I came across several posts in social media where certain photographers were offering their services that left me in questioning the state of our creative industry. Would such price nowadays sustain our livelihoods?
The question of professional fees have been hounding freelancers since time in memorial, and it’s the topic of heated debate both online and offline with no resolution in sight.
I was immediately triggered and tempted to write a lengthy rebuttal as to why such pricing isn’t good for the industry, blah, blah blah.. you know the usual retort you’d hear from older industry folks. But I stopped myself short of clicking to post. I had to ask, who am I to judge? What’s the story behind such freelancer dropping their price like that? Is there another side of things am I not considering?
Pricing is such a delicate topic where people would easily snowflake over the slightest nugget of an exaggeration. So let’s settle it: How you price your services is up to you. I am not here to tell you how much you should be charging for your creativity. But what I can share out of my limited experience of freelancing for 17 years are certain mental guides that have helped me price the way I do.
First order of the day is detaching yourself and your business, even if the business is named after you. What I did was create separate bank accounts for what I earn in bulk from my business and in turn give myself a “monthly salary” into another account. So when it comes down to my books, how I spend as a person is separate from the business.
We are tied up to our professions to the point it is hard to separate business expenses from personal ones.
Most freelancers, especially in the creative fields are pretty much leaning towards the right side of the brain. Meaning, we aren’t really good with numbers, but we are hella awesome when it comes to chucking out quality work. Me included.
So then, what is the Goldilocks zone of pricing? Something that adheres to our value while at the same time empathizing how the market is around us and the clients involved.
Since we are searching for the holy grail of freelance pricing, what kind of figures are we talking about? Yes, there is a strong argument about everything being relative, but despite adhering to Einstein (#titojoke), one thing is consistent and a good starting point is what I personally call, “The Ground Up Method”
The Ground Up Method starts from expenses. Take some time and open up an Excel file or jot things down if you’re more old school. Measure for these factors and be honest with yourself. Take note, these are “business expenses.” Your trips to the grocery or your latte from Starbucks aren’t included. Those factor into you taxes, which is for another topic altogether.
As much as I hate to admit it, we must have some level of financial literacy if we are to survive as a business.
There is thing looming cloud called overhead. Overhead are the expenses you incur as part of your operations as a business. You will incur these expenses whether you do something or not. Rent is a basic example of overhead.
If you are working from home, treat your business as if it was renting from your home. Also account for electricity, water, internet, and other utilities you would need if your business were to “live” outside of your house. When the business does grow, you would have no other choice but to move out anyways. Already account for such so teething pains are managed.
Operational expenses. This goes as basic as the gas you spend going back and forth for your clients, the minutes / data on your phone, etc… This factor is further compounded when you start employing people to help you out. Salaries, benefits, etc…
Measure for depreciation cost. Your equipment through wear and tear will not last forever. One way or the other, you would have to replace that for a better model. You must be prepared to set aside funds for this. Worst case, having to buy due to equipment breakdown.
Part-time doesn’t mean part-pricing. The day jobs and other sources of income you have (asides from photography), are taken for granted. Because whether you get the job or not, you will have a salary. That skews the way one would compute for operational costs. Remove any safety nets of a regular income stream and compute as if that was the only way for you to earn.
This is also when you start considering one of the basic terms in a business: Return On Investment (ROI). How much money do you need to earn before you gain back what you invested on? This is where depreciation cost comes into play in setting aside the money. What I am even sharing is a very crude form of computing depreciation, so my apologies to all accountants out there.
How much money over a set period of time do you need so you can buy / replace that gear you spent on? Let’s look into a camera as an example:
Canon EOS R is priced at P 140,000.00 on average. As a professional how long would you think you would be using such camera? 3-5 years? Let’s compute for four (4) years.
4 years = 48 months
P 140,000.00 / 48 months = P 2,916.67 / month.
In order for you to replace your EOS R in four (4) years, you would have to set aside at least P 2,916.67 a month. Now do that for all the rest of your equipment. As the numbers stack up (and I’m sure they will), the only way to you to compensate is either raising your rates per job or getting in more volume of work. The latter of which is harder considering there are finite number of workable hours in a day / week / month. Not to mention, you are only human, and we need to rest our brains in order to come up with the best ideas.
Paying for your taxes. As much as I hate myself, this is a necessary evil. If you want to deal with bigger clients down the line, you would have to register your business. That’s the reality of things. Other businesses would require for you to have an official receipt, which in turn obliges you to pay for taxes. Salaried people don’t have to worry about this since it’s their employer’s job in taking this out automatically. But as a freelancer, you would have to compute this on your own (or through your accountant). If you don’t do this right, you’d end up paying for more than your fair share.
Only then you can compute for the kind of lifestyle you live. That’s the “salary” component your business can give to you. Personal expenses? Now that is another Pandora’s box to open, or perhaps another Excel document.
I honestly don’t have an answer to the perpetual question of costing, and if you have a better idea on how to works with everybody, lemme know.