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Are you keeping an eye on your bottom line? ©LaCour

Many of my favorite photographers have built successful careers on being excellent observers. Their images are powerful because they watch, anticipate, and press the shutter at the decisive moment.

But being a keen observer of people is not enough. To succeed in the business of photography, you must employ a careful combination of observation skills. You must be an excellent observer of people AND business. To succeed, you must watch your business –- know it inside and out. As John D. Rockefeller said, “Everything that is watched improves.”

Rockefeller knew exactly how much it cost to extract, refine, and deliver a barrel of oil. He was fully aware of all his costs. Knowing this information –- and acting on it –- gave him a competitive advantage. He knew how to price a barrel of oil to turn a profit.

As a result, he implemented cost savings measures like manufacturing his own barrels and starting his own transport company. By carefully observing the data that mattered, Rockefeller made Standard Oil wildly successful.

The success of your photography business also depends on your observations. Are you watching each area of revenue and cost? What things are you tracking? What systems do you have in place to help you measure and manage your business’s success? Here are three areas that you should be observing particularly carefully.

1. Calculate Your Profitability

• First, create a price list of all your “items” (individual products and services you offer) and calculate profit margins for each item. By understanding profit margin, you will ensure that you’re making money on everything you sell.
• An item’s profit margin is based on “Cost of Goods Sold” (COGS). In order to calculate the total profit margin on packages/proposals you create for clients, identify a COGS for each item on your price list.
• COGS for an item is calculated as the total direct expenses incurred in the production of a good, including the cost of materials used to make that good and the cost of labor to produce it. COGS does not include indirect expenses, like marketing, accounting, and shipping.
• Knowing the COGS will help you determine which products and packages are turning a profit. Subtract an item’s COGS from its sales revenue to determine the gross profit it earns.
• Net profit is the difference between COGS and indirect expenses from sales revenue.

2. Identify and Track Referrals

• Referrals are the lifeblood of many photography businesses, especially wedding. In a good economy, fostering strong referral sources is the most effective growth strategy. In a bad economy, it’s critical.
• If you don’t know where your profitable referrals are coming from, you’re wasting time and money. For example, let’s say five colleagues in your community are responsible for referring 60 percent of last quarter’s business. Don’t you want to treat those referral sources differently than the florist down the road who hasn’t referred anyone? Tracking your referral sources allows you to invest valuable marketing resources into the right people and groups that will give you new business.
• Tracking referrals is a detailed process — one that requires organization and automation to be effective. You can use simple Excel spreadsheets to track referral sources and leads. There is also more sophisticated studio management software available. The good news is that both options can be cost-effective for even the smallest studio.

3. Create a Marketing Strategy and Track Your Success

• Marketing can seem daunting at times, but even a simple marketing strategy can have a beneficial impact on your business. Here are a few things that most successful businesses strategies have in common.
• First, a contact database. The importance of maintaining an organized contact database can’t be stressed enough. It may sound like a basic tactic, but trying to grow your business without a contact database is like trying to drive a car without an engine. If you want to grow your current relationships and develop new ones, you must keep track of communications with every client, referral source, partner, and prospect with whom you interact.
• Second is email marketing. Email communication is the name of the game these days. And with the help of your growing contact database, you can easily reach thousands of prospective clients with a single key stroke. Keep your contacts up to date on events, new services, awards, specials, and other important information with emails. That way, you will already be on their mind when they are seeking photography services.
• Finally, make sure to track your database efforts. Some automated solutions allow you to track the read and response rate for email blasts through easy-to-read reports. Whichever way you decide, be sure to regularly review your efforts to understand what’s helping you drive revenue and what’s not.

An image from the Edmonson's Indian wedding site. ©Edmonson Wedding

When we started working together, my father’s business was primarily commercial photography: magazines, books, CD covers, annual reports. So one week I got sent to the West Coast for an assignment, and he got sent to the East Coast for an assignment. And I said to my father, I came back here so that we could shoot together, but I don’t feel like we’re doing that. This is the commercial world, and that’s the way it’s going be; but we have our Saturdays, and wedding photography has changed. Have you ever considered doing weddings? I showed him that wedding photography today is little bit more lifestyle, more photojournalistic. I also showed him how the coffee table wedding books now are more of a magazine layout, which he could relate to.

So we kind of put our sign up in the world to do weddings. The first year, we did everything wrong. We did 120 weddings at $1,000 each, which was way too much. But you learn from your mistakes. So we changed our prices and we ended up doing more weddings the next year. We almost burned ourselves out because we were just all about volume — that’s what we thought success was.

So we learned from our mistakes again and changed our business model. One of the big ways we did that was with our websites. I have background working with websites, so when I very first started, I started off doing it all by myself, ’cause I thought nobody can do it as good as I could. But then I ended up realizing that the only way to grow your business is if you free yourself up to do what you’re best at, which is getting  business, running your business, being a photographer. So we started out with four sites. Those first four were a site tailored to our American weddings, a site tailored to our Indian clients for Indian weddings, a website for David Edmonson, and a website for Luke Edmonson. One of the reasons we had our two individual sites was because some of the organizations that we are part of, for instance WPJA, have specific parameters for the type of images that you show, and if you can identify who the photographer is. For us it was much simpler just to say, let’s take our consistent look and feel from our wedding sites, and we’ll make separate sites dedicated to each target audience.

The second reason we wanted separate sites was that, when we looked at our client, we saw that our most profitable clients are either our high-end Indian clients and our high-end American clients. We’re not making much profit on the in-between, middle-ground clients. But if we were only going after one group or the other, then we would be limiting ourselves. So we said, let’s go ahead and invest in completely separate websites.

Then number one, we could choose a domain name that meant something special to our Indian clients. That’s why our domain for that site is EdmonsonShaadi. “Shaadi” means matrimony in the Hindi language. And the messaging, the tone of what we wanted to say to clients was different, simply because culturally Indians are Hindus, Muslims, and Christians and have 10 thousand different languages and dialects. So rather than presenting ourselves in English, we wanted to be able to talk to say thanks to them in their own languages -– the different greetings that they would expect from other people who understand their culture. We were blessed to shoot a wedding in New Delhi, India, and we had the ability to see things first-hand. For us, when we’re looking at how to divide up the website, it was really important to be able to show our Indian clients things that relate specifically to their expectations. And then, vice-versa, for our American clients we could do the same.

©Edmonson Photography

Another thing that was important to us was that our separate sites link to one another, to allow people to navigate to the different types of photography we do. So for our wedding sites, at the bottom you’ll see that it says “Wedding,” “Indian,” “David,” and “Luke.” That is simply because we want our Indian clients who maybe know somebody who is non-Indian, to realize that we do work other than just Indian weddings, and hopefully recommend a new client. And likewise for our American clients, who could see we do Indian weddings and might tell a friend.

The same thing goes for our commercial and portraits and other related businesses. One of the things my father taught me long ago was that it’s very hard to be profitable the first time you do business. Profitability comes from a lifetime relationship working with someone. So we start out showing clients that we put an emphasis of the type of photography that we’re doing for them, but then we expand to their other needs.

For instance, someone might start out as a wedding client; then, of course, they’re going to have portrait needs. Maybe that starts with babies, maternity photos, and eventually those become senior portraits, family portraits, and so forth. Perhaps the dad has a business, so it’s awesome if he can see that we do commercial work as well. There are an infinite number of ways to grow your business by just putting it out there. One of the things that we found was that whenever we were initially introduced to a client, they wanted to be able to see that we focused on them. If it’s a commercial client, they didn’t want to see any portraits. They didn’t want to see any wedding photos. They wanted to see commercial photos. Likewise a bride who is looking for wedding photos, that’s all she wants to see. It’s only later in the relationship, when they started to explore some of our other offerings, and once they’ve already gotten connected to you and liked you, all of a sudden they start thinking of you and other ways that they can use you in their life.

• The Online Photographer highlighted a brilliant idea for goodwill marketing this week: Minneapolis photographer Scott Streble is doing a one-day free portrait shoot for anyone in the area who is unemployed. Noticing the poor quality of pictures he saw on his unemployed friends’ resumes, Scott hoped to improve his friends’ chance of landing a job by providing them with better headshots. See more details at Scott’s blog.

• Arctic glacier expert and photographer James Balog and his Extreme Ice Survey will be featured on PBS’s NOVA next Tuesday March 24. State of the Art also reminded us about an audio interview James did with Fresh Air‘s Terry Gross — insightful, as usual. Want to learn more about photography in the Arctic and Antarctic? Check out Chris Linder’s series, Tips from a science photographer.

• We want to congratulate PDN for receiving TWO Neal National Business Journalism Awards. The announcement came yesterday (March 18) from New York that PDN had won best single issue for their September 2008 Book Issue, and best blog for PDNPulse. Way to remind the world that photography is still a business, and still thriving.

• The Telegraph reported that four Spanish schoolboys, aged 18-19, are taking the term “science project” to a whole new level. Armed with a heavy duty latex balloon, made-from-scratch electronic sensor, and a digital Nikkon camera, the team from IES La Bisbal school in Catalonia managed to take amazing photos of the stratosphere in February. The helium inflated balloon flew the equipment to 20 miles above the ground and took atmospheric readings and photographs, while mapping its progress using Google Earth.

World-renowned conservation and fine art photographer Art Wolfe is in the process of reinventing his business model — upgrading to a liveBooks website and selling his stock images directly through a Photoshelter account that is linked to it. Art will be contributing to RESOLVE regularly, but we couldn’t pass up the opportunity to record a few words of wisdom while he was visiting last week. We shot the short interview below with Art and Jim Martin, executive director of Art Wolfe Inc. and an accomplished photographer himself, near our San Francisco office.

When Art started to see diminishing returns from stock sales years ago, he reworked his business around selling images himself through his website. Understanding that “fur and feathers” stock photography was not sufficient to keep his business afloat, he also did what many photographers are now learning the value of — he diversified. On top of stock and print sales, Art is also reaching millions of viewers through his TV show Travels to the Edge and is reworking his workshops for more intimate, challenging classes.