What to charge? Continued...
For a detailed overview of architectural photography, please start at our Architectural Photography – An introduction page.
Crunch some numbers
Let’s start with the lower end of our day rate range that we found during our quick online search: £500. Over 100 days your income will be £50,000. Could this be this enough for you?
The basic tax rate is 20% on the first £50k of your income, after deduction of your personal allowance. Above £50k, and up to £150k, you will be paying 40% tax. Having earned £50k, If we take the personal tax allowance as £12.5k, you are left with £37,500 taxable income at 20%. Your tax will be £7.5k. To find out more about UK income tax, visit the HMRC website.
National Insurance (NI) rates vary depending on your particular circumstances, so let’s assume NI at 10%; you are going to lose £5k from your kitty.
So far you have lost 12.5k from your 50k gross earnings; you are down to 37.5k through tax and national insurance, and you haven’t even had time to grab a coffee! You also still have to cover your other outgoings such as insurance, studio rent or mortgage, council tax or business rates, electricity, water, phone, car tax, car insurance, vehicle maintenance, broadband, website, IT, software licensing. Let’s call it £10k; and you are now down to 27.5k.
But what about marketing, promotional materials, and business acquisition? Business cards? You would be surprised how the cost of printing anything can hit your pocket over a year.
I’m sure you will have other costs that you will have to cover too.
Refining your numbers
Perhaps now you are beginning to wonder whether your £500 day rate is high enough. You can increase your day rate, but now you have to remember that you are entering the higher-rate tax band of 40% on everything above the £37.5k taxable at basic rate. And the more you increase your prices, the greater the chance of losing a commission. If you start with 100 customers, and lose 2 every time you increase your price, you have to factor that in too, and the results might just surprise you.
As an example, let’s allow 1 different client per day for 100 days, so 100 clients. At £500 per day your revenue will be £50000 for the year. Now let’s increase our day rate, and project that we will lose 2 clients each time we increase our rate by £50. At £550 per day we get only 98 clients, but with revenue of £53,900. We bump our prices up again to £600 per day, but lose another 2 clients. Now we have 96 clients and revenue of £57,600. If we now increase our day rate to £700, losing another 4 clients, our revenue will be £64,400 from 92 clients.
Interesting isn’t it? We are now only working 92 days instead of 100, and we have increased our annual revenue by £14,400. Time for a holiday, with all expenses paid?
But beware, there comes a point where the profit starts to fall off as you increase your rates and lose customers. That’s where the spreadsheet that accompanies this article comes in. You can subscribe to download it at the bottom of this page.
Work smarter, not harder
This is simplistic of course. There are other business costs that come into play too. But I’m sure you will see my point here. You don’t have to flog yourself to death for peanuts. Work smarter, not harder!
What is your output worth?
And then there is the significant factor of what your output is worth. If you make a fine art masterpiece in one day, are you going to give it away for a song, a measly day rate, or create a limited edition and cash in? You really need to sell on value rather than compete on price. If you want to charge more, what’s in it for the client? If you can’t answer that question, no-one will answer it for you. Not so easy is it?
After looking at the spreadsheet, you will probably find that the question to be asked is not “What should I charge?”, but rather “What can I sell at?”
Download the spreadsheet
To help out, I have put a spreadsheet together to help you see things more clearly. Please note that the spreadsheet is intended for use as a learning tool only, not as a business tool. Do not base your business projections on the sample numbers and assumptions contained within it; do your own research, and then use the concept to develop your own business model.
Please subscribe to our newsletter below to download the spreadsheet, and feel free to leave your comments too.
Subscribe to our newsletter!
Subscribe now to download your spreadsheet