Market Capacity vs Cost of Doing Business

This question has perhaps several obvious answers, but I am going to pose it anyhow. What do you do when your minimum costs of doing business per day as defined by the number of days available to work, is a higher figure than what the market will allow for that particular product or service?

Example, a photographer decides he can schedule shoots to the tune of 60 four hour shoots per year (part time). His costs divided by 60 equals a certain amount per shoot, but the local market will only sustain 60-75% of that amount per shoot. What should said photographer do? Shoot more? Find a different market? Reduce costs? All three?

Just looking to see what perspectives the collective can bring out in this situation. How have you guys made a strong value added proposition to clients who seem to only think in bottom line numbers? What communication techniques have you used to show how what you offer is of value to the client and their bottom line even at your price, thus convincing them to make a decision based on more than just cost? I am thinking along the lines of real estate, local restaurants (small), and other small local businesses who aren't too far from just using their own point and shoot and being happy with the results. I live in a very small town where almost every business could be described this way, so please keep that in mind when considering the above.

Thanks in advance.

times are tough, if you cant make enough money in a given market you find a new market or find another way to supplement your income.

For my day job, I work in online advertising. I learned at one of my previous companies that the $100k client is going to be much easier to manage vs the $20k client vs the $5k client. The $5k client probably saved the money up over a long period of time and is going to be watching every single penny like it's his last, while the $100k client may not even notice a $5k or $10k discrepancy in billing.

The same applies to photography. The lower your rates, the more your clients will be asking for justification. I just got hired by a client (a Fortune 500 company) who is paying me 4-digits for a 3 subject shoot (3 individual shoots, 1 hero shot each with 2/3 alternate options for layout). The process of negotiating pricing and closing the deal was probably the smoothest of any client I've ever dealt with. Meanwhile, the editorial clients I work with negotiate over every $20 on every invoice I send them.

I read somewhere that some wedding photographers found that increasing rates from 1k per wedding to 10k per wedding led to 3x more revenue and 10x less headaches. I'm probably not getting the numbers EXACTLY right, but you get the jist

JacobPhoto wrote in post #15689255
For my day job, I work in online advertising. I learned at one of my previous companies that the $100k client is going to be much easier to manage vs the $20k client vs the $5k client. The $5k client probably saved the money up over a long period of time and is going to be watching every single penny like it's his last, while the $100k client may not even notice a $5k or $10k discrepancy in billing.

The same applies to photography. The lower your rates, the more your clients will be asking for justification. I just got hired by a client (a Fortune 500 company) who is paying me 4-digits for a 3 subject shoot (3 individual shoots, 1 hero shot each with 2/3 alternate options for layout). The process of negotiating pricing and closing the deal was probably the smoothest of any client I've ever dealt with. Meanwhile, the editorial clients I work with negotiate over every $20 on every invoice I send them.

I read somewhere that some wedding photographers found that increasing rates from 1k per wedding to 10k per wedding led to 3x more revenue and 10x less headaches. I'm probably not getting the numbers EXACTLY right, but you get the jist

I agree with most of what you are saying. But how do you factor this in when you would have to travel outside your local market to find that $100k client? I suppose I could find a hand full of clients around here that are willing to spend more than average Joe, but compared to more metro areas, it is all relatively chump change. Maybe that is my answer, it is all relative.

Thanks!

...if you haven't got cash flowing into your business: you aren't in business.

Being in business ain't easy. There isn't a single right answer. If you drop your rates then it "positions yourself" differently in the marketplace and you will get different clients. Don't drop your rates and you end up not being able to eat.

We can't all land that fortune 500 client and if your photography skill level and your ability to sell yourself isn't there yet: then pricing yourself like you are is a mistake. The key is proper financial forecasting and business planning: knowing where you need to be to hit your financial targets and the ability to change the game plan when you are not. That game plan change might be to increase your price, it could be to decrease your price, it could be to stop playing with building your website and getting out on the streets and knocking on doors. If you need to lower your sights: even for a short while, then do it.

But if the cashflow is slowing down or stopped: its time to do something. That is individual to you and your business. And if you haven't written your business plan yet: then get busy writing it.

How do you know a market will only bear X amount?

Thomas Campbell wrote in post #15689599
How do you know a market will only bear X amount?

I don't know yet, I am trying to gain sales skills so that when the inevitable small town business owner says they can't afford x, or that they'd rather just not spend money and use their point and shoot, I have an understanding on how to sell them on the value of what I offer. Also, I read a lot on here about not lowering your prices so you don't position yourself as the low cost (low value) provider in your market. But what if your entire area is a low cost market (low income area)?

Truth be told, I haven't had a chance to really test the market and see what it can support. I am just starting out but hopefully, I will discover that it is not as bad as I am expecting. If it turns out to be less than ideal, I will just have to lower my income projections accordingly. My fixed costs are very minimal, so if I lower my personal income expectations, as well as profit expectations, I think I can adjust to the situation. I originally decided that if I can't earn at least the same as what I earn at my day job, then I won't do it. I might have to re-evaluate that, but perhaps not.

If anything, I thank you and others for asking questions that get me thinking about things I haven't considered yet.

Easy, either raise the bar and the expectations so the market will bear more, or lower your CODB, or quit.

Most likely the market will bear alot more than what you think it will if you market yourself correctly and do good work. Its all about the right clients.

Thomas Campbell wrote in post #15689599
How do you know a market will only bear X amount?

For me, that is easy to determine. Although I think I offer very reasonable rights-managed rates for use of my images, I frequently get turned down - and the reason the potential clients turn me down is because of price. And keep in mind that there are clients that have contacted me, asking about image use. They are coming to me, making the initial contact. Then when I give them a price, they decline, or counter-offer. That pretty much tells me what the market will and will not bear.

tlzimmerman wrote in post #15691253
Easy, either raise the bar and the expectations so the market will bear more, or lower your CODB, or quit.

Most likely the market will bear alot more than what you think it will if you market yourself correctly and do good work. Its all about the right clients.

Very true. Thanks. I think it is only hurting me to have a certain expectation for what the market expects. I should just focus on providing the best product and service I possibly can, then adjust prices as I see what is working and what isn't. Eventually, I hope to have enough command of my craft and of the market that I can simply use pricing to control how much I work, if that makes sense.

Tom Reichner wrote in post #15691476
For me, that is easy to determine. Although I think I offer very reasonable rights-managed rates for use of my images, I frequently get turned down - and the reason the potential clients turn me down is because of price. And keep in mind that there are clients that have contacted me, asking about image use. They are coming to me, making the initial contact. Then when I give them a price, they decline, or counter-offer. That pretty much tells me what the market will and will not bear.

It is possible that you have learned what some of the market will bear for your level.

Thomas Campbell wrote in post #15694773
It is possible that you have learned what some of the market will bear for your level.

This sentence is interesting for me. Especially the part bolded (my emphasis). Do you believe that as one gains skill and competence they can continue to raise prices, regardless of what the particular socio-economic conditions in a geographic location can support? Or do you believe that there is ultimately a max that no matter how much better you are at something, you have hit the ceiling? I guess what I am getting at is that more goes into the fees you can command and what the market will support than just your skillset.

I understand that as you gain skill and raise prices, you enter a separate segment of the market and leave a lot of the other segments behind. But what do you do if that ceiling is fairly low. Low enough to cause some concern about the long term viability of the business? I think everyone dreams of progressing to the point where they can command the highest possible fees and pick and choose clients. But what do you do if the highest possible fees for your area aren't much to write home about?

This is all hypothetical and I am not convinced my area can even be described as such. Just thinking about extremely small, rural towns without a lot of wealth. What may be the greatest thing in town there might cost less than the entry level guy-with-camera in a larger wealthier area.

I think that just because you get rejected because of price doesn't mean that is the ceiling for the region. It may just be that you have priced yourself over your level of skill or that your skill isn't sufficient enough to warrant considerable expense over free.

Thomas Campbell wrote in post #15695196
It may just be that you have priced yourself over your level of skill or that your skill isn't sufficient enough to warrant considerable expense over free.

Thomas,

In my situation, I don't think pricing myself "over my skill level" is the problem.

Consider the following real-life situation:
Someone contacts me asking what I would charge to allow them to use one of my Whitetail Deer photos on their business card. I research the person, and learn that they are an amateur, freelance outdoor writer that gets one or two articles published each year. So, I reply to them saying that nonexclusive use of the photo for their business card will be $25. They reply saying that is just too high - that they don't need such a good photo after all, and they will just use something of lesser quality that they can get for less, or free.

When selling my wildlife photos to local agencies and businesses it is the same way. They ask about the cost for licensing a photo for a particular use, and I reply with a modest fee. They reply that they would love to use my image, but they simply cannot justify the cost, so they will use another (local) photographer's image instead, because they don't have to pay as much for it.

So, in light of that, I'm not sure where your "for your level" phrase fits in. Except that many potential (local) clients decide that they really don't want to have to pay for my level, and will just settle for lower-level, lower-priced images instead.

Keep in mind that thee basis of this thread was about making local sales, within one's community. And that is what my response was based on. At a national and international level, the market is quite different, and I "get my price" routinely when dealing with businesses and publishers outside of my home base.

Thomas, I wonder if you are familiar with the marketplace for wildlife images sold as stock? In particular, game species, sold to the hook & bullet / blast & stab market? From your response to me, it seems that maybe you are not familiar with my particular niche, nor with my work and how it fits into that market.

The result of "No sale due to price" can be due to many factors.
1. Don't have the money
2. Have seen something or know where to get something cheaper.
3. Free alternative
4. They judge your work as less valuable than the price
5. You aren't skilled enough to charge what you charge
6. For your same price, they can get someone that is more skilled

I'm just pointing out that just because a business has negative price feedback, it may not be because the market can't bear the price.

That could be the case. I'm not in your market. I am speaking in general terms. Just because you don't make the sale at a price doesn't necessarily mean the market won't bear that price.

I do more landscape, but don't sell as stock. The market is too saturated. I do sell my editorial work as stock. My landscape work I sell as art. I don't dabble in wildlife. But I am very familiar with how stock sales work.