What is your business worth - what is your actual investment? This is the first question every photographer should be able to answer in order that he may figure his profits or losses for the year and plan a better and more profitable business for 1915-16.

Take an inventory by all means, but take it right - that is, don't try to cheat yourself. Practically everything you have in your studio, with the exception of actual working materials, depreciates in value every year.

What Is Expense What Is Profit StudioLightMagazine1915 91


By N. Brock Asheville, N. C.

If the life of some particular accessory is five years, deduct 20 % from the value of that article each year in your inventory and set aside a sum equal to this depreciation to be used in bringing your equipment up to its normal condition.

Depreciation is one of your expenses, and if you don't allow for it - if you don't actually take an amount equal to this depreciation and use it to rebuild, you are simply eating up your investment and jollying yourself into believing that you have made a profit.

Charge depreciation to loss and credit it to a reserve fund that you can draw on at any time without feeling that you are eating up profits. Depreciation is an expense the same as rent, but you only pay your reserve or renewal fund once a year.

You need a new rug, a new background, a new chair, a new display case. Are you increasing your investment when you buy these things ? - Certainly not. You have had that old rug for ten years. Had you set aside 10% each year for its depreciation you could throw the rug away, take the amount from your renewal fund to buy a new one and you wouldn't be a penny out. You have been buying that new rug at the rate of 10 % each year and it is paid for when you get it.

Your studio when new was worth $1000.00. At the end of a year, say your depreciation amounts to $95.00. Your studio inventories $905.00, and with the setting aside of $95.00 for your renewal fund your investment is still $1000.00 as it should be. You don't enlarge your business when you replace a thing that has worn out. You only enlarge when you increase your investment, and this will show by the increase in your inventory.

If you fail to allow for depreciation you will imagine you have made just that much more profit, when the fact of the matter is you owe it to your studio. Then when you do have to pay it, as you surely will, sooner or later, you will be complaining that you are having to put all your profits into the business, when as a matter of fact, you robbed the business each year to pay yourself a dividend that you never had coming to you.

I learned these things a few years ago from a bookkeeper friend I played cribbage with every Saturday night. It was a revelation to me when I got it through my head and I started to run my studio as a business man should. There wasn't such a word as "pep" at that time, but that was what I put into my business. I didn't know there could be so many expenses in a photographic business, and right there I decided there should be some profit, but I had to conduct my business in a different manner to make it.

If you have no system by which you can know your expenses, your costs and your profits, I will give you a simple one that can be applied to most any studio business, and if you put it to work you will either have a good profit at the end of the year or know why you haven't.First of all, take an honest inventory and credit your depreciation to a renewal fund. If you haven't the money to set aside for this purpose, pay it in installments.

It will be most simple to have a studio account at your bank separate from your personal account, the advantage of which you will see later on.

When you have your inventory you know just how much you have invested in your studio business. You own this business personally, but you must pay yourself the same interest on the investment as though you were doing business on borrowed capital. Make the studio pay you 5% on your investment. This is the first expense, and if the business can pay you cash, the 5% goes into the personal bank account and is charged to studio expense.

What Is Expense What Is Profit StudioLightMagazine1915 93


By N. Brock Asheville, N. C.

If you own your own studio property, it should not be included as a part of your investment and should not be shown in your inventory. You must pay yourself rent the same as if you were renting to an outside party. This is your second item of expense and is a real part of your cost of doing business. Your personal account at the bank is growing, but it is not profit on your business as yet. Simply profit on real estate and investment.

Next, charge what you pay for hired help, and in addition to this, an amount equal to what your services would be worth to others. Really pay yourself this salary and insist on getting it every Saturday night. If any member of your family is employed in your business, the studio must also be charged for these services.Charge all fixed expenses such as taxes, insurance, water, light, fuel, telephone, advertising, etc., and incidental expenses such as postage, printing, office supplies, deliveries, etc. Charge losses of every character, including work that is complimentary, orders made over, bad debts, etc.

When you have found what the sum of all these items amounts to for a given time, a month or a year, prove it by your books and you will have your total expense for that time. Then divide this figure by the total of your sales and the result will be the per cent, which it has cost you to do business.

If it is 29%, deduct this from the price of any style of picture.you make - say your $5.00 grade. You have $3.55 left. Deduct from this the actual cost of material used in making the pictures, including mounts, waste plates, paper and developer, and the remainder will be your net profit.

With an increase in the volume of business, the cost of doing business will decrease in proportion, so a fair estimate of the percentage of the cost of doing business can only be figured on the business for a year, covering the lean as well as the fat seasons.

The average man with a small business who owns his own building and does his own work, with the aid of his family, considers his rent and help as part of his profit. This is a mistake. It's an expense, and when it is figured as such, with the other expenses, the probabilities are that it is costing this man 50% or more to do business. It may pay him better to sell his business, rent his building and go to work on a salary.

At least - take an inventory, find your cost of doing business, your cost of material and your profit on your work, and if your studio is not making money - if you are only getting rent on your real estate, interest on your investment and a fair salary, you have some leaks to stop up or you are not getting enough for your pictures.

What Is Expense What Is Profit StudioLightMagazine1915 95


By N. Brock Asheville, N. C.

If you take the above advice it may involve the employment of a bookkeeper to get you started right and to look over your books occasionally, but you will find it will pay you to know these things.