Best Business Practices for Photographers [80]
One way to evaluate what a fair markup rate is for you is to find a day when you are not shooting or doing post-production work for a client and look at the items you typically use for assignments—seamless backdrops, film (if you're still shooting film), packaging materials for shipping and overnight services, and so on. Understand, too, that you will be carrying these expenses for a period of time that ends up being somewhere around 30 to 45 days, with some clients demanding 90-plus days before payment. There are businesses that earn millions of dollars just on the "float" between when they receive payment as a middleman and when they have to pay that money to the ending third party. If you're carrying a $1,000 expense for a client for 60 days at 15-percent APR interest, you're paying $12.50 in interest on your credit card. If you are paying off your balance, that $1,000 you paid off with $1,000 of personal or business resources was not available to earn interest in an interest-bearing checking account or to be invested in higher-yielding accounts.
I know, for example, that when I provide services to a PR or advertising firm, they mark me up somewhere between 12 and 19 percent. Some have pegged their markups at 17.65 percent and printing markup at 20 percent. This covers their cost of hiring me, paying me, dealing with any problems that I may create for them or their client, and dealing with my paperwork. All their client has to do is have me turn up and make photographs. More important, markup percentages are no secret—they are typically outlined in contracts between client and firm. Everyone involved is aware of them, and although there might be some haggling (especially when the client is the federal government or a charity), markups are a given in many business transactions. In cases such as a charity, I have been directed to bill the charity directly, so that they could save the markup on me. Although it is standard for PR and ad firms not to charge a markup for media buys where the client who is making the media buy pays their firm a surcharge, they make their profits on their commission from the media buy, usually paid to them from the publication's advertising department. This is typically done in one of two ways—one where the ad firm delivers published rates, receives payment, and pays a lower figure to the publication, and the other where the client pays the publication the published rate directly, and a commission check is cut from the publication's ad department to the ad firm. For both of these situations, the commission has a range somewhere between 10 and 15 percent. However, on multimillion-dollar media buys, commissions can drop to as low as three percent.
With all of this said and your understanding that markups are a common practice, you should be more empowered to charge markups on everything and not feel any sense of guilt in doing so. I accept a fair markup of around 17 percent for many services we render and expenses we cover on behalf of a client. It's imperative that I not be their "float" and have to leverage my credit cards to service their debts.
Chapter 9 Who's Paying Your Salary and 401(k)?
It's never too late to plan for your retirement. In fact, it's never too early to do so either, and the earlier you start, the better off you'll be when you do retire. Many of us think we'll be making photos until our last breath because we love to, but what if we had to because we'd not planned for retirement?
If Everyone Hiring You Has a Retirement Plan, Shouldn't You Have One, Too?
Most professional employers—the people who will be picking up the phone and calling to give you assignments and projects—have some form of retirement program for their employees. Some are stock programs, 401(k)s, and the like. There is no shortage of retirement benefits for the companies that are hiring photographers, so you'd do well to expect the same from yourself. Factor this into your overhead and cost of doing business.