Think like a photographer when pricing your product or service

More than a thousand words

A picture may say a thousand words, but a photo doesn’t just tell a story. A simple photo can be an excellent example on how to price your next business product.

Photography blogger Sarah Petty wrote her method of pricing a simple 8×10 inch photograph for as advice for her fellow photography business owners. But her advice can actually be applied beyond the world of studios and darkrooms. Here’s how to think like a photographer whenever developing the cost of your next good or service.

Step One: Know thyself (and know thy client)

Your first step in knowing your next price for your next best selling item or service is truly knowing what type of business you run. This is solved by answering the simple question: are you a high volume seller with lower prices or lower volume seller with higher prices?

This question can be answered by looking at your sales for the past month. Are your trends indicating your customers prefer a more personalized, boutique approach to the things they purchase from you (with higher prices), or do you move a lot of product (with lower prices)?

When you understand what type of business sales trend you’re following, move onto step two.

Step Two: Understand your sunk costs.

A sunk, or fixed cost, is the price to manufacture or deliver a good that will not change (unless reacting to the market’s inflation). What is the basic core cost of manufacturing the product you intend to put in your store? What expenses go into offering your service (payment processing, software, etc.)?

That amount, your cost of goods sold (COGS), is the baseline from which your ultimate price will come from. Now to step three.

Step Three: Look at your other overhead for producing your product.

So you know your COGS, so all you do now is just add what money you want to make off that? Wrong. You’re forgetting that you’re not just making that product or offering that service.

You are maintaining a store or electronic storefront, you’ve got office space, human resource costs, and other things that may slip by whenever you’re trying to develop your price for your next big thing.

This doesn’t mean you’re charging a customer a month’s rent for consultation fee, of course, but knowing that you’re going to need a comfortable cushion whenever figuring this product’s cost out.

According to the federal Small Business Administration you should allocate a portion of the profit “to each service performed or product produced” and this cost should be calculated annually. Finished, now to step four.

Step Four: Profit!

Finally, after factoring your COGS and your overhead, now you can decide what you want to make by selling. Petty personally uses the approximation of making 4 or 5 times her COGS plus her overhead per item.

Whatever the ultimate cost is, it has to be able to lend you the ability to live comfortably in order for you to be able to manufacture more in the future.

The next time you have to develop a price for a new product, don’t forget to step into the world of photography for awhile. You’ll be saying cheese all the way to the bank.