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Understanding the Cost of Doing Business

Nikki HarrisonComment

Pamela Jean~Be Brave in Business

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In the April article, I talked about thinking like a business owner, not like a photographer.  Have you given that any thought?  Have you challenged yourself as to what thinking like a business owner means to you?  What does the phrase Cost of Doing Business mean? 

This article is going to address the Cost of Doing Business.  If there were one business aspect that is highly critical to the sustainability of your business it would be this.   Before setting your pricing, creating a sales system or developing your marketing plan, you must figure out your hourly CODB. 

You will start with the number of hours your business is open to clients.  In the example below we will go with 40 hours per week.  You will then go through ALL of the expenses you have in running your business.  Keep in mind, every business model is different, my expenses will be different then yours and visa versa, it is important to take the time to figure this all out according to YOUR business model. 

If your monthly rent is $1000, divide that by 4 (four weeks in the month), which will equal $250 and then divide $250 by 40, (40 hours per week open to your clients) which breaks down your rent to $6.25 per hour.  Do the same calculation formula for all of your expenses, add them together, then you will have your CODB per hour total.  It is safe to say this number will be around $200 per hour to unlock your doors to your clients.  Keep in mind; this number does not reflect your Cost of Goods Sold.  That is a separate from your CODB.

Here is a table to help you visualize;

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You will start with the number of hours your business is open to clients.  In the example below we will go with 40 hours per week.  You will then go through ALL of the expenses you have in running your business.  Keep in mind, every business model is different, my expenses will be different then yours and visa versa, it is important to take the time to figure this all out according to YOUR business model. 

If your monthly rent is $1000, divide that by 4 (four weeks in the month), which will equal $250 and then divide $250 by 40, (40 hours per week open to your clients) which breaks down your rent to $6.25 per hour.  Do the same calculation formula for all of your expenses, add them together, then you will have your CODB per hour total.  It is safe to say this number will be around $200 per hour to unlock your doors to your clients.  Keep in mind; this number does not reflect your Cost of Goods Sold.  That is a separate from your CODB.

Here is a table to help you visualize;

Now let’s analyze a session.  I would like for you to have an understanding of how to figure out how much you are making, or losing on a session.  In this example, I will use a Newborn Session.

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The newborn example is why many photographers find themselves to be a starving artist.  Perhaps you are that photographer.  Do you feel like you are working hard and creating a lot of cash flow, but at the end of a month you don’t have as much money in your account as your thought your should?  Chances are your CODB and Sales are not in line, there is a disconnect in your business.  If you are out of balance with your CODB and time spent with each client there are a several angles to look at:

·      Consider raising your prices.  Depending on your market and your quality of work this may or may not be a good option.

·      Reduce your production time.  If you can cut back on how long the session is, your production time etc, you can get things in a better balance.

·      Increase your sales.  Be sure you are not leaving any money on the table in the sales room.  Create a solid sales system and stick with it!

·      Cut back on expenses, become more frugal with office supplies, phone bill etc.

All businesses are not created equally.  It is so important that you focus on your business model and focus on your financial goals.  Understanding what your Cost of Doing Business is imperative to your business and personal success!

If you would like more information on my Be Brave in Business Cost of Doing Business Coaching Program you can reach me at pamelajean.anewlife@gmail.com.  I do have the Excel Spreadsheet available for download for only $25 click on this  link;  https://pbox.photobiz.com/form/pamela-jean-bebrave-codb-and-free-7-steps-to-successful-sales 

All Chasing Light Members will also receive the 7 Steps to Successful Sales for FREE, an exclusive for Chasing Light Members only.