There are 3 things to consider when building an effective pricing structure for commercial photography:
Each is important in ensuring fair and adequate compensation for your work, your time, and your expertise.
The #1 mistake in pricing commercial work is quoting a flat figure for the entire job and leaving it there. Why?
Breaking down your costs is your single best tool in understanding your pricing.
Clients may balk at a large number with no explanation. But when you explain that it 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.
It 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.
On your invoice you’ll include line items for your time, the equipment or help you need to produce the required images, and an appropriate licensing agreement. These make up your job’s creative, production, and licensing costs.
This is not the quality of your images. It is the cost of hiring you as a photographer.
Your creative cost is a calculated amount that covers all of the costs of doing business and being reasonably compensated for your work.
If you expect to make $50,000, and you shoot 100 days of the year, DO NOT CHARGE $500 per day. If you do, all of your equipment fees, studio rental, insurance, etc will be coming out of your pocket, leaving you with a pittance. Don’t be afraid to charge what you require.
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 every job you do.
One project may be very simple, and will not require much more than you and your gear. Some projects may require a team of 10 who will need to be fed for a week. Some projects may require travel costs or renting equipment.
Use your experience and a little market research to come up with accurate quotes. Note that it’s not uncommon to mark up these costs a little to cover your research time, transportation of rented goods, or setup. You’re not trying to make a profit off of these items, you’re simply valuing your time and including a small buffer in case your estimate was too low.
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 them, they use them. Including a licensing arrangement ensures your fair compensation for the images you create.
Why are licensing costs important? Think of the Nike swoosh. The story goes that the designer of the iconic logo was paid $35 – flat. Nike was young, 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 success of their own work.
This is the total of the costs you incur just by being in business.
It’s personal, because every business is different. Renting a studio in Miami is going to cost more than renting a studio in Asheville. It just is. Insurance varies by location, too. Same for electricity, travel, equipment maintenance, marketing… you get the picture.
Start figuring out your real operational cost just like your house budget. Include everything. Don’t feel bad about it.
The cost of doing business calculator by the NPPA is a great resource and has an excellent calculator to help you figure out your operating cost.
Got your operating costs? Now let’s talk about 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.
What is your necessary income? If you haven’t figured that out 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.
Again, this number is deeply personal and depends on your individual budget, lifestyle and expectations.
You’re not shooting 24/7, 365 days a year. How much time do you reasonably expect to shoot?
When figuring this out, remember that there are 3 kinds of work that you do: admin, sales, and shooting.
Admin – You need to take care of your business. That means time paying bills, creating invoices, building quotes, answering phones… It’s no small job. Set aside time to take care of business, so you can continue shooting.
Sales – Getting new sales should be just as important as tending to your existing clients. You can expect to spend just as much time building relationships, answering phone calls, networking, marketing and blogging as you do maintaining your business.
Shooting – This is the time you spend actively shooting. Some months may be busier, others may be less depending on the seasonality of your industry and business. We’re looking for an average of all your time in a year.
When all is said and done, most professional photographers can expect to spend less than 1/3 their time actually shooting, some even less than 20%.
Let’s assume I work an average of 5 days a week. That’s about 260 days a year.
In that time, I spend about 1/3 of my time managing my business, 1/3 of my time getting new accounts and 1/3 of my time actually shooting. (This is an optimistic guess.)
That leaves me around 80 days of actual shooting in a given year. If I need to make 100k to break even between my operational cost and my personal income, I know that I’ll need to bring in about $1,200 a day to break even.
$1,200 is my daily rate.
By using this model, I can make sure that my pricing covers not only the time I’m actively shooting, but also my “downtime” managing my business and getting new clients. This number is not about the quality of your work, it's about 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 try to charge more.
Not every job is going to be full day, but knowing your base day rate is helpful to figuring out more complex pricing models.
Say you book a client for half a day. If your day rate is $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 with mini-sessions or other kinds of hourly shoots. If you’re booking holiday mini-sessions, divide your base rate by the number of sessions you reasonably predict to book each day and then mark up that price a little to cover slow days.
How can you justify charging a large company more than a small one? It’s all in the way they use your images.
It takes the same amount of creativity and time to shoot for a large company as a small one. But you need to retain the ability to be flexible in your pricing without price-gouging. The ethical way to account for this pricing difference is with licensing fees.
Your time is not worth more to large companies than to small ones. But! A large company will use your images more than a mom & pop shop will. Those images have the potential to generate much more revenue for the large company than the small one.
If the exact same image will bring in more profit for a large company, you need to be able to protect your claim on helping generate that revenue. A variable licensing fee will be seen as fair, whereas a variable creative fee is not. By building out your fee structure this way, your pricing is built on facts – not speculation.
It’s also fair, because a smaller shop may only use your images in a few places: on a billboard, on fliers, or in their store online. But 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.
Start by defining what the company will do with your images. Ask for specifics.
Find out how long they intend to use the images. Some clients think they are buying the images, not renting them, that they can use the images forever for free. Most companies, however, replace their imagery or retire products after 1-5 years. A limited license term is actually a better deal for clients. With a lifetime agreement, they’ll most likely end up paying too much.
Once you and the client agree on the license term, you can work on making an agreement. Then you can work on pricing that license.
Generally, a sliding scale works best and is based on the company’s total spend on advertising, packaging, etc. using your image.
For example, If a shoe shop uses your image on a billboard that costs $3000, a 15% licensing fee of $450 is reasonable. If Nike uses your photo in $500,000 worth of ads and packaging, your rate amounts to $75,000. Astronomical!
For Nike, maybe a 1% license fee is more appropriate; just $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.
Licensing will also vary depending on whether you’re producing work for commercial, editorial or “retail” clients.
Corporations will use your images differently than a magazine or a couple getting married would. 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, even a guide on how to draw up a license.
I have determined that my operating and salary requirements are $100,000.
Shooting about 80 days a year, my daily rate covering creative costs is $1,200.
A shoe manufacturer has contacted me to photograph their new collection. They have 20 styles, and require 3 photographs for each: 1 front, 1 side, and a detail or “action” shot.
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 equipment to complete the shoot ($750) and a few props ($200).
The shoe company will use the product images in the following ways:
Magazine ads: $3,000 total in one year
Packaging, estimated 60,000 boxes costing $5 each: ($300,000 total)
My invoice may look like this:
Not bad for a day’s work.