Working out a pricing formula is key to making sure your business is stable and you end up being able to go home with a paycheck. But it’s an area that everyone struggles with – at least initially.
First mistake: quoting a flat figure.
Many photographers will figure their time and expenses and then quote a flat figure for the entire job. ("I can get it all done for $3570.") This is a bad idea for several reasons.
First, clients may balk at a large number with no explanation. But when you itemize your quote and explain that your fee covers equipment rental, the cost of hiring a second shooter, props, product styling, image licensing (royalties) – and not just your time – you appear professional and trustworthy.
Itemizing also helps you understand what you should be charging so you’re not losing money on a deal or paying out of pocket for necessary costs. Itemized invoices are your biggest asset in determining your pricing structure.
Breaking down your costs is your single best thing you can do to ensure that your commercial photography business remains profitable.
Now, the fun part –figuring out what to put on that invoice!
What Goes On An Invoice?
Three things. Well, three kinds of things, all itemized and clearly defined:
Your time, the equipment and tools you need, and an appropriate licensing agreement. These make up your creative, production, and licensing costs.
Creative Costs
Your creative cost is a calculated amount that covers all of the costs of doing business (like studio rental, electricity, insurance, etc) in addition to your personal paycheck!
This has nothing to do with the quality of your images! It is simply the cost of hiring you as a photographer. (Don’t worry, we’ll help you figure this out in a minute.)
So many photographers don’t separate these two concepts. They feel like they can’t ask for the money they need to make to stay in business because they aren’t famous or “awesome” enough. I’m here to tell you that you. are. awesome. already.
Don’t be afraid to charge what you need to stay in business.
Production Costs
These are simply the costs incurred to produce the photos you were hired to create. Production costs are extremely variable and will be different for each job you do.
One project may be very simple and won’t require more than you and your gear. Another may need a team of 4, travel expenses, and equipment rental.
Use your experience and a little research to come up with accurate quotes for each item. It’s not uncommon to mark up production costs a little to cover your research time, transportation of rented goods and setup. This is not to make a profit – you’re simply valuing your time and including a small buffer in case your estimate was too low.
Licensing Costs
When you create an image, you own the copyright to that image. When you give commercial images to a client, you are not selling them – they are in effect renting them. You own the images, the client uses them. Including a licensing arrangement ensures fair compensation for the images you create into the future.
Consider the case of the Nike swoosh. The designer of the iconic logo was paid $35 – flat. Nike was a young brand, the creator had no idea the company would be so successful. By not including a licensing arrangement, the creator had no legal claim to share in the enormous success of their own work.
How To Figure Out Your Creative Cost
Step 1. Determine Your Operating Cost
Start by adding up all of the costs that you incur just by being in business. Figure out your real operational cost just like your home budget. Include everything. Don’t feel bad about it. This amount will be different for everyone.
Renting a studio in Miami is going to cost more than renting a studio in Asheville. Insurance varies by location, too. Same for electricity, travel, equipment maintenance, marketing... you get the picture.
The cost of doing business calculator by the NPPA is an excellent resource tool to help you figure out your true operating cost.
Got your operating cost? Now let’s talk about your income.
Step 2. Determine Your Income
Expenses are only half the story. You need to make a living, too!
Too many photographers sell themselves short because they feel guilty charging higher rates for their work. Remember: You matter. You are worth it. You are a professional. You deserve to make the salary you require.
If you haven’t figured your necessary income by now, it’s a great time to start. There are a ton of personal budgeting tools out there to help you break down your personal budget and salary goals. The NPPA calculator includes a section for you to input your target income, too.
Again, this number is deeply personal and depends on your individual budget, lifestyle, and expectations.
Step 3: Determine Your Billing Days
You’re not shooting 24/7, 365 days a year.
When all is said and done, most professional photographers can spend less than 1/3 of their time actually shooting – some even less than 20%.
Think about all the time you spend paying bills, creating invoices, building quotes, answering phones, marketing, blogging… it’s no small job. But they’re necessary steps to building a healthy business.
Try to figure out a rough average of the time you spend actively shooting. Some months may be busier, others may be less busy depending on the seasonality of your industry and business. We’re looking for a reasonable average of all your time in a year.
Step 4: Plug In Your Numbers & Determine Your Creative Cost
Let’s assume I work an average of 5 days each week. There are also about 3 weeks total I’d like to have off each year for vacation and holidays.
This leaves me with about 240 working days each year.
If I spend 1/3 of my time actually shooting, that means 80 days shooting in a given year.
If I need to make $100k to cover my operational cost and my personal income, I know that I’ll need to bring in about $1,200 a day.
$1,200 is my daily rate.
Use this formula to determine your daily rate:
(Operational Cost + Income) / Shooting Days = Your Daily Rate
Using this model, I can make sure that my pricing covers not only the time I’m shooting, but also my “downtime” managing my business and getting new clients.
Again, this number has nothing to do with the quality of your work. It’s what you need to be charging – at a minimum – to stay in business.
Once you have your base rate, you can adjust as needed. As you gain popularity and business picks up, you can absolutely charge more.
Using Your Daily Rate To Price Partial Days/Hourly Rates
Not every job is going to last a full day, but knowing your base daily rate is helpful for figuring out more complex pricing models.
Let’s say you book a client for half a day. If your day rate is usually $2000, should you charge $1000?
It’s a better idea to charge a little more for partial days because there’s no guarantee you will be able to fill that extra time with another client. Plus, there may be travel time that eats into your workable hours. Instead of charging $1000 for half a day, you might consider charging $1500.
Same thing with mini-sessions or other kinds of hourly shoots. Divide your base rate by the number of sessions you can reasonably expect to book each day, and then mark up that price to cover empty slots, no-shows, and cancellations.
Example formula for determining mini-sessions:
(Daily Rate / Number of Sessions Per Day) x 1.5 = Session Cost
Using this model, I can still earn my daily rate even if only I only fill 75% of those slots.
How To Determine Your Licensing Cost
The last piece of your pricing puzzle is your licensing cost, and it’s perhaps the most important part of all.
Without a license agreement in place, you can lose out on extra money that you are rightfully owed as the legal owner of your images. Licensing is also an ethical way to justify charging more for bigger clients.
Yup! Let’s think about this scenario:
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A local shoemaker wants 20 product photos.
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Nike also wants 20 product photos.
20 shoe photos are 20 shoe photos, no matter who you take them for. It takes the same amount of time and creativity to shoot for a large company as a small one.
But should you charge the same rate for both jobs?
No! Here’s why:
The images you produce for a large, multinational company have the potential to generate much more revenue than for a smaller company.
Mom & pop may only use your images in a few places: on a billboard, on fliers, or on their website. A megacorp may use those images internationally, in all their retail locations, on TV ads, in print, etc. They have a wider reach, they’ll be used more, and they stand to make more money from your work. YOU deserve a portion of that difference.
A variable licensing fee will help you price fairly, for you and for the company. The key is determining exactly how companies will use your images and then charging them accordingly.
Lifetime Agreement vs. Limited License
Some clients think they are buying the images, not renting them, that they can use the images forever for free. And you can absolutely offer a lifetime agreement. But most companies replace their imagery or retire products after a few years. A limited license term is often a better deal for clients.
Something like a 3-5 year limited license on shoe photos is smart, because they’ll probably retire those styles in a few years anyway and will need new photos for new product lines! (Your client also won’t have to pay for years and years of fees they don’t need.
Once you and the client agree on the license term, you can work on pricing that license and laying out the terms of your agreement.
What’s Your Fair Cut?
Start by defining what the company will do with your images. Ask for specifics.
How long will they use your images? Will your images go on product packaging? How many boxes will they produce? How many magazine ads will feature your photo? What is their marketing spend? Why do you need to know this?
A good rule of thumb is to base your licensing fee on what the company will spend on advertising & packaging using your image. Additionally, you need to know numbers because a sliding scale usually works best, rather than charging a flat percentage.
For example, If the tiny shoe shop uses your image on a billboard that costs $3000, a 15% licensing fee of $450 sounds reasonable. But if Nike uses your photo in $500,000 worth of ads and packaging, that 15% rate amounts to $75,000. That’s astronomically high!
For Nike’s huge budget, maybe a 1% license fee is more appropriate; which is around $5,000. Apply that 1% to the billboard, however, and you get only $30. Hardly worth it.
You will need to develop your own sliding scale for licensing fees to suit your different markets.
Example of a sliding scale for commercial licensing:
$1-1,000: 15%
$1,000-5,000: 10%
$5,000-50,000: 5%
$50,000-250,000: 2%
$250,000+: 1%
Licensing will also vary depending on who you’re shooting for.
Corporations will use your images differently than a magazine or a couple getting married would. Wedding photographers usually don’t have to worry about licensing fees at all, because the images are for personal use. If you focus on wedding photography instead of commercial, you’d probably stop at having the couple sign a model release agreement and not include an additional licensing cost.
The ASMP has a really great licensing guide for photographers on developing workable licenses that cover many kinds of photography.
Putting All The Pieces Together: Building The Final Invoice
We worked out our production costs with a little research, creative costs with some basic budgeting techniques, and our licensing cost by evaluating the project requirements and how the client will use the images. Now it’s time to put it all together on an itemized invoice.
Here’s an example of the process from start to finish:
I have determined that my combined operating and salary requirements are $100,000.
Shooting about 80 days a year, my daily rate is $1,200.
A shoe manufacturer has contacted me to photograph their new collection. They have 20 styles and require 3 photographs for each.
I determine that I can reasonably produce the 60 images in 1 day with the help of an assistant. (Their daily rate is $450.) We will also rent some props ($200) and equipment ($750) to complete the shoot.
The shoe company will use the product images in the following ways:
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Magazine ads: $3,000 total spend in one year
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Packaging: 60,000 boxes costing $5 each = $300,000 total
My invoice may look like this:
Not bad for a day’s work.
References:
- https://fstoppers.com/originals/freelance-how-work-free-2973 (4-part series on commercial photography)
6 Comments
Sep 9, 2017, 1:18:17 PM
alena - I definitely think that photographers should price their work according to how much time and effort they put in. Some people think it's just a matter of pushing a button, but there is so much more that goes into it. I think a day rate of $1,200 is totally acceptable. http://moormanphoto.com/galleries/families-children-pets/
Jun 21, 2017, 11:45:08 AM
Jared - While this article is helpful, I can't help but notice how much of it was shamelessly taken from Peter House's commercial photography series on Fstoppers. https://fstoppers.com/originals/guide-pricing-commercial-photography-part-4-license-fees-8713
Jun 21, 2017, 11:11:25 AM
Holly H - Hi Jared! Yes, I did read Peter House’s excellent 4-part series as a reference, along with several other very helpful articles.
I’m adding a list of references to accompany this article if people are looking for more reading on this topic!
Thanks for reading and for pointing this out.
- Holly H
Jan 24, 2017, 10:43:00 PM
Amy - Thank you for this article. I found it very informative and helpful.
Cheers!
Amy
Aug 14, 2016, 12:10:21 AM
George - Great article, it's like the ammunition to my gun while negotiating the quote with potential client. BTW - I am a product photographer with 18 years proven Canadian experience.
Here is the question: Most quote requests sound like this: How much you charge? How much per picture? I have 80 products - how much per product?...etc. Of course - as you know - there are so many components you need to consider before preparing final quote that you are unable to give any idea about the price. My answer is - I need more info to give you fair quote - and here comes the list of my questions. Guess what? No answer. Who wins the deal? A "PRO" who gives flat rate $10/image. Somebody else beats him with $7/image. I had projects that require many hours or days of a team hard work to set up product with props and as result it was only one picture they needed. Does it mean somebody who sticks to $7 per images commitment has to work for many hours/days and issue an invoice for $7+tax? How about editing? How about graphic designer work if the client needs to show cross section of the product?
I understand - the client may not understand how many factors may affect the cost. But - what kind of answer should I give to the client that would not discourage him?
Jul 18, 2016, 12:00:35 PM
Joe Cancellare - Love the article in my 30+ years there is also pricing so high you don't get the job especially in these days where any A HOLE with a camera calls themselves a photographer. I believe it's time for us as professionals too stand up educate the public and institute licensing etc like most other professions due to keep the ametures out