I remember securing what I would call my first “real” gig as a photographer almost 15 years ago. It was an assignment with a major brand in the outdoor industry. I was really excited. As the negotiations proceeded and we worked to figure out the deliverables that were expected and so on, brand X, naturally, asked what my rate was. It quickly became apparent to me, that I didn’t know what to charge this client.
Luckily, I had a couple of seasoned photographers that were willing to share their vast experience and knowledge with me. Veterans, mentors people that I looked up to that I could reach out to for help. So, I sent an email, called them on the phone and asked: “Hey, what should I charge?” “What do you charge?” - I thought surely they would share their advice with me and I would then know what to charge client X. Instead, their responses left me at square one. “I can’t tell you what to charge” “I have no idea what you should charge, that’s for you to figure out.” I Realized then that I had a lot to learn about business if I was planning to be a professional. At least for any length of time. My mentor’s responses were, without a doubt, the best thing they could have done for me.
Luckily, figuring out what I needed to charge was a really fun adventure for me. It turned out the business of photography, business in general, I found interesting. At that moment in my career, it was a turning point to understanding what to charge but more importantly how to value my work (product and/or service) and to be able to justify my rate to anyone who asks.
“Cost of Doing Business” - CODB is not only a valuable exercise to learn as an up and coming freelance creative it also proves to be absolutely mandatory in maintaining a sustainable business. Or staying in business at all. I was lucky to figure it out so early. I have met other freelancers that have zero idea what their CODB is - how they continuing operating as a business is beyond me. Freelancing is hard enough, why make it harder?
At the very basic level, CODB is:
Desired Income per yr + taxes (25-33%) + yearly business operating expenses / Billable Days per yr = Total Minimum cost per billable day.
This dollar amount represents the cost to operate your business for each billable day. The number will be the dollar amount that you need to make in order to BREAK EVEN - to be a profitable business you will need to average more than your CODB per day.
So, at the simplest level as an example: $50,000 (desired yearly income) + 33% tax + $45,000 (operating/purchase expenses) / 200 days (billable days per year) = $557.50
This number should be your north star.
Only you know what you need to make a year. The desired income number should come from your personal budget rent, mortgage, food, clothing etc. $50K in New York City probably wouldn’t be enough or if you have 2 kids living in Seattle it still might not be enough.
Think about ALL the purchases you need to make in a year for your business to operate: internet, business insurance, accountant fees, phone etc any items that are simply keeping your business in operation. There are so many items that do not cost much but they add up really quickly over the course of a fiscal year. Assuming that you purchase items like a camera or a computer which you plan to have in operation for 2-4 years before upgrading can be budgeted for over the course of their life. ie laptop $3,000 / 3 years = $1,000 per year.
On the example spreadsheet, there will probably be items that you don’t need or there may be items not included that you need to add specifically to your business. The below spreadsheet is just an example to help you get started on figuring out what your CODB is. Remember, it is completely specific to you and can be adjusted easily to quickly accommodate changes.
Figuring out how many billable days a year you can really have is a really important piece of this puzzle. 5 days a week x 52 weeks a year = 260 but of course there are holidays, some personal time or vacation and you certainly can’t be shooting 260 days because of the pre and post time, scouting days, etc 200 billable days a year is probably more accurate. Although even that is A LOT of shooting days in a year. Below is a CODB example based on 200 days/yr
The nuts and bolts.
So now what?
You know you need to charge $585 (I rounded up from $584.06) per day and have 200 billable days per year, THIS IS TO BREAK EVEN. You will need to average more than $585 a day in order to make a profit. Why should you want to make a profit? Aside from the obvious: being able to save money, grow your business, hire employees, purchase that really expensive lens or a fancy camera, or you get sick, hurt or have a really bad month. So $585 is just a starting point. Baseline.
Let’s say you ended up averaging $500 each billable day. You are now in the red $85 dollars for every billable day you had. You had to make that $85 a day up somewhere somehow. How? Well, you could choose to not buy as much gear, pay yourself less in salary, increase your rates, work more days, you get the idea.
A very common question I receive is what to do if a job presents itself that is creative, working with fun people, and has the potential to lead towards other opportunities for future work. But the client can only pay $1,000.00 for the job. There are 4 days of shooting + an edit. Based on our CODB we know we need to make $2,340 to break even. Taking this job would mean that we are losing $1,340 and it can be hard to make up lost revenue. Is it worth it? More work might come from it down the line?
So you take the job, understanding that you are losing $1,340.00 right off the bat. On top of all this you then spend time emailing and a few phone calls with the client, a day of pre-planning, that’s an additional two days. Plus the four shoot days. The edit takes longer than you were planning and the client wants a second edit done, boom, there’s two more days. The shoot turns into eight billable days. $4,680 is what the total job invoice should be - you only made $1,000 - your business is in the red $3,680 just like that.
Freelancing is hard enough, there is no reason to make things any harder for yourself.
Everyone’s CODB is going to be different. That’s ok. We all have varying costs of living, no kids, 3 kids, expensive hobbies, rural living or city living etc
It is your professional responsibility to know your CODB
Let’s say two photographers bid on the same job: photog #1 bids $1000 and photog #2 bids $2500
Let’s say Client X chooses photog #1 but this photog does not know his CODB - not only is he undercutting photog #2 but worse, photog #1 could be shooting himself in the foot for any future work. What do I mean? Let’s assume client X chose this photog because of how cheap he/she was. Once photog #1 educates themselves and learns what their CODB is they might not be able to ask for what they are worth on future jobs. They could be labeled as a cheap photographer and stuck in that bottom tier which will eventually lead to their photography business dissolving because they can no longer afford to be in business. Ultimately this scenario hurts everyone in the industry. Basically, freelancers racing to the bottom. Know your CODB and understand the value of what you charge and why you charge it.
To summarize, knowing your CODB is your break-even point, your BASELINE. You should have higher financial ambitions than whatever this number turns out to be. By doing this you will be able to, perhaps, accept more creative work that doesn’t pay as much, invest more money into your business or have more money set aside in your savings for that period of time when you don’t have as much work as you’d prefer.
Here is another good resource on this topic.