Finding your CODB and your hourly rate...

MLeeK · Nov 3, 2012

While I have all of this time on my hands I am cointinuing along on my pricing theme posts...

There is a Cost of Doing Business Calculator for photographers located here: NPPA: Cost of Doing Business Calculator
If you hover over each item in that calculator it will explain it to you thoroughly. I strongly suggest you read those explanations. Reading the ones that you say to yourself "well, I just use my home computer/cell phone/desk/living room..." is REALLY important. Think of it this way: regardless of whether you are working using a corner of your dining room you are using a space and if you didn't have that space you couldn't do what you do. You can remove the underlined parts of that and substitute it with phone, computer, internet and so on. The point is you have to have that thing to do what you do. That makes that item or a portion of it a business cost. I am all for sharing costs to keep them down in any way! If you can share your internet, mortgage/rent, phone, etc, that will make your overhead that much lower.

If you have a zero in any location you need to read again and REALLY think hard about that zero. You really shouldn't have any.
Enter your figures into every box there.

Income Factors:
Desired Salary: toward the bottom of that there is a place to enter your desired salary. I like to leave that out at first so you know what your costs are before you get paid anything.

Non Assignment Income: If you read the description it's pretty self explanatory. For a person starting up their business the probably won't have any of these. If you do, enter them.
Number of days you can bill per year: I actually like to break this down much further than the number of days you will bill for. I want to know the number of sessions, number of hours you will work and number of hours you will shoot in a year. We are going to spend a LOT of time playing with these numbers.

Once you have all of the data entered in you will get an answer for what your total annual costs are, what that cost is divided by 50 weeks and what that is per billable day if you figure it as the tutorial does.

Those are cold, hard costs without a dime being paid to you. If your numbers are roughly low average for a full time photographer we'll guestimate that it's costing you about $30,000 per year in overhead costs. Real. Cold. Hard. Cost. At 50 weeks, 5 days a week that is a weekly cost of $600 and a daily cost of $120

Let's break that down further.
I am going to utilize the numbers that I use, personally for how many planned sessions per year you will shoot. This is actually a very personal number and it's based on you setting up your calendar ahead of time.
I shoot 10 weddings; roughly 40 family portrait sessions; 80 senior sessions; and 170 mini slots per year. That adds up to 300 sessions of some sort. If I break the cost per year down to the cost per session by dividing by 300 I get a cost of $100 per session. The problem I have with that is that weddings are 30 hours of work while a mini session might be a total of 1/2 hour of work. I can't charge the same cost to each type of session. So I wanted to break it down further into WORKING HOURS and SHOOTING HOURS.

WORKING HOURS: This figure came by taking each type of session I shoot and figuring the amount of hours before, during and after that go into it. My figures look like this:
Wedding 30 hours x10=300 working hours per year
Family Session 10 hours x40=400 working hours per year
Senior Session 8 hours x80=640 working hours per year
mini session 1/2 hour x170= 85 working hours per year.
Total: 1425 working hours per year.
If I plug my working hour figure into the slot for Number Of Days You Can Bill Per Year I now get a cost of $21.05 per hour before I get paid anything.

SHOOTING HOURS: I wanted to know this average, even though some session types are more working hours to shooting hours than others. Those figures look like this:
Wedding 8 hours x10=80
Family Session 2 hours x40=80
Senior Session 1 hour x80=80
Mini Session 15 min x170=42.5 shooting hours
Total 282.5 Shooting hours. If I plug that into the slot for Number Of Days You Can Bill Per Year I get an answer of $106.19 average cost per shooting hour. *before I get paid.*

One more figure we need here is going to be your average number of working hours per each shooting hour. You could figure this more precisely by each session type, but I wanted a rounded cost per hour for me to shoot. Simply divide the number of working hours by the number of shooting hours:

1425 (working hours)/282.5 (shooting hours)=5.04 working hours to each shooting hour.

I still need to get paid SOMETHING! I am not in this to donate my time!
How much you deserve to make per hour that you work to YOU for your expertise? I hope you consider time valuable and I hope it's valued to reflect your knowledge and expertise in photography as well as a business person. If you are a sole proprietor you wear many, many hats. You are the marketing division, administration, secretary, receptionist, accountant, graphic designer... If you had to pay someone for each of those roles that cost would go up significantly and you'd have to have someone skilled to do those things. Simply put, don't discount your many skills aside from knowing what you are doing with the camera and computer. You have to have a LOT of education in many fields. However you acquired that education doesn't matter. Education is something we pay for. I pay my computer technician for his education when he fixes everything that I've screwed up on my computer. Most times he doesn't have to use any tools or install hardware or anything. Just his knowledge in how to un-do what I did. I GLADLY pay him to fix that. Your services are equally as valuable and you need to be paid what you are worth. It's not minimum wage.

Don't forget that you also have to pay your own taxes, retirement and possibly even your own health insurance if you are a full time photographer. When you are an employee a portion of that cost is paid by you, but there is also a portion paid by your employer! That's easily 33% of the hourly you decide you are worth. When I figure my hourly minimum rate it is just that, the minimum that I want to make per hour. Let's estimate it low at $20. Based on our 1425 working hours that's only a GROSS income of about $28,500 per year for working part time/approximately 30 hours a week. Not much, but you are also hoping to PROFIT above and beyond that..

Adding the $20 for you together with the $21.05 cost per working hour gives you a CODB of $41.05 per working hour.

So, what is your cost per hour for shooting? Take your average number of working hours to shooting hours of 5.04 times your CODB per working hour of $41.05=$206.90 per hour. That's what you have to take in for each hour you shoot. The client needs to cover $206.90 for each 1 hour you shoot for them for you to cover the costs and get paid your minimum salary.

So, how do I apply that to pricing? First and foremost you have to decide how you want to set up your pricing structure http://www.thephotoforum.com/forum/...-its-not-answer-what-do-i-charge-for____.html. The answer to the question of whether you charge a sitting fee to cover that cost or you have a sitting fee to cover part of it and expect products to make up the rest is going to be totally up to you. As you make that decision don't forget that not only are you hoping to get paid your minimum, but to profit as well and keep that in mind through the whole pricing adventure.