PPA Today: Benchmark Financial Survey Archives
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By John Owens
This year PPA is working with two lucky studios in all areas of their business, to give them a total "makeover". Every facet of their businesses will be scrutinized to help them be more profitable. The makeover will touch on and improve their business model, branding, pricing, marketing, sales strategy, workflow efficiency and overall profitability--all based on the tools, information and resources set by PPA's Benchmark!
Follow these two studios' progress, challenges and changes. Updates will be posted right here on the blog and you will be able to watch monthly webinar updates to track this year-long process. It's a series worth paying attention to, as there will be strategies and business tactics you can apply to your business too.
We're back with an update on Krista Newbill's Studio Makeover. Check out the previous post on the project overview if you need a refresher, and take a look at Wes Roberts' first update from last month.
Below is an update on what Krista has been doing with her team of PPA mentors, the early progress she's made along with some of the obstacles she's facing. Some of it surely applies to some of you and your business... maybe you can consider applying similar changes to Be More Profitable too?
Krista first came to PPA for help with her business back in 2012. At that time her studio's gross sales were down 21% from 2011 and what was more telling, expenses were up and her bottom line suffered, going down 52% during that time.
In 2013 Krista focused on cutting costs. Her sales that year increased and her bottom line recovered. Then in 2014 the stress of running and paying for a retail location caused Krista to rethink her location. She opted to co-lease a space with another photographer. With sales up 14% and her expenses once again down, Krista was keeping almost 61% of every dollar she grossed. According to PPA's Benchmark, top-preforming retail studios keep about 39% of each dollar, proving that Krista was doing a great job keeping her expenses in check.
As she started planning for 2015, Krista was feeling that she was working too hard, too many hours, and not spending enough quality time with her family. "How long can I keep up this pace?" is a question most business owners ask themselves at some point during their careers. That's why the concept of sustainability is one of the most important things to consider when you're planning each year.
What affects your business sustainability? The number of hours worked, stress levels, income, family life balance, and pretty much anything else that affects you as the business owner. Simply ask yourself, can your business continue on the same track it's currently on with you, as the business owner, doing everything as-is? Sometimes it simply comes down to time (or lack thereof). In the long run, can you realistically continue to put in the hours/week that you are currently spending and be achieving your life goals?
Krista realized that she's too busy and is now looking for ways to work smarter, not harder. Her main product lines include weddings, portraits and headshots. She lives near Nashville and has a very large clientele. Up until 2014, Krista created albums and sold prints to her wedding clients, but she only sold digital files to her portrait clients.
By: Lauren Walters
If you're looking to make a bigger profit, PPA's Benchmark Resources are here to help revise your budget. A small change can make a huge difference in your business. In fact, a 1% decrease in your cost of sales and overhead expenses can save you as much as $50,000 by the end of the year.
For a retail studio, overhead expenses should estimate to about 40% and cost of sales at about 25%. Keep in mind that your profit depends upon the amount of sales for that fiscal year. For example, you need about $143,000 in sales to earn a $50,000 profit. Make sure to use PPA's Square One tool to see the change 1% makes to your bottom line.
The video below stresses the importance of creating a strategic budget and sticking to it! Watch and learn more about how to keep your sales and expenses in line with your new 1% budget.
For more information, visit PPA.com/Benchmark. Be More Profitable.
In the previous post 2 Studios Are Getting a Full Business Makeover This Year! you met PPA Studio Makeover recipients, Wes Roberts and Krista Newbill and read the overview of the makeover process.
Now that the makeovers are underway, you can follow along with their progress! First up is Wes as he and the PPA mentor team dove into the financials of his business.
Wes was super excited to get started. He's been working with PPA's Business Consultant and CPA, Bridget Jackson, to get a handle on where he is currently and the best way to move forward.
First, we always did a complete financial analysis of the studio. It's important to know what's working and what's not. We did this by comparing Wes' studio's numbers to PPA's Benchmark Survey. By comparing his cost of sales, overhead and net profit we started to get a good picture of the pitfalls that are causing monetary loss. We also uncovered potential opportunities for savings.
Wes' numbers looked better than the average benchmark studios in 2013 and 2014. However, his 20% cost of sales percentage doubled between 2013 and 2014. While, in general, 20% is a great number to achieve (below the recommended 25%), we had to figure out what has changed to cause such a drastic uptick and put everything in place to ensure that trend would not continue in 2015.
Second, PPA mentors helped Wes develop a photography business plan for 2015 that included three goals:
- the number of sessions he wants to photograph (broken down by month)
- the sales average of each session
- his net profit
Have you ever read something and thought to yourself, I could have written that! Today is that day for me. In fact, the entire article could have been my quotes.
The article was 7 Ways to Help Ensure Your Business Succeeds by Donald Todrin. He points out business fundamentals have not changed, but new strategies are required in light of the changing economic conditions. The information is poignant when applied to photography business owners, so I decided to do just that! Here are his seven ways to succeed in business tweaked for what I believe to be strategies for the photography industry.
1) Have a written plan that should include the following:
a. A financial plan detailing how many sessions you plan to conduct at a certain sales average, an estimate of how much it will take to produce your products (cost of sales), and an estimate of what your fixed expenses will be.
b. A source of initial financing until the business is self-sufficient. On average, per the SBA, it takes some businesses 3-5 years until they are sustainably self-sufficient. Knowing this, if you plan to use your personal resources, go at it fully understanding that it will take time to replenish.
c. A sales plan to achieve your sales average goal. The plan should include a strategy and a price list set up to achieve the goal.
d. A marketing plan to attract the amount of sessions you need to satisfy your financial plan. The plan should identify your ideal paying client and the appropriate strategy to attract such defined target clientele. Also develop your marketing calendar, detailing the tools to be used, when to use them, and how you will measure your results. (PPA's Square One tool is a great place to start developing your plan.)
e. Detailed workflow from the initial phone call to the delivery of the products. Outlining each step of your process doesn't only help identify the time required for each session, but it will also help you define outsourcing/employee opportunities.
2) Don't marry your plan. Even the best laid-out plans can eventually go awry. Think of it this way; it's not necessarily the plan that is important, but what we learn from the planning process and how it shapes and guides our future actions.
3) Keep your ego in check and listen to others. The photography industry is unique in some ways in that there are plenty of mentors out there to help guide you. Find one whose business is a reflection of what YOU would like your business to be. Look past the "flashy stuff" towards finding a mentor who is dedicated to their craft and their photography business.
4) Keep track of everything, and manage your numbers. In order to be successful, it is imperative as a studio that you know how many sessions you need to hold in order to reach your goals. The results of this analysis can tell you if your sales and marketing plans are working. It's that plain simple. And if they are not working, it may be time to reassess. PPA has made it easy for you to evaluate your numbers. Just go check the online tools, Square One in particular, that will help you establish the basis of managerial accounting.
5) Delegate and avoid micromanaging. This is where your detailed workflow (see 1e) comes into play. It is important for you to remember that you don't have to do everything. In the beginning, it might make sense, but as your business grows, carve out specific outsourcing opportunities using your detailed workflow. The photography business tends to be seasonal so keep that in mind as well when you are creating your plan. If you find yourself needing help year round, then it is time to take the steps needed to hire on an additional employee.
6) Use the internet! Social media is one marketing tool that is inexpensive but vitally important to building your business. It takes time and effort but if you schedule it ahead of time and take advantage of off-season opportunities to pre-post, it will become easier. More importantly, it is pertinent that you do it consistently in order to be effective. Look outside of our industry to see how profitable companies take advantage of free marketing tools.
7) Reinvent your business. Seriously. If you don't like what your numbers are telling you, make a change. Of course, map out your change, but always remember that it is ok to take calculated risks. It's not about what you gross, but what you keep in our pockets. Assess your business from a different perspective. Ask yourself what your competitive advantage is. What niche could you carve out of your competitive market, and how could you provide better customer service to elevate your value? Discounting brings down your market's perception of your value so instead of playing the pricing war, exceed your clients' expectations by delivering more!
You have made a conscious choice to be a photographer, one that requires time and money. Always give yourself the best chance to succeed in this ever-changing profession. Knowledge is power--and as an entrepreneur, you are on an endless path to discover what you don't know. This is what PPA is here for: to help you be more profitable by continuing to learn about the photography business!
About the author:
Bridget Jackson is a Certified Public Accountant (CPA) and PPA Business manager. Over the years, Bridget has helped hundreds of photography studios become more profitable.
PPA's Benchmark Survey, to the uninitiated, is an amazing tool that can help PPA photographers maximize their profit potential. If that isn't convincing enough, as an added incentive, we've been giving away prizes to several lucky winners. It's a pretty sweet way to not only figure out all of the numbers you need to achieve what you want in business, but to also potentially win big!
We've heard from a few of our previous winners over the past couple of weeks and this week we're super excited to announce a brand new winner--Paul Jew!
Paul has photographed a huge variety of subjects--from celebrities to presidents, so the ability to compare books with other diverse businesses is important to his bottom line. "I think it is helpful to share so you can compare your business to other studios. Without this comparison, it would be difficult to assess how our business is doing compared to our peers. It's very important to have this knowledge." Paul used PPA's Benchmark survey as his photography business guide and it was easy. Remember, the knowledge is just a few clicks away!
For participating in the survey, Paul is taking home a $500 gift card to Showcase Inc.! Not a bad way to kick off the holidays (yes, there are already Christmas decorations popping out everywhere).
PPA's Benchmark Survey is the industry's only complete
financial overview that depicts what profitable successful money-making studios
(the kind you want to be) look like. That's unlike any other industry averages
that only give you, well, averages. Having access to information that shows
what high-performing studios look like has been helping photographers form a
better idea of where they stand and how they can improve their bottom line. Please
consider giving it a try! It really helps!
How? On top of the survey, digestible summaries, and an easy projection tool, participating studio-owners get a side-by-side comparison of the Benchmark with their own financial data. And this comes free for PPA photographers! Not only is this an in-depth source of information to help you grow your business, it is a $750 value (or more!). As a bonus, if you participate, you're also automatically entered each month in some giveaway drawings for great prizes! This month, participants are entered to win a one-year subscription to Sticky Albums or a $250 gift card to Adorama.
Don't forget about this awesome little nugget of information: In addition to the monthly giveaways, all participants are also entered into a drawing for an all-expense-paid trip for two photographers to Imaging USA 2015 in Nashville. That includes airfare for two, hotel for 4 nights and two all-access pass Imaging USA registrations. Submit your info today!