You Can't Eat Overhead
But Overhead Can Eat You Up!
I have seen lots of photographers really struggle with excessive overhead. This quote, from my friend Doran Smith - Herndon, VA, is deeper than it first seems. While we all know a nice gallery and studio is important, it must be in balance with your overall operating expenses. We know that with rent, utilities, insurance, and taxes you have to do quite a lot of photography just to break even.
My advice; Be careful during your growth spurts. Moving to a new location can be exciting, but can put you under if you don't have the business to support it. Be careful when investing in new equipment. Digital can be cool, the 'in' thing, but don't do like some photographers, invest big bucks, then try to figure out how to make it profitable. You had better have a business plan in place prior to the purchase. And 'Just because it is fun and I want it!' is not a business plan.
Here are some general guidelines for expenses in your business :
Film 3% Finishing 20% Accessories - frames, albums etc. 10%
Total cost of goods sold 33%
Salaries (not owner, including payroll taxes) 14% Professional services 4% Advertising 10% Office supplies, postage, telephone 4% Rent, utilities, insurance, repairs 6% Auto and travel 2% Interest, depreciation, repairs 4% Education 1%
Profit (owners salary - not spouse's salary) 20%
I learned these guidelines form Lisle Ramsey and have used these as a starting point for evaluating my business as well as other photography studios. Remember, these are guidelines. Some of you will have higher salaries and lower rent. If you work out of your home, your profit margin can go up substantially. My goal is to keep my expenses down and write off absolutely every single legal deduction. Keep every receipt. Don't pay cash for anything you will be expensing. Keep a log of your mileage and make sure every trip you make includes at least one business stop.