Photography marketing

To make money from photography, you need to know your value chain

I’m writing this article because I see a lot of photographers asking the same questions over and over again and thought it would be nice to give you all the tools to answer your own questions. Or at least the 2% of you who search before asking questions.

Why should you listen to me? With the important caveat that you should never blindly trust anyone and should verify everything, I am a business consultant; people literally pay me to tell them how to run their business. I don’t claim to be the smartest person in the world, but I’m confident in what I’m saying here.

The value chain

The purpose of this article is not to answer your questions but to give you a wonderful tool that you can use to solve your own problems. In fact, it will solve almost every trading question I have seen on the web in the past few months.

The tool takes a day to analyze what the “value chain” is in your business. A value chain is just a fancy term to describe the steps you take to create a valuable product, including the value/cost at each step.

For example: if I run a lemonade stand, I buy $100 of product and sell $200 of product. If it takes 1 hour to set up the physical booth, 3 hours of selling, and 1 hour of begging my mom to pick me up, then we know I’m creating ($200 – $100)/(1+3+1) = $20/hour.

We also know how much value each step creates. If I wanted to hire a buddy to set up the stand, then we know that unless they’re under $20, it’s not worth it. If I want my little brother to run the booth, then unless they’re under $60, it’s not worth it.

Why does this apply to photography? Because like any business, making “lemonade” is only one step in the process. You also need to do: business functions (eg. invoicing), marketing functions (eg. advertising), process functions (eg. editing) and other little things (eg. transportation). People overlook them or underestimate them, and it will ruin your profit margin.

Examples

Let’s look at some examples of how you can apply this to your daily life.

Example 1: A friend asks you to photograph his product/event/person/dog, what should be the discount amount for your friends and family?

Many people don’t realize this, but there’s actually a business case for giving friends and family a discount. When you look at your value stream, look at all the steps that you don’t need to do because they’re a friend. You don’t need to advertise because they came to you. You don’t need to network because you were already friends. Your communication time is less because you can sort out some details when you normally spend time with them.

Let’s say you normally charge $900 for a specific job, and you add all those savings up and you get $300. If you’re having trouble finding clients, you can offer them the job for $600, saving them $300 and earning you profits you wouldn’t otherwise get. If you’re full-time with clients, you can offer them the job for $750, save them $150, and earn you $150 more than you normally would since you saved all those costs.

Either way, having your value chain and knowing your needs (more customers, more money, etc.) allows you to make a financially smart decision when offering a discount. More importantly, it’s a win-win situation, because you’re both better off if you hadn’t made the deal.

Example 2: You hear about this new app that will help you get clients. Should you join?

This is similar to the lemonade stand example, except it’s reversed slightly. Instead of hiring someone and setting financial limits, you are hired and the limits are set for you. Again, your value stream can come to your rescue and help you decide.

Now, I’m going to assume that anyone considering this type of gig is new to the business, as they always are in my experience. What you need to do first is quickly think about the red flags from your value chain perspective. In previous jobs, how much time was spent getting the client versus shooting/editing? If networking is 70% of your time, then when you outsource that task, you outsource 70% of the profits.

As a new shooter, you might think 70% is an absurd number, but a quick Google search of how much time the pros actually spend shooting will validate it.

Photographers commonly spend about 15% of their time filming and editing, with some spending only 6% of their time. So if the only thing you want to do is film/edit, you’ll only see 15% of the profit. How does this app sound now?

For most photographers (not to mention new ones), you can expect a small restaurant to pay Creating a Value Chain

So how do you create a value chain?

I know it can be tempting to steal the % off internet articles, and while that’s a good starting point, it won’t work. Your work is different and requires different efforts. Your clients are different and require more/less work. Your location is different and needs more/less time to move. More importantly, your business model makes a huge difference, are you trying to sell prints? Are you trying to sell to individuals? Are you trying to get repeat customers? Create your own value chain.

For a small new photography business, what you should probably do is:

1. List all the steps you need to take to make a profit. Include things like advertising, networking, doing your finances every month, nagging customers for payments.

2. Record the time it will take for each step. If you don’t know, seek advice from the pros, if everyone hates you, make your best guess and adjust, but use it as a last resort.

3. Offer a reasonable hourly rate for each step. Think of it this way: don’t ask what you want to be paid for each step, ask yourself what you’d be willing to pay per hour for someone else to do it. The reason is that it pushes you to think of these costs as minimum costs, which is what you want.

4. Multiply your hours by your hourly rate and add them up.

Example of a value chain:

Spot 1: Recruit customers. 20 hours per week. $10/hour. $200 total.

Task 2: Shooting/editing. 3 jobs per week, 3 hours per job. $20/hour. $180 total.

Task 3: Transportation. 3 jobs per week, 1 hour per job. $10/hour. $30 total.

Task 4: Commercial operations (eg invoicing). 10 hours per week. $10/hour. $100 total.

What does this tell me?

1. I expect to work 42 hours per week.

2. I expect to have $510 in “costs” per week.

3. For 3 jobs, I need them to pay at least $510/3 = $170 per job.

4. If I outsource customer acquisition, I lose $200/$510 = 40% of potential profit.

5. If I find a client who does not need transportation (for example in my building), I can offer them a discount of $30/$510 = 6%.

To note: These are invented numbers with no real relation to the real world.

Keep in mind that these are the break-even points for everything. So, for example, I wouldn’t price a customer at $170, because that would be “cost-plus pricing,” which is generally considered bad. Pricing is a whole other demon to tackle and should be its own article.

If you want to learn about people much smarter than me, I suggest you start with this article from Harvard Business School. Keep in mind, however, that Porter’s more refined and detailed value chain analysis is intended for companies with different departments. For 1-5 people working in a super small business, it’s not really necessary to get that detailed, but it certainly won’t hurt!


About the Author: Otto L. is an avid photographer who has been photographing for years and is passionate about sharing information that helps other photographers grow in their craft and business.


Picture credits: Photos licensed from Depositphotos