The simple formula for profitability is revenue - expense = profit. But if success were that easy, why do most new small businesses fail? And what more should you be thinking about when starting your new photography business?

First off, where will your revenue come from? For photographers this is typically from one or both of two sources:

• Through the sale of goods: charging for prints, digital files, videos
• Through the sale of services: sitting/booking fees

And secondly, where will your profit come from? There are many pricing models available to photographers, but these are two of the most popular:

• Cost-plus: add a markup to your calculated cost of goods
• Value-based: based on the value of your service as perceived by your customer
  

What does it cost to do what you do?

Whether you decide to use a cost-plus pricing model or a strategic pricing model based on the value of your service, you need to have a good understanding of your actual costs of doing business. This is more than an hourly rate or the cost of the products you’ll provide. 

Consider the following:

• What is your time worth?
  Make sure you consider all the time involved in a shoot—contact with customers before the shoot, travel, shoot time, edit time, delivery time: it all adds up.

• Wear and tear on your equipment.
  Shutter count, dust and grime, not to mention upgrading to keep current with ever-improving technology.

• Business expenses.
  Electricity, insurance, marketing, software, website, child care...

• Who do you want your customers to be?
  And what will it cost to market and appeal to your target audience?

Hot tip: The National Press Photographers Association has a handy cost calculator that might help you figure out your cost of doing business.

‍Why you should never lowball your work.

How you value your work is more than material cost and time spent, it’s about the time, experience, and artistry it takes to capture the images uniquely as you and only you can. If customers could take the photos themselves, they wouldn't be hiring you. 

Every business owner will battle pricing pressure at some point. It can come from price wars with a competitor or a persistent customer who won't buy anything without a discount. That being said, starting low is bad for business. 

Low prices set low expectations from your clients. If you’re a cheap photographer, clients might immediately question your reliability or the quality of your work. 

Being “cheap” also means you can’t afford to invest in your business or use more effective marketing strategies like coupons and special sales. These tools are invaluable for creating urgency and closing sales. Also, placing a fair (higher) monetary value on your work will inspire confidence in yourself and your clients.

"Moms and young kids out of college are opening up shop down the street. The new freelancer charging $50 per session has taken some of my clientele," Susan Sidoriak of Silverbox Creative Studio said. “Yet I have raised my prices throughout the recession, and the economy hasn’t really hit my business." Sidoriak got a bit of pushback when she raised her prices on 4×6 and 5×7 holiday photos last fall, but not one customer jumped ship.

‍Use SmugMug pricing tools for an easy advantage.

SmugMug's pricing tool allows you to create different pricelists for different products and event types: weddings versus senior photos, limited-edition prints versus stock photos, etc. You can then apply each pricelist to galleries or individual photos.

Every new SmugMug Pro should set up pricing. You’ll have some important decisions to make:

• SmugMug offers many great print labs. Which one is right for you?
• The labs offer color-correction services. Should you use it?
• SmugMug offers more than 300 print, merchandise, and download products. How many will you offer?
• How much profit do you want to make?

Offer clients discounts with a built-in coupon tool to sweeten the deal. Who doesn’t love a sale? Incentivize your customers to make their purchase quickly by setting expiration dates on your coupons.

“Print credits are vital to my business model,” said Meghan MacAskill of Wild Bloom Studio. “[I noticed] that many clients weren’t actually pulling the trigger and getting prints. I decided to model photo sessions differently and include a print credit in every package to guide clients into purchasing prints. It has been very successful, and SmugMug's coupon feature is vital for it to work without me filling those orders myself.” 

A couple more Pro tips.

Packages are also a popular tool for school and sport photographers. With packages, you can bundle a set of prints together for a single price, creating a value incentive for your customer...and a simpler buying experience.

Printmarks allow you to “sign” prints and photo downloads. They can be used as an artist's signature, to add value to a print product, or as advertising, which then allows you to offer the product at a reduced price compared to a non-printmarked version. 

Pick the strategy—or mix and match several—that makes the most sense for your business!