Turning Pro - Understand your Business costs

[DJW]

I was going to post this at the end of PeteMCs latest thread, but thought this would be better on its own.

Most of us dream of being able to make a living out of our hobbies. Let's say you have the skill, drive & create the opportunities to make this happen. You now need to understand what your Business costs will be for the year, including your salary. This will give you a minimum amount of revenue you must achieve.

From my Mgmt/finance experience in Corporate IT land, the real cost to a company of an employee is double their salary. This is with large economies of scale, so for a 1 man band this could be more or less. I'll try & list what costs will be incurred by your business (others can add if I've missed anything)

Premises
Rental costs
Mortgage costs if buying
Rates
Utility bills
Telephone / Broadband
Insurance
Furniture
Maintenance
- the above is still applicable if you use just 1 room in a house (take a % from house costs)
Studio / location rental (*)

Equipment
All Camera equipment & Accessories
PC equipment, printers & Accesories
Consumables (batteries, printer ink, paper)
Hiring of equipment (*)
Software
Maintenence
Support (eg. PC support)
Insurance

Transport
Vehicle, including maintenance, insurance, TAX
Shoot transport costs - Petrol, Parking / Taxis, trains, planes etc (*)

Offsite Accomodation
Hotels / B&B's etc. (*)
Meals (*)

Marketing / Advertising
Magazines, Radio, TV etc
Internet - Web site Design
Web hosting
Entertaining (*)
etc..

Employee Salary / Benefits
Salary
NI
Pension
Sick pay
Holidays
Training

Other
Accountant
Admin
Hiring of models for shoots (*)
Agencies

(*) - These are likely to be non core costs - eg. only applicable to specific shoots

Note certain items above such as hardware/software purchases can be spread over several years via loans etc.

I know it looks a bit daunting & some people would say all the above is not necessary, but there is a big difference between running a successful business (however small) & being a successful Photographer. One cannot work without the other & from my experience it's very hard to juggle both hats.

Your salary is just 1 part of overall costs. Therefore when pricing jobs for the week ahead, you not only have to cover 37 hrs pay of the Photographer for the week, but all the additional costs above. I won't even go in to continegency for lax periods

Hope the above is of help to some people, or at least a good starting point for discussion. I'm sure those who have run their own companies will have more understanding on the subject, which they could share with us.

 

[Catdaddy]

Really useful info, Dave!

One thing (if I may add) is the 'rates' issue - your local council will only charge business rates if the premises you use is solely dedicated to business use. If you work from home, they ought to charge business rates only if you do silly things like have a constant stream of traffic outside your house and clog up the streets with it, disturb the neighbours, etc...

 

[Cav]

Good info DJW, the true costs of living truly are daunting when we look at them.
Take me, for example, reasonably comfy in a nice house and no money worries...other than being over $200 000 in the red stuff! And no D-SLR...

Getting back to the point, for those of us who wish to get to the point where we are selling a few photos on a part-time basis, registering as a business will make some stunning tax savings on kit, lenses, PC consumables, etc. I think?

Add to that signing up for a one week correspondance course in anything cheap (just to get a student number), and you can also get CS2, etc etc at student rates and costs can be cut dramatically, so there can be a happy flip-side.

 

[Steep]

Buy the book "My Mamiya made me a million" if you can get hold of it. Written by a guy who turned pro, tells what he did how he went about it and the mistakes he made, It's a very good read too.

http://www.amazon.co.uk/exec/obidos/ASIN/0951791605/203-9074726-3315125

 

[Ross]

Great post - worthy of a sticky perhaps?

 

[barrymoir]

Great stuff, interesting read

 

[Venomator]

From my Mgmt/finance experience in Corporate IT land, the real cost to a company of an employee is double their salary.

Excellent rule of thumb Dave - and true across most businesses I have been involved in ... small or large !

Comprehensive listing there too - Profit is all I would add !