Marketing Proms: Making the Most of a Challenging Market!

Proms, which used to be the golden goose of the Spring photo season, have now become a financial challenge for photographers in the digital age.  Proms are still being held all over the country, and expensive tuxedoes and fancy dresses are still all the rage at these events; but pre-paid posed photographs have taken a serious hit.

The cultural shift that we have seen in the college market in the sale of Party Pics, has worked its way down to the high school market, and the printed photograph is not the prized commodity it once was among the 14 -18 age group.  Combine that with the proliferation of digital cameras, camera phones, and other recording devices and you have a very steep mountain to climb.

Ah, but all is not lost.  If you are serious about cracking into the prom market or trying to make some lemonade from these lemon-scented events, then you will have to change the way you think about proms.  Though it’s true that the students may not be interested in photographs, their parents are!

A few years ago a CCS customer decided that he was going to change his marketing direction for proms, and instead of directing his efforts towards the students, he would now target the parents of the students.  Working with the administration of the schools, he enlisted their help in providing a mailing list with all of the parents’ names and addresses. He then sent out a nostalgic letter reminding the parents how important, fun, and prized their prom photos were when they were in high school; and wouldn’t they like the same valuable experience for their sons and daughters?

His success rate was instant and his stable of prom events quickly doubled their gross sales over the previous year. Marketing in advance of the event proved successful and it can work for you also, but it will require some work on your part. In the communication sent to the parents you will need to let them know in advance what the packages contain and their cost. In addition, you’ll need to include an order form, or provide a link to one they can print out to bring with them—with payment—the night of the prom. You may want to include a pre-order discount code that they can bring with them the night of the prom to receive a percent off discount.

Remember to display the background to be offered at the prom prominently on any flyers or order forms distributed. Create posters with samples to display around the school for a few weeks prior to prom.  Provide each school with website/password cards to be used as invitation/ticket stuffers.  Each card should include information about your portraits and candid service.

In Oklahoma City at our retail division we are still shooting many proms but how we execute the event has changed dramatically.  In order to photograph as many couples as possible we shoot everyone with no money collected upfront.  When our pre-paid sales dived to next to nothing we decide that, in order to get couples in front of the camera, we would have to offer a free sitting with many poses which would encourage them to view those poses online to pick the best one for their prints.

Depending on the school and the number of couples attending we will also include the Jump Studio as an alternative photo location at the prom where they can do whatever they want to do—photographically—within reason!

Now, if you’re looking for something completely different to offer consider green screen for your proms. Green screen will enable you to offer more background options—online—without the added investment of props. If you choose to go the green screen route it is imperative that you test, test, and test again for the correct lighting setups.  Green screen is not very forgiving when improperly lit so if you go this route you will have to TRAIN your photographers to execute perfectly.

At the prom make sure your shooting location is highly visible.  Your portrait location should be easily accessible and within sight of the dance floor to increase participation. If possible provide a short script to the DJ for regular announcements over the sound system on your behalf encouraging the attendees to have their photos made.

After the prom is imperative that you utilize an email campaign for at least three months.  Just because they didn’t buy shortly after the event doesn’t mean they won’t do so several weeks or months afterward.

For more information about executing proms, marketing or pricing prom packages call Brian at 800-336-4550 ext. 251.

Reports That Can Help You Run Your Business: Event Sales Aging Report

Candid Color Systems has developed a new online report called the Event Sales Aging Report.  This new, beneficial business tool displays a sales cycle for specific events or market type over a defined period of time.  This data can be compiled from any online event orders placed across multiple CCS software platforms and can be filtered in a variety of ways.  The Sales Aging Report presents information on:

– Total Sales
– Sales within the first 7 days
– Sales 8-14 days after an event
– Sales 15-30 days after an event
– Sales 46-60 days after an event
– Sales 61-90 days after an event
– Sales 90+ days after an event

What is a sales lifecycle?

The sales lifecycle is commonly defined as the interval between initial contact with customers and the final purchasing decision. For our purposes, however, we will define the sales cycle as when your sales occur, relative to an event, and how often sales occur thereafter.

Why It’s Important

Understanding the sales lifecycle is a critical part to a successful business. By getting a good grasp on this information, you can better manage your time and resources and gain insight on the following factors: 
   – Cash flow management
           o Budget planning
           o Forecasting revenue
   – Compare sales from year to year
           o Track successes and failures
   – Managing your staff
           o Hiring new employees
           o Salary adjustments
           o Downsizing
   – Adjust marketing campaigns
           o Re-orders
   – New product/service innovation
           o When to introduce new products/services
           o When to retire old or outdated product/services

Marketing Implications

In addition to the items listed above, understanding your sales cycle can also help you determine what your most effective marketing strategy is. If you create an email campaign, you can see which are effective in generating sales and which you should replace. If you are mailing paper proofs or postcards after your event, you can see what immediate affect this has on your sales. This data will allow you to adjust your marketing plan in order to find the most effective way to get your customers to order, and ultimately increase your business in the long run.

How CCS can Help

To take advantage of our sales tracking report, please contact Customer Development at 800-336-4550.

Remarketing Effort-If you are not doing this aggressively, you could be leaving up to 40% of Potential Revenues on the table!

In the early days of Party Pics we preached with religious fervor that contact or projection proofs (made from film) should be displayed for no more than two weeks and preferably no more than ten days.  Many customers left them out only one week. Orders were placed by writing the name of the purchaser, the size and quantity of prints desired right on the proof sheet.  That was the only chance to order the pictures unless there happened to be an end of semester sales each semester at a higher print price.

Then, when we started fledgling digital Party Pics about ten years ago, we initially displayed the proofs about the same amount of time that we had when we were marketing contact and projection proofs.  At this point emails were not on our radar screen and few people had email addresses.

This short proof display time continued until about 5 years ago and was ushered in by the use of emails for marketing graduation pictures by some of our customers.  Emails offered the opportunity to contact customers and deliver proofs to them quickly, at almost no charge, and to send them email specials and reminders repeatedly for months or even years.  Concomitantly, we extended the display times provided to our customers so that we are now storing and displaying images for over one year.

Interestingly, we have found that 40% of orders are now placed after having been displayed over 30 days.  Many orders are received up to a year after an event. 

An important point to note is that the sales that occur after thirty days can be looked at as found money, since in the film days and early days of digital, those sales would not have occurred.  But, and this is terribly important, these new sales after 30 days have a much higher profit margin than the initial sales because the cost of photography, order set up, etc. has already been expensed against the sales from the first 30 days.  This scenario creates at least a 60% profit margin since the only new variable cost is the cost of printing and mailing the prints.

In addition to email marketing, many customers are also mailing out paper proofs a second time at somewhere between 30 days and a year after the event to stimulate additional sales to non internet/email users or as a reminder to those who do use them.

If you are not taking advantage of the remarketing systems provided to you by Candid Color Systems, then you are leaving a large amount of money on the table that could be realized with very little effort.

Call Customer Development or Customer Support for advice or assistance in setting up email campaigns or creating a proof template for paper proofs.

Making a Big Success From a Small Event!

Success stories in sports photography happen every week.  In fact, anytime you can generate a great turnout of athletes, produce creative images you can print, manage to stay on schedule, and walk away with a pocketful of money—it’s a success!  But occasionally we hear of stories that are just so encouraging you just have to share the results.

Recently Candid Color Sports, the sports arm of Candid Color Photography, photographed a tournament that generated nearly $7,000 in sales—in about 12 hours—by offering Attitude Panos only!  The event was the 2010 ASA 12 and Under B Southern National Softball Championship and it was held at “ground zero” for women’s softball, the Amateur Softball Association (ASA) headquarters.

For several years CCP has enjoyed a great relationship with the ASA administration ever since CCP bailed them out of a situation a few years ago. At that time their photographer had backed out of a tournament and they asked CCP to step in—with one day’s notice!  It turned out to be an incredibly successful tournament with over $10K in photos sales. Since that time CCP has nurtured the relationship with the ASA administration and this latest tournament was no exception.

Previously, an 18 and under tournament, which CCP had photographed for the past couple of years, changed locations. Under their new format the tournament will only make an appearance—locally—every three years.  In return the ASA offered the 12 U tournament to CCP—less than five days before the tournament began and they accepted; a small tournament in comparison to the one they lost, 20 teams versus 80 teams.

Robert Miller, the Candid Color Sports manager, quickly had to scramble to get order forms and flyers printed and prepare for the tournament which was just days away. One of the keys to the financial success of this tournament was Robert being allowed to meet with all the coaches, as a group, the day of the tournament before play began. He was able to pass out packets to each coach, deliver a two-minute “commercial” describing their service, and was able to show off the cool products they would be offering at the tournament, namely the Attitude Panos and vinyl banners made from the same image. 

                                                                                                                                                     Those sample packets included images of the USA women’s softball team pano taken at an earlier tournament a few years ago, which helped build their credibility with the coaches and players.  Prices for the products were $45 for the 10×30 pano and $225 for a 30×90 vinyl banner, which included shipping and handling.

“Location was critical to the success of this project,” said Robert, “and we were setup in the best location possible.  All of the teams HAD to pass in front of our tent on their way to the ball fields”!  Each team was guaranteed to play four games but it was important to photograph each team before their first pool game, which would be the third game played.

Each team had a mom who was their contact person and since there were no photo schedules for each team it was up to the two onsite photographers to make contact and get each team scheduled.  Of the 20 teams that attended the tournament only 14 teams were photographed.  But those 14 teams spent an average of $496 per team!

So, the key elements in this success story were:
• Nurturing a relationship with the decision makers
• Meeting with coaches to explain your products and services
• Choosing a great location to setup and photograph
• Selling the sizzle by showing your best work

In this particular case, all of these elements came together to make a great and profitable story. However, all of these elements are within everyone’s grasp as you cultivate new business and create your own success stories. Give it a try; you may be surprised at the results.

Venue Photography

                                                                                                                                                     Venues such as stadiums, arenas, convention centers, hotels, country clubs, zoos, museums and bars present a large pool of events and attendees to photograph and sell prints and images.  Each venue will have events unique to its location, so the opportunities are varied.  For example, at country clubs you will find golf tournaments, weddings, charity events, social functions and  anniversary parties to name a few.  Events at your local zoo might include holiday themed events such a Halloween party and seasonal concerts. An advantage to targeting business at a venue is that the fixed location allows a photographer to build a repo ire with venue staff and, ultimately, the photographer can get an exclusive contract for events occurring at the venue. Here are some examples of venue photography success stories.

                                                                                                                                              Rockefeller Plaza in New York is a venue with a history of success.  Photographs of attendees to The Today Show were taken from 6:00am until noon 365 days a year regardless of weather conditions and typically generated $1000 in sales per day.  Emails were collected from each person photographed and used to create a link to their images that was sent via email on the same day. The email collection portion of the process was critical to success, because attendees to The Today show were typically passing through for a short time and not returning to that location. 

Yet another opportunity at this venue was taking pictures in front of the Rockefeller Center Christmas Tree.  This project was conducted over a 31 day period.  Over 40,000 sessions including individuals, couples and families were taken.  Each session included 4-6 photographs.  Email addresses were collected and links to images were sent via email within 24 hours.  Sales averaged $11.38 per session or $2.28 per image taken.

To be successful photographing large events at venues, you must hit a critical mass with the number of images posted for sale.  The more quality images you post overall and for each person photographed, the more likely attendees will be to visit your website to view images and order prints.  If you have recurring events, such as football tailgating, the excitement generated from the previous event can carry over to the next making it easier to get more images. 

At one such football venue, several improvements were made this year in order to reach the above mentioned critical mass of images. The average number of tailgating and fan images posted per game day increased from 3,000 to 10,000 images per game by making some simple changes. The changes began with hiring more aggressive photographers, providing photographers with recognizable t-shirts, positioning photographers at well-planned, high traffic locations, shooting with more scenic or iconic backgrounds and also by shooting in the stadium stands during the football games.  Photographers wore highly-visible neon, yellow shirts and were positioned by 8 foot tall, yellow Party Pics® banners for easier identification.  Roving supervisors constantly monitored the photographers’ productivity to keep them motivated and producing quality images.  Sales from tailgating images posted online are still coming in and are approaching $1.40 per image taken. In this scenario, emails are also critically important. Email addresses are collected and emails continue to be sent months beyond the football season. 

The additional images translated into additional revenue at the football venue. Another key to increased sales and participation at the football venue was email pre-promotion indicating where photographers would be located, images posted by location to reduce the time spent finding images and weekly reminder emails following the game days.  We also feel that speed in processing and uploading images played a role in increased sales. Pregame images were posted before the end of the game and images taken during the game were uploaded immediately after.

To book events at a venue, start by contacting the venue administrator or event coordinator.  Depending on the venue, you may be able to negotiate a deal giving you exclusive photography rights to their events or you may be added to a preferred list of vendors that event coordinators can select from. There are a few ways to get your foot in the door. Start by showing samples of your work and offering your services free of charge.  You can provide images for their website, e-newsletter or magazine in exchange being named their official photographer. Another strategy would be to pay a minimal fee or percentage of each package sold to the venue or sponsor. 

Venues open up a steady stream of event possibilities. For more detailed information on Venue Photography contact CCS Customer Development at 800-336-4550.

Maximizing Events with Remarketing

It seems like a no-brainer that acquiring a new customer can cost many times more than retaining and maximizing an existing job(some studies say up to 6 or 7 times more). However, our focus is often on finding and booking new business. While booking new jobs IS an integral part of any business strategy, we encourage everyone to pay close attention to the jobs they currently have by maximizing profit on the shoots they currently have booked. 
                                                                                                                                             Incremental sales on existing jobs can mean BIG profit. Earning these highly profitable dollars is important. You can increase sales by shooting more images, changing your product offering and through a myriad of other efforts.  Our focus in this article is on the impact of marketing efforts on your events. In our example shown below a sales increase of 20%, using sometimes overlooked extended marketing efforts means an increase in total profit of a whopping 35%!
                                                                                                                                                          Let’s take a look at a graduation example for inspiration on instituting remarketing efforts.
Let’s use a 300 student single line graduation with a handshake & flag shot.

Sales: Let’s assume ….
Participation/buy rate of 42 %  = 126 orders
Selling price of $7.95 per 5×7 and $14 per 8×10
Order average of $35.71 (without shipping)
Sales subtotal $4499
Gross sales $5129 (with $5 shipping)

Variable Costs: Let’s assume ….

Photography  $280
Mileage  $30
Id’ing $12 /hr for 3 hrs.   $36
Data entry $12/hr for6 hrs. $72
Proofs at  $ .80 each X 300 $240
Print costs  $655.40
CC Processing fee $153.87
Per MB Fee $120
Order entry $12 /hr for 3 hrs.   $36
Shipping $100.80
Total  Variable Costs $1,724.07

Fixed  Costs: Let’s assume ….
20% or  $769.35
Your salary
Photography manager
Office rent
Utilities, etc…

Total costs $1025.89+ $1724.07= $2749.96
Gross sales $5129.46 (with shipping)
Profit $2379.50 or 46%

                                                                                                                                       Maximizing the event with remarketing
                                                                                                                                                          Now, let’s assume that we are able to increase sales 20% by remarketing using cost-efficient postcards!
$6155.35 or an increase of $1025.89 (with postcards)
NOTE: Additional sales include a $5 archive fee to the retail customer for each order
22.44 orders at $45.71 each with archive fee & shipping
Archive fee & shipping total= $224.40

NEW Variable Costs: Let’s assume ….

Postcards at $ .40 each X 174 $69.60
Print cost $119.78
CC Processing fee    $30.77
Order Entry             $12
Shipping $17.95
Labor $12/hr X 2hrs $24
Total add’l costs $274.10

$1025.89-$274.10=$751.79 Net Profit after postcards
(Fixed costs already addressed in initial sales):
73.2% Profit on the additional 20% of sales

                                                                                                                                            Increasing Sales with email marketing

Now, let’s assume that we are able to increase sales 20% using emails only!
$6155.35 or an increase of $1025.89 (using emails only)

NOTE: Additional sales include a $5 archive fee for each order
22.44 orders at $45.71 each with archive fee & shipping
Archive fee & shipping total= $224.40

Variable Costs using emails: Let’s assume ….

Print cost $119.78
CC Processing fee    $30.77
Order Entry             $12
Shipping $17.95
Labor $12/hr X 2hrs $24
Total add’l costs $204.15


$1025.89-$204.50=$821.39 Net Profit
80% Profit on the additional 20% of sales

                                                                                                                                                               The results!
The original profit on this graduation event was $2379.50.  Adding the additional profit with extended email marketing of $821.39 = Total Profit of $3200.89. 
A 35% increase in profit!
You now have 52% total profit!
These additional sales account for 16.6% of your total sales! They also account for 26% of the total profit!

There are many things that can be done to maximize an event using marketing efforts. Consider the following when planning your upcoming events:
• Extended email marketing campaigns (CCS has the tools to automate these efforts. Do NOT pass up this opportunity.)
• Send additional paper proof sheets (Make sure to set sales goals. If you have not met these sales goals an additional round of proofs may be in order.)
• Postcards (postcards are a lower cost alternative to proof sheets but can still serve as a great physical reminder to customers to place an order. )
• Reminders on your website, an organization’s website or even via social sites
Remarketing is not just for events where images are “identified” by person. Extended marketing and remarketing efforts are important on all kinds of special events. For additional examples of how extended marketing efforts impact special events (including pre-paid events) and ideas to try, CCS customers can view the Remarketing to Maximize your Events presentation posted on CandidNet with the 2010 Winter Seminar presentations.

It is also important to remember that remarketing is not just good for your sales it is good for the customer. Additional opportunities to order are good customer service. The value of images typically increases overtime. This concept is not to take away from the urgency in getting images to customers for an initial sale, but rather to highlight the need for additional opportunities to order which can include holidays, seasonal products and discounts.

Reporting-Are You Studying All Aspects of Your Business

As Graduations, Sports, Parties and Events ramp up this Spring, the typical focus is on how to get enough good photographers; How to train those photographers,  how to field enough equipment, how to upload images to the lab quickly,  how to get proofs I.d.’d and posted quickly, and how to get manual orders input and to the lab.  All of these steps are certainly important and must be done early to insure good sales.

But the failure to keep score-the failure to know what are good sales at an early enough point that you can fix a mistake or not make the same mistake again-is equally important.
It is a well known business maxim that “what gets measured gets done.”  Conversely, “what isn’t measured often doesn’t get done.”

Monitoring reports and interpreting those reports is a key managerial function that all too often is not done.  I think the reason for this is that too many tasks are not done early enough in the season, resulting in a mad rush at the last minute which consumes all available time to the detriment of taking the time to view the reports.  The reports will not in and of themselves be a source of customer complaints or even bad performance.  However, the use of the reports can increase your profits and alert you to potential customer service or quality problems which can be corrected or avoided on upcoming events.

Candid Color Systems has, with customer input and direction, put together a host of reports to enable you to monitor your business.  We have provided you with all of the key indicators you need to know how you are doing from the time an event is posted or proofs are mailed.  This is more than half of the battle because if this service were not provided to you, you would have to 1) create the reports and 2) populate the reports with data.  These two tasks would insure that you would not have time to deal with reports.
Accessing Reports:
The CCS Reports can be accessed in several different ways depending on what program you are using to market images and prints.

1. In Core:
a. Select the Reports Tab
b. Select “CCS Web Reporting”
c. Sign in using your account number and Partypics Password
2. From the Web
a. Go to:
b. Sign in using your account number and Partypics Password
3. From QP2 Administration
      a.   Sign in to QP2 Administration
                  b.   Select the Reporting Tab

We are going to focus on the two reports most applicable to graduations which we deem important although you could certainly benefit from looking at all of the reports.

The two we will focus on are:
• The Event Comparison Report and
• The Master Event Report
The Event Comparison Report
The Event Comparison Report allows you to compare two events sales at any point after the events.  So for example, you can compare the Oklahoma University College of Arts and Sciences for 2009 and 2010 five days after the event went live or two months after the event went live.  This is the most accurate way to evaluate how an event is doing compared to a previous event of the same kind.  If you do not have two events of the same kind, you could compare a similar event last year to a specific event this year.

Event Comparison Report allows you to compare sales and event attributes for one or more events.
• The sales data includes:
o Manual order sales
o Online sales
o Sales totals
o Average order size
o Sales per attendee
• Key Event Attributes available for Comparison
o Days since post
o # of attendees
o Number of images
o Distinct images ordered

The Master Event Report
This report is useful in the case you have not photographed the event previously.
It allows you to:
• Select an event date range and filter by market type
• Easily determine the status of an event’s sales
• View Event totals, such as sales, images shot and images ordered
o Number of attendees
o Number of images per attendee
o Number of distinct images ordered
o Percent of images ordered
o Number of orders
o Average order
o Lab cost sales prekey
o Subtotal Sales Online
o Subtotal Sales
o Subtotal Sales Per Image Shot
o Subtotal Sales Per Attendee
o Lab Cost        
o Total Profit
o Time to Post Images

It is important to place an order all the way through your online system and your proof system (if applicable) for every event to be sure everything is working properly.  This should be done as soon as images are posted.
When to view reports
Start monitoring reports within 24 hours of posting.  If sales are not up to last year or to a reasonable expectation, then dig deeper to check the following:
1. Quality of images (If images are sub par, can they be fixed in Photoshop and reposted?)
2. Number of attendees (Up or down from last year)
3. Percent of emails collected
4. Freshness of emails collected
5. Accuracy of email data input
6. Speed of posting images online
7. Number of addresses and freshness of addresses
8. Accuracy of spotting (Id’ing)
9. Offers (Same or different-More expensive/less expensive)
10. Were emails sent out? If so how long did it take?
11. Were paper proofs sent?  If so how long did it take?
12. Emails getting through and being opened?
13. Do all the links in the email work properly?
14. Website working properly?  Can customers get to the event?

If a serious mistake has been made in spotting, then respot, repost and resend proofs.
If images look bad, fix them as much as possible and repost.
If necessary, obtain help from the school administrators or graduates to help straighten out sequencing errors.  Do not accept defeat without a fight.

A Guide to Corporate Events and Parties

 How and where to book events
        o Personnel Directors
        o Managers
        o Owners
                  – Offer free photos for their publication needs
 Pricing of Events
         o Some companies pay for photographers to be at their functions  while others do not
                 – For those that pay fees:
                           • $60 – $100 per camera or $60 – $100 per hour per camera
                 – Some companies are willing to purchase vouchers as gifts for attending employees
                           • Vouchers could include free shipping, free 4×6, etc.
                 – For companies that do not pay:
                           • Increase package prices to offset cost
 Suggested number of photographers to photograph event
         o One photographer per every 250 attendees
 Photo pay for photographers
         o $15-$20 an hour based on a 20 cent to 25 cent per frame rate
 Photo Opportunities
         o Formal pictures on backdrops
              – Photograph the couples or individuals as they arrive (Great time for Green Screens!)














 o Party Pics
              – A vertical shot of two people, 4-5 feet away from subjects. vertical
















              – Horizontal shot of three or more, same distance as vertical shots.


              – Posed candid’s, not photographs of unaware subjects
              – Party pics of groups at tables are ideal when half of group is standing behind the other half sitting.












o Groups
      – Organize company/ department photo


o Awards

Understanding the Economics of Your Photography Business

It takes a lot of effort to book photography events.  It takes a fair amount of effort to schedule, photograph, set-up an event in software, upload images, create email campaigns  and make sure everything is working properly. 

All of these steps require about the same amount of effort, whether you gross $200 from an event or $2000.  However, the bottom line profit result is quite different.  In the case of a $200 photo event, you have probably lost money or made a very small amount.  In the case of the $2000 photo event you have made a profit of 50% or better.

There is also another component that discriminates against a photo event that grosses only $200.  That is the “opportunity lost.”  “Opportunity lost” is the time and resources expended on a low selling event that could have been better utilized on a high selling event.

This “business case” begins with the decision of what to book.   You should not make this decision lightly, as once the decision is made, the “dye is cast.”  Only a decision maker who understands your photography business thoroughly should be entrusted with making this decision.  The decision to turn down an event that is a “loser” can be just as important as recognizing an event which can be a big “winner.” 

The first step in making a rational decision about what event to book is to calculate your “breakeven point.”  “Breakeven point” is that dollar volume necessary to cover all expenses for an event.  It is calculated by first figuring out your fixed costs per event photographed.  This includes your office staff cost, your office, utilities, etc. A crude calculation can be made by adding up your fixed costs for one month and dividing by your average sales per month.  For example, let’s say overhead is $5000 per month and your photo business’ sales are an average of $15,000 per month.  Your fixed cost as a percentage of sales would be $5000 divided by $15,000 or 33% of monthly retail sales for your photo business.

The second step is figuring out your variable costs.  The two biggest variable costs are photographer cost and lab/ production cost.   Photographer cost should be kept to 10-12% of sales. Lab cost consists of print cost, e-commerce cost, credit card processing cost and shipping cost.  This can be expressed as a percentage of retail sales.  If prints are being sold at retail for $2.50 for a 4×6 and the cost is $.49, then lab cost is 19.6% of retail. E-commerce fees for an event, where the average image size is below 700K, is 5% of retail (in the case of our lab). Credit card processing fees are 3% of retail.    Shipping cost is usually neutral, at worst, in this calculation because you would normally set shipping charges higher than the out-of-pocket cost.  Therefore, your total variable costs are about 40% of retail sales.
12%(photographer cost max) +19.6% lab cost +5% e-commerce fee +3% credit card cost= 40% total variable costs.

Fixed costs should be added to variable costs for the average number of photo events in a month.            
The Variable Cost is calculated by the formula Fixed Cost=R(Revenue)-.4R
Revenue Reducing:  Variable Cost Revenue=Fixed Cost/.6   In our example: Fixed Cost=$5,000
So: Variable Cost -$5000/.6=$3,333
Break Even=Fixed Cost+Variable Cost.  So, $5000+$3,333=$8,333
This tells us we would need to take in $8,333 to cover all expenses and not make any profit.

In our earlier example, our total costs as a percentage of sales on a volume of $15,000 per month would be 40% variable and 33% fixed for a total of 73%.  This would leave 27% profit or $4050.
Since volume varies from month to month, you must do this analysis individually for each month because you will need to set your fixed costs low enough that you will break even or lose very little during slow months.  Likewise, you will need to set your fixed costs at a higher enough level to be able to effectively handle the higher volume of business in busy months. 

If you calculated the variable costs accurately, then they should take care of themselves because they go up and down with volume.

Most businesses hire extra people for busy seasons and then retain the extra people too long, thinking that they are necessary, even though the busy season is past.  Employees are skilled at looking busy and elongating tasks to fill the time available. So, lack of productivity is not always readily apparent.  It is imperative to cut back fixed costs, i.e. office overhead, at the earliest possible moment.  In fact, this should be planned before the new seasonal employees are hired and they should be informed that the job is temporary.

Knowing your breakeven point and how much you are spending per month on payroll is key to operating a profitable business.  Although there is a little work involved in doing the calculations, the time is well spent as you will insure the economic health of your enterprise.


Get every new post delivered to your Inbox.

Join 142 other followers