Case study: Benchmarks enhance productivity
If you understand your expenses, you can earn more without adding more photography sessions to your workload.
• August 2015 issue
Earn more, work the same
For several years, Stephanie Anders, owner of Stephanie Anders Photography, had been humming along. Focused almost entirely on the artistic side of professional photography, she had built a solid customer base and was experiencing good growth of her Miami portrait studio. But as she eyed the next level for her business, she realized she didn’t know how to get there.
SITUATION
Anders’ sales were pretty good and the number of sessions she was photographing was where she wanted it, but she lacked a more detailed perspective on her finances. She wanted to understand more about managing her expenses, improving her per-session sales average, and conducting a more effective sales process. “I wanted to grow my business and make sure I was running it properly from a financial perspective,” she says. “I knew I was profitable, but I didn’t understand how to look at those numbers and grow.”
In early 2013 Anders went to Imaging USA and attended a seminar given by Bridget Jackson, manager of PPA consulting services. Jackson discussed the basics of managerial accounting and some financial best practices for professional photography studios. Inspired, Anders returned home and began to reorganize her accounts in QuickBooks so she could practice better bookkeeping.
Anders also wanted to figure out a better sales process. Often, she simply sent her clients to an online gallery and let them place their own orders. When she did meet a client for a sales presentation, it was usually at a coffee shop. She’d bring her iPad and scroll through images while they sipped lattes. The images were great, but Anders admits now that the coffees probably packed more of a punch than the presentations.
Anders worked out of the home but was desperate to move into a studio space. She felt that she could do more and sell more given a more professional environment. However, she wasn’t sure if she could afford it or how to manage the expense within her overall financial structure.
SOLUTIONS
Anders spent about a year implementing some of the lessons she learned in Jackson’s seminar, and she had some success. She had the willingness and aptitude to manage the financial elements on her own; she just needed more guidance. So in 2014 she took a three-day workshop from PPA mentor and member Allison Tyler Jones, CPP, and began working with both Jackson and Jones.
The three of them immediately launched into tracking Anders’ expenses against the PPA Financial Benchmarks. For the first time, Anders began looking at things like cost of sales—the cost to produce goods for sale—as opposed to just tracking total sales. That process encouraged her to cut costs in wasteful areas and work more diligently to find great vendors at the best prices so she could increase her profit margin from each session without sacrificing the quality of her products. “Her costs were pretty good,” recalls Jackson. “She mostly just had an issue with spending too much on props. She was shooting enough; her session counts were good. She just needed to make more per session.”
Working with Jackson and Jones, Anders started to take steps toward maximizing each session. Critically, she began to grasp the concept that she didn’t have to shoot more to make more money. Instead, she started working toward the ultimate goal of boosting profit so she could shoot the same number of sessions but take home more money.
One of the most important changes was the implementation of projection sales. Anders purchased ProSelect from TimeExposure and did some training on the software while at Imaging USA 2014. As soon as she got back from the convention, she started using projection sales and experienced an immediate boost in revenue. Rather than forcing clients to squint at an iPad or guide themselves through an online purchase process, she was able to direct a sales presentation by projecting images at actual size, with different framing options, and even show how those images would look on clients’ walls.
Finally, Anders reviewed her packages and pricing. Jackson and Jones looked at all of her packages, gave feedback on pricing and the included items, and suggested new wording for each package description to position them as higher-end offerings. With this feedback in hand, Anders increased her pricing across the board. This not only helped support a higher level of product offering, it also boosted her ability to sell products with a higher profit margin. Anders bumped up a la carte prices for individual albums, prints, and canvases. At the same time, she dropped lower-end packages off the product list so the only package options were higher-end (and higher margin).
RESULTS
In the two years since she started using PPA Financial Benchmarks and working with PPA mentors, Anders has more than doubled her per-session sales average. That’s helped her boost gross sales by about $65,000 with-out photographing a larger number of sessions. Her cost of sales is below the PPA Benchmark, and she continues to experience positive growth in the business.
In March 2014, Anders moved into a commercial studio space. “Before making the decision, we looked at the numbers to see what I could afford,” she says. “It was going to be a stretch, but we felt like it would increase sales from having a professional space to display sales presentations and also a place to do studio work. Before, I would show up at my client meetings with a bag of product samples. Now I have a big gallery with different items that clients can touch and feel.”
Normally, PPA doesn’t recommend overhead of more than 10 percent of gross sales, and moving into her desired space pushed Anders beyond that level. However, Anders had more than doubled her revenue from 2011 to 2012 and then bumped it up again by 64 percent from 2012 to 2013. Looking at this strong pat-tern of growth in early 2014, Jackson believed Anders could justify the move. “She was at a point where the next stage of growth required moving to a studio, and we projected an increase in revenues from that new studio,” says Jackson. “Also, she runs a really tight ship, so she could afford to spend a little more on rent because she’s saving elsewhere. For example, her administrative costs are 7 percent of her gross sales, and we recommend 9 to 12 percent. Her cost of sales was projected at 15 percent of gross sales, well below the recommended 25 percent benchmark. That efficiency was pretty much the case across the board. Since she was meeting or exceeding all the other benchmarks, she could afford a little more for rent even if it brought her above the recommended benchmark for overhead expense.”
Moving into the studio bumped up Anders’ overhead expense to 15 percent of her gross sales, 5 percent more than PPA’s recommended benchmark. But considering her thriftiness in other areas, her overall expenses still come in at 32 percent of gross sales—well below the total amount recommended by PPA. This means she’s keeping 53 cents of every dollar she earns, which is a great mark for any professional photographer. “Even with that extra expense, she is still outperforming the highest-performing studios in her category because of her lean business practices in other areas,” says Jackson. “When some people would have experienced a financial setback moving in to a new studio, she has been consistent. Now, with an updated sales plan and marketing strategy, she should experience continued growth.”
Jackson adds that Anders has been aided by her focus and discipline. Rather than looking for massive changes, she meticulously works on the little things that make up a successful business. “She consistently works on all the components of her business, and that’s how she has achieved success,” explains Jackson. “She’s not looking for the home run. She understands that being consistent and working on processes helps build longevity much more than someone who is just chasing that big win, because those are hard to come by.”
Having that focus and discipline is something that Anders credits, in large part, to the lessons she has learned from PPA. Rather than floating adrift, she now feels grounded and in control of her destiny. “Working with these financial systems is not something that comes naturally to creative people. However, going through the process with people who are familiar with photographers and what they are going through is so helpful,” she says. “I would recommend it to anyone who is interested in growing a business.”
Jeff Kent is the Professional Photographer editor-at-large.