So you are thinking about becoming a full time professional photographer. Or you already have a photography business. Great! Let me ask you one quick question:
What is your break-even figure?
If you know the answer to this question and you know that it is correct, no need to read further; you are sorted for this part of your business and you can go and do a happy dance with your dog. Or a child if you are not lucky enough to have a dancing dog.
BUT: If you don’t know the answer to this question, don’t go anywhere. Read on. You need to sort this one thing out before you do anything else in your photography business.
Why is it important to know your break-even point?
Knowing how much you need to earn to break even is the very basics of business finances. This is what people learn when they go to business school as one of the first things they are taught about running a business.
Most people who are passionate about photography and start doing it for money and start dreaming about making a living out of it, don’t go to business school of any kind. As a consequence, they may leave their day job and start a business without even knowing how much they need to earn in order to pay for everything they need to pay just to get by.
This is why working out your break-even point is critical to your success. If you don’t work out this figure, you won’t be able to:
- Know exactly how much you need to earn from your photography per year, per month and per week in order to pay your bills and have clothes to wear and food to eat.
- Be able to determine whether you need to get a business loan or use savings or have additional income until you reach your break-even point.
- Know how much you need to charge for your photography services in order to run a profitable business.
A break-even point can mean one of two things: 1) if you talk about a business as a separate entity from your life, your company’s break-even point is when your sales exactly cover your business expenses. However, in this instance I am talking about 2) break-ever figure as it relates to your whole life, i.e. how much you need to earn to cover both your business expenses AND your living, including your home, clothes and food, and any other extras you like to have in your life apart from the bare minimum needs.
How to calculate your break-even figure?
In order to calculate your break-even figure, you need to take into account everything you need to pay for in your everyday life. This may include any of the following:
- Monthly food bill
- Monthly clothes shopping
- Eating out
- Petrol, car servicing, MOT
- Electricity, gas, water, council tax
- TV licence + subscriptions
- Children’s hobbies
- Dog food, vet bills
On top of that, you need to calculate all your costs of running a business:
- Cameras + other gear
- Studio rent
- Computer hardware
- Computer software
- Website hosting
- Equipment depreciation / upgrading
Naturally, if you in the lucky position that someone else covers your living expenses, you only need to work out your business’ break-even point. But you still need to make sure that you have a proper, detailed plan on how the heck you are going to make all that money to cover your business expenses.
Because otherwise you don’t have a business; you have a very expensive hobby.
So to calculate your break-even figure, make a spreadsheet of ALL your living expenses plus your business expenses. I recommend keeping this spreadsheet open and adding to it for one week, rather than creating it in one go, because you are bound to come across some expenses that you didn’t think about first time round. Add them to your list during that week as you think of them.
Once you have added all your outgoings into one total sum, you know how much you need to earn to break even. Then you can make a business plan so that you know how much you need to earn, and exactly how you are going to make it happen.
As the saying goes: If you fail to plan, you plan to fail.
This is the very basics of business finances, but you’d be surprised how many photographers don’t think about calculating these exact figures, and fail in business in the first 1-3 years as a consequence. Don’t be one of those dreamers who bury their head in the sand – be sensible and do this right now, if you haven’t already.
Photo by stevepb