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Old 23-01-2006, 11:44   #1 (permalink)
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Turning Pro - Understand your Revenue Target

I would recommend you read thread on "Understand your Business Costs" before proceeding.

OK, you now understand your full core Business Costs, so therefore have a Revenue Target to achieve. In simple terms if you set to same as your Business Costs (incl your salary) you break even for the year..... less, you lose money.....more, you make more money.

So how does that equate to a weekly target ? Lets start with a target revenue of £100K for the year. Easy you say ...divide by 52 weeks = £1.92K . In theory correct, but in practice you will not be working/ generating revenue each week. Lets say you aim to take 5 weeks hols a year & allow 2 weeks for sickness .....that takes you down to 45 weeks. The target has increased to £2.22K a week now !

So how do you break down the weekly target, to an hourly target, help price jobs. You want to work 37 hours a wwek...so divide by 37 you say to get £60p/h. Once again in theory yes, but in reality you will not be working on revenue raising work 37 hrs a week. We need to break out "Overhead" hours.
In corporate IT land we work on 20% overhead to cover meetings, admin etc. In a 1 man band this could increase dramatically to cover marketing, job pricing, invoicing, paying bills etc. etc. So lets say 14 hours are lost to overheads leaving 23 hours for chargeable work. This equates to £97p/h

OK, so to summarise you have to have 23 hrs of chargeable work a week, at £97p/h lined up for 45 weeks of the year.

If only life was that simple. What happens if you can't get 23hrs work one week ? Options are :-

- Increase hourly rate for work you have, without exceeding competition quotes
- Decrease your Business Costs
- Work more chargeabe hours in another week to compensate

If none of the above works, you have to set yourself a time limit, at which point you have to seriously question running a Business yourself. If photography is your passion, then consider working for someone else on a set salary.


What happens if you have more chargeable work available than 23hrs a week ?

- Firstly pat yourself on your back for being successful
- Outsource admin/overhead work to supplier who charges less than your hourly rate, leaving you to work more chargeable hours withinthe 37 hrs total.
- Contract out some of photo work, ensuring their hourly rate is less than yours, plus they meet your standard of work.
- Work longer hours to encompass work......(only do for short periods otherwise burnout)
- Contraversial one. Increase your hourly rate. You may lose some work, but the customers you retain will think you are worth the rate & possibly introduce you to other clients who can afford that rate.

Note all the above is based on covering "core" Business Costs. Each photo shoot could incur extra expenses (eg. eqipment hire) that would be added to above.


All the above is in simplistic terms & based on my knowledge from a Mgmt/Financial role in a large Corporate firm, plus experience as a Contractor with my own Ltd company (1 man band). Based on this, others with more experience of Proffessional photography will be able to give more acurate advice / comments.

Last edited by Dave; 23-01-2006 at 18:46.
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Old 23-01-2006, 11:49   #2 (permalink)
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This just shows the £150 an hour that was mentioned in Pete's thread is realistic.
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Old 23-01-2006, 16:50   #3 (permalink)
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And why I charge £1500 for a wedding... (only get about five a year... I'm away the rest of the time...)
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Old 23-01-2006, 17:01   #4 (permalink)
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Kinda puts things into perspective when you see jobs advertised as £5.50 an hour, and then on the other hand someone is charging £150 an hour
(Obviously overheads taken into consideration etc etc)
 
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Old 23-01-2006, 18:22   #5 (permalink)
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Quote:
Originally Posted by DJW
If only life was that simple. What happens if you can't get 23hrs work one week ? Options are :-

- Increase hourly rate for work you have, without exceeding competition quotes
- Decrease your Business Costs
- Work more chargeabe hours in another week to compensate
OR ... stay employed !?!

Fart oo complicated for simple ole me ! Hope you got your brain sorted after explaining that little lot Dave ! Should put most off just looking at the sums ?
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Old 23-01-2006, 18:43   #6 (permalink)
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LOL. Good point re employment. I did have it in my head to add an ultimatum....will add now
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Old 23-01-2006, 19:13   #7 (permalink)
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Ahh took me back reading through this. Business plans and bank managers. Back in 1980 Barclays refused to fund my plan. I told the manager OK fine I'll do it without you..... then he asked me to sit down again and offered me a loan (I still had to sign over my house as security)

Business is about commitment. If you don't believe it no one else will and if you don't put in the effort it won't happen either. Once during the early days I worked 36 hours straight to get a job out and keep a customer - and bribed the staff to do it too. The first 10 years of the business I worked 12 hour days Mon-Fri and 6 hours Saturdays - and we still came close to going bust once.

Over the years I have had contact with many start up businesses. Those (like my own) that had their feet on the ground...watched their expenditure and kept costs under control mostly succeeded.
The other type that thought they could spend their way to success (big marketing budgets no revenue stream) almost without exception failed.
Also be prepared to adapt. My original plan was to sell direct. I'm an engineer not a salesman. I could make a good product but hated selling - we became subcontractors. Big company sells catalogue items and needs specials to complete the tender - we step in.

Lots of good advice there from Dave for any area of business. Read it all and do the sums. When I started out I earned half my previous salary in the first year of trading. By year 3 I was back where I started.
I'm now in the final stages of closing down a business that had a 2M turnover (turnover does not = profit!) ...but that's another story

If you want it - go for it.... but keep it real
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Old 23-01-2006, 19:18   #8 (permalink)
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Quote:
Originally Posted by DJW

In corporate IT land we work on 20% overhead to cover meetings, admin etc.
I tried many times to quantify that. Always ended up as something of a guess despite having audited accounts to hand.
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