Today’s Topic Tuesday is the fourth in the series of Financial Posts from Guest Blogger Brittany Salay of Brittany Lauren Photography. Brittany is a senior photographer in Charlotte, North Carolina who loves to share information about the financial side of the business.
4. Break it down! How much do you need to make per client?
This is the 4th post in this series which we have now determined how much it costs to cover your bare minimumpersonally and in your business monthly, how much time you spend on each client and how many clients you can take on per week. Now it’s time to start translating this into how much you need and want to be making a year.
This topic can be complicated when you start considering all the different ways you can set up your business and pay yourself. We are going to approach it from a sole proprietorship standpoint or a single member LLC. If you are registered as a S-corp or anything else, your tax withholdings and how you pay yourself are different. You need to talk about this with your CPA. If you don’t currently work with a CPA, you need to immediately. This is not something you want to put off understanding. They will help you with tax planning, explaining write offs and any state specific considerations and laws.
So let’s get down to it. Is there a salary you desire to make each year? Do you know if that will cover all of your personal and business obligations and goals? We calculated our Bare Minimum per month and mine is $2,831. This means I need to PROFIT at least that after taxes to cover all of my personal and business obligations and goals. I just threw out a few terms that might need a little clarity. When I say PROFIT, this is your sales minus your COGS (cost of goods) like cost of products the client purchased, props for the shoot, hair/makeup artist and anything directly related to that shoot you paid for. This will leave you with your profit.
Sales/Revenue – COGS = PROFIT
From your profit, you must pay your state/federal taxes. If you work for someone else, these are withheld for you every paycheck but as a small business owner, you have to withhold them yourself. You cannot dedicate all of your profits to expenses and savings. You have to put back to pay your taxes quarterly or yearly. Your CPA will advise you on what percentage you should put back as mine has recommended 25% of my profit for taxes to be on the safe side. I don’t want to be surprised and have to take money from my savings to cover taxes at the end of the year when I should have been planning for this all year long. We will learn in a later post how to make sure you are calculating for taxes in your prices.
PROFIT – Taxes (25%) = Net income ← what you have to cover your personal and business obligations and goals
Below you will see that I need to profit at least $42,465 to cover my Bare Minimum. My “salary” goal is higher than that but you need to know where to start so you can properly price yourself. Remember, everyone’s business looks different. Some of you may need $100,000 to cover your bare minimum and others may only need $20,000. Either way, we are learning to make our numbers work for our business, not someone else’s. This is why we shouldn’t be looking at or caring about how others price themselves. You never know what is going on in their business.
We can now see how much that means we need to be PROFITING per client. If I’m taking on 2 clients a week or 8 a month, I need to profit at least $442.34 per client to meet my Bare Minimum and pay my taxes. This calculation only brings you to what you need to cover your Bare Minimum. This should NEVER be your goal. Every year I evaluate how much I made the previous year then set a new “salary goal” for myself. I think in those terms because it was drilled into my head in my previous corporate life.
Next, we will talk about your salary goals and how to break that down into an average sales goals per client. And soon enough we will get into PRICING!
We're busy curating all the best resources, trends, and opportunities for creative women in business - just like you!