The short answer is, of course: As much as possible.
The long answer depends a lot more on where you personally fit into the photography industry and your local market.
In this article I am going to explore the seven critical factors that determine how much should photographers charge per hour, along with an example of how to calculate a reasonable billable rate.
WARNING – WE ARE GOING TO TALK ABOUT MONEY
Money is a touchy subject for a lot of people – and it seems especially so for photographers.
Everyone’s personal circumstances are different, and we have a global audience with drastically different markets and ideas about income levels – so the numbers I am presenting in this article are what I would consider realistic for a typical middle class Canadian – but please feel free to make adjustments to suit your own income goals and local market.
WHAT YOU BILL IS NOT WHAT YOU EARN
Say it with me – what I bill per hour is not what I earn. What I bill per hour is not what I earn. What I bill…OK you get the point – but for some reason this seems to be a particularly hard lesson for photographers to learn – especially those just starting out.
The reality is that all professionals who bill by the hour – such as lawyers, engineers, architects, accountants etc. bill their clients at a minimum two to three times their take home pay rate. For example, if a lawyer earns $60 per hour – they would typically bill at least $120 to $180 per hour.
For photographers who own and operate their own businesses (often as the sole employee), the ratio of billable rate to take home pay is even higher, as we will see.
To estimate how much you will earn in a year based on an hourly rate, simply double the hourly rate and move three decimal places.
For example $35 per hour is approximately $70,000 per year.
($35 per hour x 8 hours per day x 5 days per week x 50 weeks per year = $70,000)
HOW MUCH IS YOUR TIME WORTH
If you are a recreational photographer and you practice photography purely because you love it and you would do it for free – that is awesome – do us all a favor and just do it for free. Seriously!
There is nothing wrong with working for free – as long as everyone knows you are working for free. The problem is when photographers fall into the trap of working almost for free. Photographers that undervalue their services are not doing themselves any favors, and are in fact contributing to the wholesale undervaluing of the entire industry – but that is an argument for another day.
If you are a part time photographer, you can look at what you earn in your day job to gauge how much your time is worth. If you earn $30 an hour at the office, chances are you’d like to earn at least $30 an hour from your photography.
If you are a full time photographer, you can work backwards from what you need to earn in a year to support your family and your lifestyle. Or, you can figure that if you had to quit photography to put food on the table, you would presumably have a suitable full time job and rate of pay.
For the purpose of providing an example, the average income for a married person with a family in Canada is around $60,000 per year. That’s about equivalent to $30 per hour.
HOW MUCH OF YOUR WORK IS NON-BILLABLE?
Nobody that charges by the hour is working on something that they can bill to a client 100% of the time (nobody honest about it anyway). So, the question becomes, how much work do I do that I don’t get paid for?
For a photographer, this is a substantial portion of time.
Think about everything you do on a daily basis that is related to your photography business, but does not directly earn income.
Email, answering the phone, proposals, bids, social media, promotion, your website, blogging, personal projects…the list goes on and on.
I estimate that I easily spend 50% of my time as a photographer doing work that I can’t bill to a client – and that is probably on the low side.
That means that in order to earn that $60,000 a year goal, I would have to bill $60 per hour, not $30 per hour.
To adjust your billable rate depending on your own ratio of billable versus non-billable time, take your target hourly rate, multiply by the total number of hours per week you work, and divide by the number of hours you bill to clients.
For example, if I want to earn the equivalent of $30 per hour for a 40 hour work week, but I can only bill 20 hours, I have to bill $60 per hour. I am still working 40 hours per week, but only 50% can be billed to a client so my billable rate doubles.
($30 per hour x 40 hours per week total / 20 billable hours per week = $60 per hour)
PAY IN LIEU OF BENEFITS
As independent small businesses, photographers are on their own to cover the costs normally paid as benefits to salaried employees.
Of course, benefit plans vary greatly, but most companies cover some portion of dental, medication, vision, life insurance, sick time etc.
Where I live in Ontario, Canada, salaried employees may occasionally work in lieu of benefits – such as when they are picking up extra shifts or working overtime. In these instances, they are normally paid an additional 18% on top of their regular pay rate “in lieu of benefits”.
If you live somewhere that does not have universal healthcare, the value of a corporate benefit plan that covers health insurance would be substantially more that 18%. If you live somewhere that has social dental, medication and / or vision plans, the value of a corporate benefit plan would be less.
For the sake of this example, I am going to equate the value of a corporate benefit plan to 18% of my adjusted billable rate.
That means that I have to add $10.80 per hour to my $60 per hour billable rate to cover the cost of benefits – bringing me up to $70.80 per hour.
($60 per hour x 18% = $10.80 per hour)
WHO WANTS TO WORK UNTIL THEY DIE?
Not me, that’s for sure.
Problem is, we all need to eat, live somewhere, and have something to do between the time when we stop working and when we kick the bucket.
If you’re a self employed photographer, you’re not getting a corporate pension – so tough luck – you’re on your own.
Therefore, saving for your retirement is not a luxury or an option – you must build it into your photography business plan.
How much money you actually need to save for retirement depends a lot on your personal circumstances.
Where I live, the maximum annual contribution to a registered retirement savings plan (RRSP) is 18% of your net income, which is roughly 10 to 15% of your gross income.
For this example, I am going to plan on putting 15% of my gross income away for retirement.
If I plan on earning $60,000 per year, I need to save $750 per month – or approximately another $9 per hour.
That brings my billable rate up to 79.80 per hour.
($60,000 per year x %15 / 50 weeks / 20 hours per week = $9 per hour)
VACATIONS AREN’T FREE
You might have noticed that so far there are two weeks out of the year we are not accounting for.
We are assuming that we are on vacation for those two weeks and as an independent small business, cannot earn income.
However, Canadians typically get 4 to 6 weeks per year of paid vacation – Europeans a little more, Americans a little less.
That means that if I want to take more than two weeks off and still reach our target $60,000 per year, I have to adjust my billable rate to make up that lost time.
For our example, I’m just going to stick with two weeks of vacation because I would have to start the math all over from the start based on working 46 weeks in a year instead of 50 – but you get the point.
WHAT’S YOUR OVERHEAD
Finally, we have to consider our overhead.
Again, like many of the other factors, overhead varies greatly depending on a photographers personal circumstances and business model.
At a minimum, overhead would include things like: camera upgrades, computer equipment, home maintenance or rent, software, cellphone, internet, advertising, web hosting, transportation, insurance etc.
Most photographers drastically underestimate their overhead, and if you are a recreational or part time photographer, the lines between what is overhead and what you are just buying for your own enjoyment blur together a little.
But, for our example, lets put an overhead budget together:
Camera Upgrades – say maybe a new body and maybe a lens, and some lighting gear every three years – roughly $2400 per year, or $200 per month.
Computer Equipment – say a new computer every three years too – roughly $600 per year, or $50 per month.
Home Maintenance or Rent – this can vary a lot – but lets say a modest $200 per month would cover a home studio.
Software – upgrades, Photoshop CC etc. – $100 per month.
Cellphone & Internet – I pay around $200 per month.
Advertising and Web Hosting – depends on how heavily you advertise – but say $100 per month.
Transportation – again depends on your mode of transportation – but easily $200 per month.
Insurance – say $100 per month.
That all adds up to $1,150 per month in out of pocket expenses (and that is on the very low home studio end). To cover $1,150 per month in overhead, or 23% of your target annual income, you have to add another $13.80 per hour to your billable rate.
That brings our total billable rate up to $93.60 per hour.
SHOW ME THE MONEY!
OK – so here is how the whole example breaks down.
If we bill $93.60 per hour and we work 40 hours per week but only bill 20 hours per week, and we take two weeks of unpaid vacation, in one year we will gross $93,600 per year.
($93.60 per hour x 20 billable hours per week x 50 weeks per year = $93,600).
Now we get to play Bill Cosby and figure out where the money goes.
$10,800 goes to pay for benefits (18% of $60,000), $9,000 goes to retirement savings (15% of $60,000) and $13,800 goes to cover overhead (23% of $60,000), leaving us with our target income of $60,000.
($93,600 – $10,800 – $9,000 – $13,800 = $60,000)
THE BOTTOM LINE
In the end, we can see that a photographer’s billable rate should be at least triple of what they plan to take home as pay – and even four times would still be reasonable in most cases.
HOW MUCH DO YOU THINK PHOTOGRAPHERS SHOULD CHARGE PER HOUR
What have I overestimated? What have I underestimated? What do you think photographers should factor into their billable rate? Do you agree that a billable rate three to four times of take home pay is reasonable for photographers?
Leave a comment below and let us know what you think!