HOMEROOM
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Answering YOUR Questions

WTF is "MARGIN" and why is it so important?

 

If you've worked with me or heard me talk on Instagram stories lately, you've heard me say the word "margin" ...A LOT. Also, if you've ever watched Shark Tank, asking about a product's margin is always one of the shark's first questions. If they don't get a good answer, they'll give that swift kick in the backside real quick, because margin is important!

 
photography business pricing
 

But, for some reason the service industry and the creative industry in particular don't talk about it.

My reaction when I see a talk or read an article about pricing and they don't bring up margin (which happens A LOT):

 
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So first off, what is margin? It's actually not complicated. It's the revenue that you're bringing in minus the cost it takes to create that revenue. If you're a graphic designer, you may need to purchase a new font with each logo design. For a photographer, that might be the cost of renting gear. If you're a wedding photographer, you may have the cost of a second shooter or the cost of outsourcing your editing. Below is an example for a wedding photographer for 8 hours of coverage.

 

 

$2,500 IN REVENUE FOR AN 8HR WEDDING

- 150 (camera body rental)
- 30 (for a lens rental)
- 300 (for a second shooter)
- 200 (outsource culling/color correction)
- 100 (delivery box, thumb drive, and small gift)

$1,720 is the MARGIN

 

 

AND WHY IS IT SSSOOOOO IMPORTANT?

It's important because it let's you know how much money you are actually making per job. The margin per job is the amount that you are able to contribute towards paying yourself, paying your annual expenses, and paying your taxes. Uncle Sam is going to come calling in mid-April, and the bast way to prepare is to know where and how all of your money is allocated.

When I work with clients to come up with their unique financial strategy, we go through margin for every single product and service. We do this to make sure their time is accounted for, they can pay all of their fixed/annual expenses (like website, licensing, subscriptions, education, insurance, gear, etc), and so that we can best determine how to pay yourself a regular monthly "salary" instead of per job. That may sound overwhelming (because there are a lot of moving pieces), but the first step to all of that is knowing your margins.

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Courtney Zerizef