, that $15hr (or about $10/hr after taxes). Congratulations, you make less than minimum wage after expenses. This is why I deliver images via my existing hosting service and shy away from third party services such as TourBuzz. I do charge more than $50, btw.

    I’d recommend moving Professional Development up from number 8 to something higher. Sometime this fall, I’m going to get some coaching that I hope will improve my post processing time and quality. That should also help my onsite time so I am not making images that I won’t need in post. My goal is always to come away with images ready to go straight out of the camera with just a few tweaks in LR, but there are images in every job that need a trip through PS to get my gear out of a mirror I couldn’t avoid, rooms that needed in frame flashes to get good lighting and other little fixes. I nearly always come away from a workshop with at least one little technique that makes the whole thing worth more than the cost. The same holds for online training from Lynda, Kelby or CreativeLive.

  • The thing that everyone is missing is, you never know “why” someone else is doing what they’re doing. Being in your own business to make money is one thing, being in business to “be your own boss” or whatever foolishness you subscribe to is another.

    I just lost an account to someone willing to do it for $65 a shoot. With the average ‘wage’ in Chicago at $25.23 HR, if he spends 2 ½ hours per shoot, including travel and processing, and has no overhead, he’s even. His work is not great, but it isn’t awful and I can’t fault the agent for trying save some money. As a business owner for profit, you have to be aware that there are fools like this.

    Before you can advise anyone on what to charge, the first question has to be “Why are you doing this?” If they “love photography”, or “wanna be my own boss”, it’s pretty simple. OTOH, if it’s because (like me), nobody else will pay you what you can earn on your own, then you have to analyze the numbers and make them work for you. I’m not suggesting you start picking the fly shit out of the pepper, but have a good idea what it costs to run the business and what you have to charge to make what you want. At a minimum, put a life span on everything you use and adjust to replace it.

    The next thing you have to do is analyze the competition. And don’t play Name That Tune where if he’s doing it in four notes, you’ll do it in three. No, take an honest look at see if there is a market for your talents. Understand that we’re not making Hollywood Blockbusters. We’re dealing in a commodity and there’s only so much you can charge. Yes, I know there are Super Stars that command more. In the beginning, that ain’t you! Talk to Realtors. Ask them what they’re paying, what they like and what they don’t. It won’t take long to see if this game is for you or not. Be realistic.

    Keep in mind, it’s OK to walk away and not whore up this market, even if your spouse is willing to support you while you play. If you think you can make money at it and be a true “Professional”, welcome aboard.

  • You have to make a living but…that is a completely subjective measurement.

    $99 seems low unless you’re simply using an on-camera flash and only processing the pictures with a lightroom preset. Drive time, picture time, edit/delivery time, collecting money time, cost of equipment, gas, website, etc all add up. In my experience, the people at the low end are either not very good, or not full time, or both. And they don’t stay in business long. $25/hr as an employee is ok. $25/hr as someone running a business, with expenses is a bad idea unless you’re in high school.

  • I agree that it’s hard to compete with some photographers in my area doing HDR for $100 -150. I strive from multiple off camera flash and HDR when necessary or to get in and out fast. Even worse the agents seem to actually like/prefer HDR. Luckily, I have been able to stand apart with video services too as a lot of people who do RE photography do not offer video in my area.

    None the less, I just wanted to share the accounting software Wave. It’s free and has been good for my needs as a multimedia specialist and as a DJ. So, if anyone is trying to cut costs, check out Wave accounting. It’s not quick books but it’s free.99. 🙂

  • I use WeTransfer (free version) to send images and on occasion, Pixieset (free version) if someone needs to view proofs–but that’s strictly for rare, out-of-state corporate payers to see watermarked proof I did the work, clean images sent upon payment. Outage an excel spreadsheet for income and one for expenses. After years of doing my own taxes with Turbo Tax (what was I thinking?), I know how to group items under categories for easy tax prep. First time with CPA, and she was delighted with my records, but I’m a little on the OCD side, so that’s not for everyone. I’m on Houzz, have pretty much abandoned the Thumbtack game except for things like events or headshots, and somehow I did something right with my website because people say I come up in Google searches for photography in my area (Chicago suburbs). I have gotten new agent clients who had homeowners throw a fit over a first set of lousy photos. I love the smell of desperation in the morning. 🙂 I am not the cheapest one around, and I apologize in advance that I am not the fastest shooter, but I make up for it with excellent customer service and images that satisfy the clients. I don’t pay to advertise other than web hosting and my lunch at a twice-monthly networking meeting. Word-of-mouth and free social media posts are my best advertisers. I go to the client home with business card in hand (MOO cards with photos of my work on both sides–a mini-portfolio–got a baby shower gig doing that! I’d love an easier updating method to my website but scared if I change from GoDaddy I’ll be “fixing something that ain’t broken.” It’s probably Kramer-esque methodology, but so far it’s working, and other than equipment and gas, I have little overhead.

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