Wednesday, June 4, 2008

Longitudinal Accounting - It's Impact on Your Business

When you get a check from a client for $2k, you don't immediately say to yourself "wow, I just profited $2k." You recognize that you'll have to pay taxes, and cover your overhead, with a portion of that money. In other words, you realize that that gross income does not equal net profit. To not look at things this way, you would wrongly take the approach that your "Accounts Recievable" department is the most profitable department in the company. No one looks at things that way.

What if, as the result of an $85 photoshop workshop, you learned to edit your images faster, and more efficiently? How long would it take for that expense to be a long-term cost savings to the business?

(Continued after the Jump)

If you knew that the shutter life of a prosumer camera (say, Nikon D80, D300, Canon 5D, 40D, etc) is 50,000 frames, and the cost to replace a shutter is $1100, and the cost of a Nikon D3/EOS 1D Mark III is $5k, but that that camera has a 200k frame mean time until failure shutter life, is it at all possible that not only is it more cost effective to buy the professional grade equipment, but moreover, not just the loss of the income from the assignment you were working when that shutter failed, but also the lost revenue, over time, from the dissatisfied client who won't hire you again, coupled with the cost to you to earn a new client (proportioned marketing/advertising costs, and so forth), would you first opt for the professional grade equipment?

If you knew that choosing an off-brand/third-party flash unit with your camera would yield a higher number of images that require exposure corrections after-the-fact, as compared to a strobe manufactured by the same maker of your camera, at what point would you make the greater upfront investment in the Canon/Nikon strobe, as compared with the initial reduction in cost of the flash in the first place?

And, let's look, for a moment, at the next wave of photography - multimedia. Doing the math, a photojournalist earning $45k a year, is paid about $22 an hour. Many of these photojournalists are now migrating to video, which, in most arenas, are shooting to tape, which means that for every hour of tape shot, that's an hour ingesting that footage. By contrast, the purchasing of a more expensive camera that writes to a memory card, or a direct-to-hard-drive device like a FireStor, can make a huge difference. After just 54 hours of tape, a $1200 camera-cost-increase or a $1200 FireStor becomes a quantifiable savings, If a photojournalist shoots 2 hours of tape in a day, at $22 an hour. This does not even begin to take into account the value of getting the finished video project out faster, meeting deadlines, and so forth.

The cost of your education is usually amortized over your career. It's easy to see this when you have student loans to pay, but when you don't, your cost - in both time and money - is not only appropriately amortized over the span of your career, but so too, do you amortize the cost of continuing education - like that $85 photoshop workshop.

we don't use these words - longitudinal accounting - to describe what we do, but it is what we do, if we think about it. We (should) look at everything along the line of impact, and the concepts, across the spectrum of photography and specifically across every photographer's business, applies. Considering all aspects and facets of your business, and how efficiencies in one arena can have a significant impact in other arenas allows you to become more profitable, and more efficient.

Please post your comments by clicking the link below. If you've got questions, please pose them in our Photo Business Forum Flickr Group Discussion Threads.

9 comments:

Anonymous said...

d300 has a shutter life of 150k.

John Harrington said...

Thanks - that was an example, not a specific representation. I didn't know the D300, or D3 shutter life numbers, but was making the point about considering all those factors. I appreciate the additional information!

John

Anonymous said...

It's impact on your business? It's??? It's not "it's", it's "its". Also recievable is wrong. Professionalism includes checking your grammar and spelling.

Sean Cayton said...

"and the cost to replace a shutter is $1100"

John, I like what you had to say. I agree with most of it. But please. No one needs to be frightened by the cost of shutter replacement.

I've had several replaced over the years and your number just didn't ring true.

So I called CPS. Shutter $96. Labor $180.

How about instead of cost, you talk about profit, markup strategies for growth and importance of specialization?

Let's get down to the business of making money rather than worry about how much it will cost us.

Anonymous said...

Cost to replace a shutter,
including lost income due to having one's primary camera down...
is not mere cost of shutter + labour.

Also, some cameras cost more than others.

But look at the whole cost, eh?


There's an excellent book for Canucks, called
Make Sure It's Deductible ( Evelyn Jacks )

While the details of the law are different in the US, the principles ought apply...

EVERY receipt, put its story on it, on the back.

Dinner with client?
put that on the back,
+ the client's initials,
+ the subject of discussion.

Taxman says you can't deduct that?

Yes you can.

Now you've got the context
& the objective indication that this
wasn't just "enjoying a restaurant".

Every receipt, every time.

File 'em in folders, too, possibly according to month/year,
so when it's tax-time you don't have chaos working against you...

Eventually you will be audited, so stack the odds in your favor,
because you have the right to deduct legitimate expenses.

Cheerses,

PS, JH, Thanks for a very-valuable site, eh?

Sean Cayton said...

"including lost income due to having one's primary camera down... is not mere cost of shutter + labour."

Oh give me a break. If my camera goes bad, I use my backup(s). No lost income. I also have a process for having my equipment repaired and I have insurance.

Back to the silly point that started what was important idea about how to build a business that is efficient and profitable: I can buy two 5d's and be better off than if I were to purchase one Mark II. Sorry Canon.

Beyond that, the cost of doing business is something you will never actually know until you start doing business:) And you will never learn to be efficient until you try something, learn from your mistakes and then make it better.

So how about it? Let's make the starting point for any discussion ideas and strategies for making money instead of worrying about not making any money.



I

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Anonymous said...

^^ nice blog!! ^@^

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Anonymous said...

^^ nice blog!! thanks a lot! ^^

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