We all struggle with this. Let's just get that out there. I don't think there is one of us who doesn't go back and forth on our pricing structure. It's a hard thing to determine what you're worth and what people should pay you for your work. It's hard because most of us don't have a formula for pricing, we just throw numbers out there and see if someone books. What we don't consider at that moment is all of the other parts of the equation; our cost of doing business, taxes and our actual income or our market value.
There's a fairly simple formula creating a price structure that will earn money and profit. I'm not a finance expert and I'm pretty terrible with accounting but when we worked out this formula for our business, our business starting working for us instead of the other way around.
So here it is in my simple terms.
1. Service Pricing
First figure out your cost of doing business PER WEDDING or SESSION. Use this simple calculator to help you figure out what your cost of business is per year. It's a good place to start figuring out what your break down will be for each wedding or session. You may have more items in your specific list than this calculator offers so be sure to make your own spreadsheet and add in all your costs (and add to it often when you change things in your business). Consider things like your website subscription, gallery subscription, printed collateral that you send to clients, USBs, film, lens cleaning, gear/equipment etc, etc.
2. Cost of Living
Figuring out your own specific cost of living is a challenge that requires many cups of coffee. Here's a calculator to help get you started. Once you've determined your accurate cost of living, you can accurately determine what your hourly/weekly/yearly wages NEED to be and work that into your base hourly/wedding rate.
3. Profit Margins/Perceived Value
This is where things become blurry for photographers (no pun intended). How do we determine our hourly rate or wage and our perceived value? Our business is everything to us, our hearts, it's our blood, sweat and tears. Well, there are a few places to start thinking about it practically and not emotionally.
A. Educate yourself on the pricing in your market/area by connecting with other photographers/vendors and seeing what they charge. Compare your services, your work and decide where you stand in a mixed group of peers.
B. Outline the list of "perceived value" items you offer for your customers. By items I mean the elements of your business that separate you from the crowd. Quality, experience, unique services or offerings; for example we are a husband & wife team, that is a perceived value to our customers.
C. Once you determine all of your costs from Section 1 and Section 2, you need to mark up your services to account for your perceived value and that is your actual wage. You can do this in a few different ways but the most important thing to make sure of is that you find the sweet spot, not too much/not too little by doing the research I mentioned in part A. You don't want to price yourself out of your target client's budget but also don't want to undercut yourself out of your livelihood.
4. It doesn't add up?
This scenario is pretty likely if your business is new or you are just starting out as a photographer. If you did all the steps above and the end figure doesn't turn you a profit then you need to raise prices and/or reduce your cost of living and cost of doing business. It's very important to note that most small businesses don't turn a profit in the first few years. There's a lot of start up investments spent on gear, equipment and software in the beginning stages. You can also charge more the more experience you have and the better your work stacks up against other photographers in your market. It's always the goal to at least break even. Most photographers have supplemental income until they reach a point of consistent profit.
This process for establishing your base pricing will have you on the right track to managing a business that'll work for you. It's not a get rich model by any means. There are also a number of other elements to be added to this equation down the line such as taxes, deductions, product sales and paying independent contractors/employees but that's for another time.
As many times as I have read this, it seems comprehensive to me but I'm sure I left something out. As always, ask any questions, I'm happy to answer them to the best of my knowledge!