You Must Be Selective At Choosing Your Clients To Be Successful

January 27th, 2015

ParetoPrincipleCristophe in Wisconsin recently was complaining that:

…when I give them a price they say they can get it done cheaper or do them selfs. My question is what is a good price to charge?…

Cristophe’s complaint led me to give him my Pareto Principle lecture.

Italian economist Vilfredo Pareto observed in 1906 that 80% of the land in Italy was owned by 20% of the people. It turns out that what is now known as the Pareto principle or law of the vital few, shows up in economics, in business, and in almost every aspect of human endeavor. Yup, you guessed it, it shows up in real estate and real estate photography too.

Stated for real estate agents it says: “20 percent of the agents close 80% of the transactions“. There was a NAR study back in 2004 (no longer available) that essentially confirmed this was the case. It also stated that the median income for agents who had been in the field for 2 years or less was $13,000. In 2004 the real estate market was roaring!

Anyone close to the real estate industry these days will agree that Pareto was an optimist! I’m inclined to say that 5% of the agents do 95% of the transactions. The exact percentages for my point aren’t all that important. My main point I want to make, is that to be successful as a real estate photographer it’s important to understand that you really don’t want to do business with all agents. As anyone in this business will soon discover, 90+% of agents think that shooting photos with their cell phone or their point and shoot is good enough.

Here are two facts that it’s essential to understand if you want to be successful in real estate photography:

  1. When you are building your business focus on pursuing business relationships with the top 10% of listing agents. The fact these agents are successful demonstrates they have the business figured out and they are willing to do what it takes to be successful. You’ll find that most of the top 10% of agents appreciate and can afford professional photography. The bottom 90% may understand the benefits of professional photography but are not closing enough transactions to be able to afford professional photography for their listings.
  2. The bottom 90% of the real estate agents don’t have the money to pay you the per shoot price you need to charge to run a sustainable business. This encourages beginning real estate photographers to reduce their prices to $50, $60, $75 or $99 and neglect the fact that it’s not possible to run a sustainable real estate photography business buy charging these low prices. Yea sure, you can snag some extra cash for a while, but you are not recovering your fixed costs of being in business at these prices.

I go into this subject in more detail my Business of Real Estate Photography eBook includes a Cost-Of-Showing-Up spreadsheet and walks you through the process of figuring out what it costs you to show up at a shoot and how to figure out how much to charge to operate a sustainable business.

Bottom Line: To operate a successful, sustainable business you must do business with clients that are operating successful, sustainable businesses.

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20 Responses to “You Must Be Selective At Choosing Your Clients To Be Successful”

  • I can’t agree more with you Larry! Don’t work with the bottom feeders! Not worth my time or energy! “To operate a successful, sustainable business you must do business with clients that are operating successful, sustainable businesses.”

  • I call “cell phone and point and shoot cameras” PHD cameras, “Push Here Dummy”! I’ve had agents tell me they don’t need any photos to help sell houses. I’ve only found one agency (third largest in the state and I feel honored to work with them!) in all of Albuquerque who actually believe that quality photography help them market themselves and are willing to pay for it. All the others are way too cheep and go the PHD route!

  • As Larry says, there is a “cost of showing up” and an individual hourly rate for your work that you MUST charge to maintain a viable business. The exact price will vary based on your personal situation, cost of living in your area and your income goals. You also need to be building a cash reserve to handle emergencies and slow work periods. Don’t forget those taxes that just went up again on Jan 1.

    I don’t have any problem shooting for anyone that will pay my fee. If the agent can’t find a way to pay my very reasonable rates, they aren’t going to last long. I’ve noticed that Mercedes won’t lower the price of a ML350 because I can’t afford the full price. The plumber doesn’t bill by my ability to pay either.

    I try to direct my marketing only at the top tier agents, but I often find that open houses are being hosted by junior agents or agents that will happily take a bit of cash to put up the signs and hand out flyers for a few hours on a weekend. It doesn’t hurt to practice your sales pitch on them and hand out a business card. They might be aggressive new agents just getting their start. BTW, I target my open house visits to make personal contact with the top agents. About 60% of the time I find another agent there, but I do eventually find the targeted agent. I print out the open house announcement page that I get from Trulia or Zillow and make notes after I talk to the agent on whether they seemed open, enthusiastic or would never use my services. I’ll also keep track if the agent didn’t show up to conduct the open house, which happens frequently. I’ve struck a couple of agents from my marketing list for being repeat no-shows to their announced open houses. To clarify, the house was not open at all, not just that the agent had somebody else conduct the open house which I don’t have a problem with.

    I always recommend keeping track of shooting and post time to keep a good average time per image. This lets me know what my price per image needs to be given what I’ve determined how much I need to make on an hourly basis, NET. Travel expenses are easy to calculate since traffic isn’t an issue in the area I serve. This metric for quoting jobs is why I base my pricing on number of photos and distance to the job. The square footage or asking price of the home has no bearing on my costs, so I don’t see how I could use those figures as a rational basis for quoting the job. Now, if I were to be seeing my bookings moving up-market to homes listing for $1mil and up, I would increase my rates to match my improved perception in the marketplace. I might also raise prices if I were consistently booked solid each week. If I raise my price 10% and lose 10% of my bookings, I’m ahead since I’m making the same amount of money for less work and have the opportunity to accept more work at the higher price.

    I just found an ad on Craigslist for a photographer that will shoot and deliver 25 images of a home for $50 total. I have a strong suspicion that the photos with his posting (really good ones) are not his own and he will be back to work at WallyMart within a month. Even with petrol at $2.25/gallon, there is no way that he’s making over $10/hour gross. After self-employment tax, he’s making less than minimum wage. Insane on his part and frustrating for me since by advertising such a silly price, he’s dragging down what agents might be willing to pay. Agents don’t stop and think that after an hour round trip driving, an hour on site and some time in post, less gas and business expenses that anybody advertising such a low price hasn’t been doing this long and isn’t going to be around for very long either.

    A doctor’s office visit is $130. I see the doctor for 15 minutes on the outside…….. whirr, click, buzz … $520/hr. Leaking toilet? The plumber my property manager hires can do a replacement of the mech or a new wax seal in 1/2 hour…… $125 ….. clunk, ping…..$250/hour (not counting travel time). Sigh. Putting up with poo pays.

  • Hi Larry
    The problem i find here in the UK is that the top feeding 10% are all using companies that offer energy reports, floor plans and photography in a combined package. The standard of photography is adequate for their needs and good enough for their eye.
    The bottom feeding 90% cannot afford professional photography and certainly cannot take the risk of increased bills should an instruction fail.
    Any thoughts on this Larry?

  • I heard something from a pretty successful RE photographer that he did to help grow his business…
    He would friend the agents on Facebook, and when he did a shoot, he would make sure he posted some of the best images, and tagged the realtor, who got exposure. And since the realtors friends, who a lot of time tend to be other realtors (outside of family) will also see them, the photographer gets exposure to other agents who might not otherwise care..It’s free advertising, and if the realtor is a top realtor in the area, then…

  • @Ken Brown another problem I see with the $50 dollar photographer is that some of the 90% of realtors who don’t know better think that the $50 dollar option would work. i.e. They don’t have the eye to see the quality difference in photos. So even if the person offering photos for $50 posts their own average pics most agents would think its a tad better than mine so that must be professional.

    For the 10% of agents who have the knack for marketing and know the value of good pictures you just need to show them your quality pictures. For the rest I would suggest a compare and contrast method. You can market to some agents by taking pics of the outside of the house right after they list it and show them (in a nice way) how much more you can add with your services. Talk about the studies which mention the value of professional pictures for listings.

    As others suggest target those agents who are already doing volume work or look for the new up and coming agents who are looking for the edge.

  • Larry, you’re spot on.

  • As James Flynn says, I also haven’t had much luck with selling quality photography to real estate agents here in UK (haven’t tried too many though), the package companies provide adequate-to-reasonably good photography.
    So I concentrate on construction companies, developers, etc.

  • The trick is marketing to a better clientele (and have a personality and portfolio to back it up). Since I went to a per photograph strategy, I am getting rewarded better than previously and feel this has added more credibility higher rung agents.

    Some realtors will try to run you because they call the shots in their agency and will often view you as an extension of the agency. You don’t want type as a client.

  • @James Flynn – You may have to provide Floorplans and energy reports to compete. Floor plans aren’t that hard… I don’t know anything about energy reports. Typically you need to compete.

  • Larry, with respect, I don’t agree with this at all! In fact I believe that it is not only completely wrong but counterproductive. Agent productivity is extremely volatile. It’s common for an agent to be at the top one year and the middle of the pack the next year. It’s also common for a new agents to go from the bottom to the top in just a year or two and then disappear. By limiting your client base, your are opening yourself up to adverse changes in income. What happen when your large customer decides to retire and move, or leave real estate or any of a large number of reason to stop producing. Then you have a large gap to fill. From a income security standpoint, having a larger income base is best. Then any agent the leaves has little effect on your total income.

    Nor is there any sense to the claim that a more productive agent is more likely to pay, is more appreciative to your work or pay more. Those boil down to proper handling of money and character, not volume sold. If fact some top sellers are willing cut your throat to get an extra buck.

    Instead of gambling on which agent will hot and what market segment will sell in any particular year, I suggest bring in as many clients as you can schedule. Cover agents handling all segments from high end homes to starter homes, from the agent listing 1 a month to the agent listing 1 a week. That will allow for a stable income regardless of market or agent changes.

  • @Paul Sian, My issue with the $50 photographer is that he doesn’t have a clue about business realities regardless of his photographic skills. In fact, if he is good, it’s that much worse. He’s going to be back at a minimum wage job before he can create a large enough client base to generate a living (and maybe can’t even do that booking solid) and those that do use his services will be spoiled by getting a quality product way under cost. I get calls from agents that want 30 for $30 several times a month. Some think that since I have a professional camera and lenses that I’m going to be able to dump the images from the camera onto their thumb drive and they’re going to be the bee’s knees. I’ll stamp and cheer in the streets the first time I get an entire property perfect straight out of the camera, but I’m not going to ever expect it. Every property has had images that I shot with a post processing method in mind to overcome some issue.

    @Larry, does your eBook outline ways to find out who the top 10% of listings agent are for a given area. I have not run across any sort of ranking for my area. Many agents will list the awards they receive, but it’s like youth sports where everybody gets a trophy for showing up. I’ve also tried to look up some of these awards and have not been able to see what they actually are awarded for. Is “Diamond” better than “Platinum”? Is the “Founder’s” award for penmanship? If I know who’s selling $12mil and over each year in my area, I know they are somebody I want to talk to. $12 million would be around one home per week on average.

    @Neal McGuire, I agree that one should sell to anybody with the money to pay for the service, but concentrate marketing at the top tier. For email (aka: spam) there is no cost differential and I keep a list of as many active listing agents as I can find. I never know if another agent is going to tell me to “call Tammy at C21, she’s looking for somebody right now” and I’m in a better position if I have her contact info since I’ve identified her previously as somebody with a listing(s). If I’m going to print and mail some really nice printed marketing packages, the cost can get stupid if I’m sending them to all 650 agents on my list.

    I received a call today from a broker associate who is active in the local REA/MLS and a past president of the organization. A colleague in her office passed on my business card that I handed him when visiting an open house last weekend. She wants to have a potential new high-end listing photographed next week if she gets the contract as expected. It will be the most expensive property I will have photographed if it all goes through. It will also make my marketing efforts over the weekend profitable. There is nothing like going live.

  • @Neil – I don’t know what to say, other than I already said in the post. This phenomena is visible in any RE office. As an agent you get to see it close up, there are always 10 to 20 listing agents that have the majority of the listings in any office… and those agents don’t change much from year to year depending on the market.

    @Ken – Yes, I outline how to do this in my book. Look at the website in any given RE office. Count the listings that each agent has. Make a spreadsheet.. the top listing agents will always be obvious. It takes a little time to build a spreadsheet for each office in your area but it is well worth the effort… I’ve had hundreds of people give me feedback that this works all over because it’s just human nature.

  • If I can throw my 2 cents in here–I have some very consistent clients who are already top agents. In fact one has been the county’s top agent 4 years running, but just started using me last year. One other one I shoot for is also very successful, but besides those two I have a pretty steady flow of “middle ground” agents. I even have a couple agents who have less than 12 months experience in RE, but have the brains to understand what I can do for them.

    I do agree that it’s probably more efficient to market towards top agents, but do not ignore everyone else. Some of the beginners I work with are climbing the ranks fairly well, thanks to their use of professional photography.

    @Tim W I’m not sure if I’m the guy you are referring to, but I have mentioned that FB strategy on a couple occasions. In fact, it’s help me land lots of jobs and pick up a very successful agent in the city I live in. I diverted the money I was using on email marketing and now use it to boost posts on FB. It keeps my name and work in front of many agents. I wouldn’t say it’s the only marketing you should do, but it has really worked for me.

  • We should stop lamenting on the market situation. I am always positive minded. Let me explain:

    Last summer we did an analysis on the use of quality photographs in real estate listings. Hereby we only concentrated on the higher end of our home market in Berlin, Germany and listings in Germany’s leading online RE portal. Guess what? We almost exactly hit the number of 10 per cent (10.32). (Analysis in German, use Google translate:

    To get a piece of this market share as a photographer is hard. But since there is the 80-20 rule, I guess that there are another 10 per cent (or so) who act quite successfully and could do even better with great photographs. To get their attention the photographer has to move out of the comfort zone and direct a large part of their marketing activities towards this hidden business partners. Finally it is all about penetrating them with convincing arguments, service and excellent work.

  • @Mike, No, its not directed to you specifically, but more of a general comment that makes sense..Your own results speak to the effectiveness of doing it.

  • @Ken Brown I agree with what you are saying. The $50 dollar photographer depresses prices and can’t survive on that alone. After a while they will lose interest unless they truly consider their work to be charitable. Agents will want everything as cheap as possible. While the $50 dollar photographer offers them some extreme value when that person drops the ball and can’t shoot anymore they will think twice about using low cost.

    @Neil yes new agents can go from hero to zero within a few years time frame. The idea though is to learn about your clients. There are cut throat top producers just as there are top producers who prefer to outsource just like in any business. Part of marketing is figuring that out. Also the MLS stats consistently show top producers remain top producers for a long time. Depending on the size of your market there should be plenty of opportunities to work with.

  • @ Larry
    “@James Flynn – You may have to provide Floorplans and energy reports to compete. Floor plans aren’t that hard… I don’t know anything about energy reports. Typically you need to compete.doin”

    To compete financially would involve, offering an EPC energy survey, floor plans, photography, property write up and brochure printing. The companies print brochures in volume in India for peanuts.

    So you cannot compete financially. You can only offer agents better photography. Nearly all of them prefer the company that offers them an entire brochure.

  • In theory, you are correct. However, in Philadelphia it hasn’t played out that way. The top 6 Realtors in the Philadelphia market have opted to hire photographers in the $75.00 – $125.00 range. When I refer to top agents, they are the ones with a Gross Commission Income of $1,000,000.00 or more. As a result of this they’ve made it easier for lower income Realtors to function in the market place.

    The top agents aren’t under any pressure to upgrade the quality of photography in their advertising. The Brokerage’s they work for don’t require it. Their competition isn’t pressuring them to change. Most importantly of all, their clients aren’t pressuring them to do any better. It’s my belief that until the consumer requires more it will stay the same.

    On a positive note, the primary benefit, of working in the “photography for real estate industry”, is it’s afforded me the opportunity develop my skill set and move up the food chain. Over the past two years, my client base has shifted from 90% Realtors to 30% Realtors and the other 70% are outside of the real estate industry. I’ve noticed that this is the case for many of the photographers that I’ve followed through your blog over the past ten years.

    Once you’ve had the experience of working with clients that value what you have to offer them and pay a professional fee for your services, you’ll want to move in that direction.

    The best strategy for anyone that’s dissatisfied working for Realtors is to train hard and develop your skills so you can move on. The only thing you can change is yourself.

    Please share your thoughts with me.

  • @ Drew Callaghan
    That was an interesting piece you wrote. That is exactly the way my photography has panned out. My emphassis is much more outside real estate and tuned to tourism.
    What i will never understand is how a homeowner selling a million pound house excepts photos taken on a mobile phone. I constantly see expensive homes looking like dungeons.
    Many extremely wealthy people refuse to part with a single penny on photography of their home.

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