When we look at our GROSS INCOME…. We’re THRILLED!
When we look at our NET INCOME… We’re happy but not thrilled.
When we look at our NET INCOME minus 30% for TAXES… I’m MAD!!!!!!!
I’m not writing a post to complain about the self-employment tax. However, I am writing this post to make small business owners aware that if you shot 20 weddings at $2,500, you didn’t make $50,000. At BEST, you made around $37,000 and that is just taking 25% off for your taxes. That’s not subtracting your business expenses. If you’re wondering at the end of the year “Where did all of that income go?!”, it could be two different situations:
1. You really didn’t have much income to begin with after your business expenses.
2. You have some spending habits that are slowly eating away at your income.
If you photographed 20 weddings at $2,500 and each wedding cost you $350 (mileage, online services, client experience, rentals, second shooter… $350 is the low-end!) then you are really only profiting $2,150.
$2150 x 20 = $43,000
$43,000 x .25% = $10,750
$43,000 – $10,750 = $32,250 annual income
$32,250 annual income = $1,612.50 per wedding
Just to be clear… VERY CLEAR… this isn’t a post saying that $32,000 isn’t great income. It’s a post saying “Be aware of what you’re really making so that you can make great financial decisions”. A LOT of business owners think “I’m shooting 20 weddings, I’m making $50,000” and they make business decisions off of that number and that can be scary. $32,000 is a GREAT number… $22,000 is a great number…. $62,000 is a great number… but only if it is your NET number. I just don’t want people to be confused like I was my first couple of years in business! :)
If you’re like me, you want to avoid these numbers because they aren’t always encouraging. You probably want to focus on what you brought in and not look at what you ACTUALLY made because at times, it can be depressing. I totally understand that. And the more you make, the harder you work and the more you lose. It’s not a fun game but it is a game that we are in control of. Instead of working for a corporation that tells me what my time and talent is worth each year, I get to decide what I’m worth…. along with the wedding market.
So, as we begin a new year, I have a few challenges and encouragements for you!!!
1. Don’t be naive to the facts of your business. If you’re really making $7 an hour…. you should know that. If you’re making $15/hour and you want to make $50/hour, you should know how much more you need to charge in order to get there. Know what each wedding costs you and be aware that buying a cute shooting dress at Target is NOT a write-off! (oh how I wish it was!!!)
2. When you’re deciding on your pricing for the new year, remember the facts that I just told you above. If you’re charging $2,500, you’re really only making $1,600. If you don’t know WHERE your pricing should be and you need to step up your pricing guide presentation, we have made ALL of our pricing education AND our very own pricing guide template available to you in The KJ Collection!! The KJ Pricing Kit includes our “What You’re Worth” Ebook, Pricing Guide Template (Indesign) and access to all of our pricing verbiage and structures that we deliver to our clients!! Enjoy! Click HERE to mark this big task off of your 2016 off-season to-do list!
3. If your family is in a financial crisis and the debt is piling up…. you probably feel out of control and helpless. Michael and I may have never been in debt besides our mortgage but we do know what it’s like to live off of one small salary and make it WORK before our income was anywhere close to what it is today. We made that season of our life work because we started living the Dave Ramsey way! To this DAY we still listen to his podcasts to learn how to be financially FREE! Highly recommend checking out his resources! Life changing!
For some, this post is eye-opening and for some, it’s just a good ol’ reminder that we have to be honest with our money. Just be encouraged with this…. if you’re working for yourself… at the end of the day… there are aspects of this job that are just priceless. We need to be thankful for the fact that we live in a country where we CAN make a living working for ourselves!! That’s amazing! However, in order to make it work, we have to really know our numbers. Here’s to a new year with new goals and new outlooks on our businesses!!!
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