Is it possible for a business to lose money with a steady pipeline of customers? Lots of happy large corporate and repeat customers. Who pay on schedule?
This post will help you calculate your Cost of Doing Business number. It’s the amount of money it costs to operate your business every day that you work.
Open the spreadsheet. The first tab labelled EXAMPLE has been completed to outline the costs of a Freelance Photographer. Skim through it to get an idea of expenses.
The 2nd tab labelled USE THIS SHEET is for you.
Its really a 2 step process. Fill out your own yearly expenses in the orange coloured cells.
Recall everything you have bought for your business. If you have bought a shiny new Macbook this year. Good for you. Now divide its cost by the number of years you expect to use it before getting a replacement.
For example £2,000 to use over 4 years £2,000/4 and add that number (£500) to that line in the orange cell (line 10).
If your internet bill is £30 a month (£30x12) then enter £360. The monthly and daily breakdowns will automatically populate. Simples. You may be a Graphic Designer, Coder or Cake Maker. So zero any fields not applicable to you.
Insert your gross (before taxes) yearly salary you want to earn in the blue cell. It will automatically give you a monthly and daily breakdown.
Thats it compadre.
Now before we look at the results. You may have seen the total number of work days in the sheet set to 200.
The average full-timer in the UK receives 20 days Annual Leave, 8 days Bank Holiday leave and never goes sick. Ever.
365 - 104 Weekend Days - 20 Days Holiday - 8 UK Bank Holiday days = 233 days.
Few freelancers get paid assignments every single day. You want to leave space for training, mentoring and workshops too. (You are training now aren’t you?) It’s been rounded down to a more realistic 200. This can be altered later on.
OK back to the EXAMPLE tab, the salary goal in the blue cell for our freelancer has been set at £104,000. Great. £2k a week. Oh yeah! Time to get chuck out that IKEA furniture baby!
The Freelancer works 200 days a year and quotes £150 a day for jobs.
He’s losing £1.50. Every day.
Based on his CODB he needs to charge £151.50 just to break even.
If he has a quiet month, get’s his equipment stolen, goes sick (somehow) and only works 150 days a year. The daily CODB jumps to £202. (£104,000/150 days.)
Let’s get back to our £104,000 goal. The daily rate to achieve this is £520 a day. (See line 44)
After tax of £208 (line 46) and CODB of £151.50 (line 42) is deducted his profit is £160.50 a day (line 49). Thats £32,100 a year.
Its not the money you make, its the amount you have left over after everything has been paid for.
Many new freelancers that go full time make the mistake of only quoting shoot day.
If a couple tell a photographer ‘we only have a budget of £1,200 for our wedding photography… but we really love your work!’. And they take the job. They’re working a total of 7 ½ days between pitch, prep, shoot, editing and quality control with printing.
Meet with bride and groom and consult with others planners 4 hrs: ½ a day.
Site visit 2 hrs travel, 2 hrs on site: ½ day
Wedding Day Coverage: 1 long a** day
Backup, cataloguing & early edit of images for social media within 48 hrs: ½ day
Professional Editing on wedding portfolio 40 hrs: 5 days
7.5 days x £151.50 = £1,212
£1,200 - £1,212 = - £12
The above genius has managed to lose money shooting a wedding.
To compound matters he now has only 192.5 days left to re-coup the lost earnings on top of what he must earn to keep afloat. And let’s be real. Most new photographers throw in a pre-wed shoot as a free sweetener to land the gig.
Download the spreadsheet and fill in the orange cells honestly. The blue salary goal may make your stomach churn, especially if you realise it needs to be increased. Cutting your costs is a small fix. Most costs are sunk costs. Increase your rates immediately. Otherwise you will be out of business. Start valuing yourself, your time and profession.
By being aware of your CODB number you are now way ahead of most freelancers and businesses. If you are thinking of starting out I recommend you run the numbers through at a 150 working day cycle.
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