This section is from the "Studio Light Incorporating The Aristo Eagle - The Artura Bulletin 1922 " book, by Aristo Motto. Also see Amazon: Studio Light Incorporating The Aristo Eagle - The Artura Bulletin 1922 .
WHAT is the cost of a dozen photographs?
If you know, you win. If you don't know it is very likely that you may lose.
The difference between success and failure is often the difference between knowing and merely guessing at costs. You can't make a definite profit until you know definitely what the thing you are selling costs you. And you can't tell what it costs you until you know your overhead, or cost of doing business.
The trouble with guessing at costs is that some of your work makes a profit and some of it may actually be done at a loss, which isn't fair either to yourself or your customers. Every piece of work should be done at some profit. And if it can't be done at a profit by you it would be better to give it to the photographer who has a smaller expense and let him make a small profit, while you find work that is profitable to take its place.
To know what it costs you to make a dozen photographs or one photograph you must know your entire expense for one year so that you can find what your "overhead" was for a year. You will have to take your expenses for last year as a basis unless you know of some greater expense for the present year, such as a large increase in rent or salaries, in which case allowance for such a difference can be made.
If you own your own property you must pay yourself rent. If you don't, you will not be finding true costs. Then there is adver-lising, light, heat, power, water and telephone. You must pay yourself a definite salary such as you could earn if you worked for another photographer - also a definite wage to any member of your family who may help you out at times.
A Cuban Hotel, From A Portrait Film Negative By W.N. Jennings Philadelphia, Pa.
Because your wife or your daughter or your boy helps you about the studio without being paid for their services is no reason why this saving should be passed on to the customer. It must be made a part of the studio expense and a part of the cost of your photographs or you will never get the benefit of the saving.
In addition to salaries there is delivery cost, insurance, taxes and interest on the capital you have invested in your business, all bad debts which you have charged off your books, depreciation of equipment and stock, repairs, expenses such as breakage, waste, returned goods or work made over. Miscellaneous expense covers all office and work-room supplies such as stationery, stamps, laundry and all small items.
Then there is the fairly big item of chemicals. Some people seem to think that chemicals can be figured in the cost of material, but that is a difficult thing to do. Chemicals should come under "overhead expenses" for there are no photographs made without the use of chemicals.
The sum of all these items of expense represents your cost of doing business for a year. When you have added up all of these items, divide the total by the total amount of your business for the year, both cash and charge sales. The result will be your overhead.
We will suppose it is 25%. If it is much more than this it is high, or your business has possibly fallen off slightly last year, which would account for the higher overhead.
Now you know definitely that your overhead is 25% of your selling price. You must next determine what profit you wish to make. Suppose you feel you should have 35% profit - that is, 35% of the selling price. You have allowed 25% for overhead and 35% for profit, which makes 60%. As the selling price must be 100% you know that your cost of material is represented by the remaining 40%, so it is easy to find the selling price. We will say that by figuring the cost of material carefully for a dozen photographs you find that film, paper and mounts cost you $6.40, which is 40% of your selling price.
If 40% is $6.40 then 1% is 16 cents and 100% is $16.00. Of this $16.00 you have already determined that the cost of material is $6.40. The overhead is 25% which is $4.00 and your profit is 35% or $5.60.
If you have never had a definite method of determining costs you may be a bit surprised to find that a dozen photographs cost considerably more than you thought they did.
And when you find just what they cost you may find it necessary to adjust your prices. You may have been asking too much for some styles or kinds of work and too little for others. At least you know very definitely what charge you must make in order to make a profit and you are not likely to work at a loss for very long.
A Championship Match, From A Portrait Film Negative By. W. N. Jennings Philadelphia, Pa.
The same rule that applies to photographs will apply to the sale of frames or any other articles in the nature of side lines. You must sell at a price to pay your cost, your cost of doing business and your profit.
According to previous figures the cost of the article is 40% of the selling price, so a frame that cost $1.00 must be sold for $2.50 to make you a profit of 35%.
You may sell the frame tomorrow and you may sell it a year from tomorrow. You may have frames broken and you may lose some bad accounts, but if you follow the business man's rule and add "overhead" to your cost and then sell at a reasonable margin, you will always make a definite profit. In the case of the frame:
40% cost equals $1.00 25% overhead equals .62 1/2
35% profit equals .87 1/2
100% equals $2.50