Starting a New Business: Photography Edition
Starting a new business can be a daunting task for photographers. How do you deal with taxes and record-keeping? Where will you work? What about lease agreements? How can you avoid failure? In her 2016 Photographer’s Market article “Breaking In: Starting a New Business,” Vik Orenstein answers all of these questions and more. Keep reading below for an excerpt from this photography business article, or you can read the complete article on ArtistsMarketOnline.com or in the 2016 Photographer’s Market.
Keep creating and good luck!
Your very first step in starting your new business should be to go to the U.S. Small Business Administration website: www.sba.gov. They have a wealth of information on every aspect of small business from the planning stage on through to your exit strategy.
Your next step should be to enter “starting a small business” along with the name of your state in your search engine. Most states have free guides to setting up small businesses, along with other resources including such things as low-interest loans. When searching, look specifically for government sites and avoid sponsored sites (the ones that appear at the top of the page highlighted in yellow boxes that run down the right side of the page). Sponsored sites will often charge you for information you can get free from your Department of Commerce.
Generally, the first thing you’ll apply for will be your state business tax I.D. number. This number will allow you to purchase anything you resell without paying sales tax, as your client will pay the sales tax to you after they receive their goods, and you will then pay it to the state.
UNDERSTAND SALES TAX
You can wind up paying too much sales tax if you don’t have a business tax I.D. number, or if you don’t use it. This was perhaps the second most expensive mistake of my business career. I purchased film, paper, chemicals and other supplies from several local pro photo stores in Minneapolis. These supplies went into the making of my portraits, which were sold to my clients, the end users. I wasn’t required to pay sales tax on these items. But as usual I wasn’t paying attention, so I paid the tax anyway. Eventually, one of my vendors suggested I fill out a resale tax-exempt certificate and stop paying unnecessary taxes. That guy saved me tons of money.
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UNDERSTAND USE TAX
I’ve made a lot of mistakes in my fifteen years in business, most of them of the, “Oops, oh well, life goes on,” variety. But my most expensive—and therefore most memorable—mistake involved a little thing called “use tax.” On the form that I fill out every month when I pay my sales tax, there is a line for “use tax purchases.” I had no idea what it meant, so I blissfully assumed it didn’t apply to me. For years I left the line blank. Then one day, I got a call from the Minnesota Department of Revenue: I was being audited by the sales tax division. No problem, I thought. I charged my clients and paid the state the proper sales taxes. That was when I found out what “use tax” is. When you purchase merchandise from out-of-state sources by phone, Internet or mail, they don’t charge you sales tax because you are supposed to pay the sales tax in your home state. That’s a use tax. (Use tax is figured at the same rate as your regular state sales tax.)
For years I’d been buying almost all my equipment, art supplies, props and other miscellaneous items via mail order, from companies in other states. These purchases over the course of those years totaled in the tens of thousands of dollars. Once the tax I owed, plus the penalties, were tabulated, that little oversight wound up costing me thousands of dollars.
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HAVE A RECORD-KEEPING SYSTEM THAT WORKS FOR YOU
I don’t know anybody who ever says, “Oh, goodie, I get to organize my files now!” And
photographers are probably more challenged in this arena than most. So you need to give yourself a lot of help.
Use visual cues. You’re a very visual person, remember? So use visual cues, such as color and tab placement, to make it easier on yourself. For example, I put all my vendor invoices in blue files and put their tabs all the way to the right. My leases, rental invoices and everything else that pertains to my spaces are in blue files, with their tabs all the way to the left. Banking-related documents: red file, center tab. And so on.
Be consistent. Always keep your files in the same place. This might sound basic to some of you, but you’d be amazed at what some of the offices of photographers can look like. They’re working on a file, so they take it to their desk or their couch or their copier, set it down to go do something else, leaving it there. Pretty soon something else gets laid on top of it, and something on top of that, and so forth, and suddenly the file is MIA. Depending on the depth of the stack, you might not find that file again until you retire and hold a going-out-of-business sale. So my rule of thumb is this: Always keep your files in the same drawers of the same filing cabinets when you’re not using them. After you use them, put them back.
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THE TAX MAN COMETH
Paying your income taxes is a whole new experience when you’re self-employed. Kiss those handy little 1040 forms good-bye. You’ve entered the world of itemizing, of depreciation, of mysterious column A’s that you add to column B’s and subtract from column C’s. The first year of my business I was determined to do my own taxes. I sat down with the form for a short while before I put my tail between my legs and ran whining to a CPA who specializes in small businesses. I felt silly going to a professional accountant for my piddly little $38,000 gross studio, but, boy, am I glad I did.
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You’ve budgeted for your studio space in your business plan, and now it’s time to choose a door on which to hang your shingle. Whether you rent on an as-needed basis from another photographer or sign the lease yourself, the location where you set up shop will go a long way toward establishing your image in your clients’ minds. Think about the identity you want to project: Do you want to be a trendy, artsy, edgy warehouse habitué? A suburban office park straight shooter? A downtown or uptown girl or guy? If your studio is a retail business, do you want to project upscale boutique chic or shopping mall sass?
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Working From Home
There are pros and cons to operating your studio, office, or darkroom out of your home. The biggest pro, obviously, is that it doesn’t cost you anything—assuming that you would have the home in any case. The drawbacks are twofold: It’s harder to project a professional image when you bring clients into your residence; and it’s darned hard to know when to stop working.
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Since overhead is the bane of small businesses everywhere, and rent will probably be your biggest fixed expense provided you don’t have employees, sharing space either with another photographer or with someone in a complimentary business seems like the next best thing, cost-wise, to working from home. But it, too, has its pros and cons. Obviously, reducing your rent by half or more is a big plus. But having “studio mates” and “office mates” can be a lot like having roommates—or worse yet, spouses! There’s the basic Odd Couple trap—one of you is a neatnick and one of you is a slob. Or one of you subscribes to the “what’s yours is mine and what’s mine is mine” theory of equipment sharing. Or one of you starts poaching the other one’s clients.
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Renting as Needed
The first two years I was in business, I rented a studio on an as-needed basis from an established fashion photographer. At first the arrangement worked out spectacularly; he was a slob and I was a slob, so we were compatible on the cleaning front. At first I only needed to shoot on Saturdays, and he only shot Monday through Friday, so there was no disagreement. But as my business grew, I started needing more shooting days. The day rate I was paying him for the use of his space was 20 percent of his monthly rent. So if I shot more than five days in a given month, which began to happen more and more often, I was paying him more than what it would have cost me to have my own space in the same building. And then his busy season kicked in, and suddenly the studio wasn’t available to me when I needed it. So after two years, we parted ways.
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Taking on a business partner can be, in my opinion, a great idea, but very few photographers ever try. I think we’re all just a bit blind to the importance of the business aspect of our work, and we think if we can shoot, the rest will take care of itself. Just as in any business, the photographer should only partner with someone who has something to offer that the photographer does not himself possess: capital, sales experience, business experience, clients, etc.
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It can be very scary the first time you sign a lease for a studio space. Most property companies require a minimum of a three- to five-year commitment. There’s usually a page in the agreement that says the exact amount you’ll owe for the life of the lease, and I guarantee you the number will be higher than you can count on your fingers and toes.
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BUYING AN EXISTING STUDIO
Rather than starting from scratch, some photographers opt to purchase an existing studio from a shooter who is retiring or going out of business.
The benefits of this are that you can get a client list, a complete setup (including photographic equipment, backdrops, props, and office equipment), and take over a space that probably needs little or no remodeling or construction (also referred to as build-out) all in one fell swoop.
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BUYING A FRANCHISE
Buying a franchise can be a safer bet. A franchise is like a business in a box—the planning and product development and name selection and logo—everything down to the minutiae is already in place. Just add your time, money and talent! Before a business is offered as a franchise it has to have a working model that’s proven reliably successful and repeatable. For example, suppose you want to open a bagel shop. You could go into business as Anita’s Bagel Bakery and try to break into your market with no name recognition and untried business plan, or you can buy a Bruegger’s Bagels franchise and open your doors with instant name recognition and a successful business plan. As a franchisee you’ll have the advantage of a proven guide for every aspect of operation and a product that you know can be sold. You also get comprehensive training up front.
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CONTRACTORS, EMPLOYEES, NEPOTISM, AND DOING IT YOURSELF
When you’re just starting out it’s wise to keep your fixed overhead to a minimum. There are various ways to do this.
You can hire independent contractors on an as-needed basis. You just have to make sure they actually are contractors, and not employees, or you could wind up paying some stiff penalties. There are a couple of big indicators that a person is a contractor and not an employee. The person does the same job for other clients besides you. Examples of this would be a housekeeper who cleans homes for various clients, a photo assistant who works for more than one photographer or a bookkeeper who works for other clients in addition to you. Another, stronger, indicator is whether the person is hired on a per job basis. You’ve got a big shoot coming up for MegaHuge, Inc., that’s going to last two weeks. You hire the assistant for that job only. After the job is done you part ways.
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PROTECTING YOUR NAME
If you are using your own name as your business name, you don’t have to worry about trademarking it. Your name is yours to use. The downside of that is that anyone else whose name it is can use it, too. So if your name is Stanley Kowalski and your studio is called Stanley Kowalski Photography, and the guy down the street is named Stanley Kowalski, too, and he calls himself Stanley Kowalski Photography, there’s nothing you can do about it. This could be especially troublesome if, say, you shoot high-end editorial fashion and he shoots cheesy boudoir photos for ads that appear in the back of swinger magazines. You could lose clients if they confuse the two of you, and there would still be nothing you could do about it.
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THE REASONS MOST SMALL BUSINESSES FAIL
I hate to bring up an ugly word like failure when you’re just getting started, but the fact is that roughly 80 percent of all new businesses fail. I’m not trying to be pessimistic or even cautionary, just pragmatic. I believe that if you’re aware in advance of the reasons others before you have failed, you’ll be able to avoid repeating them yourself.
A lack of knowledge. Failure can result when the new business owner hasn’t done his research. Not just research into his market as it exists in the present, but the history of the market and the names of all the major players. Knowing where your colleagues have been will help you steer yourself where you want to go.
A lack of passion. No matter that you try to have realistic expectations going into your new business venture; no matter that you’ve intentionally taken off those rose-colored glasses to face the glare of reality; no matter how well you try to prepare yourself, starting up your own studio is going to be harder than you think. Really. So unless you have that big fire in your belly, unless you love creating images so much that you wax rhapsodic just thinking about it, don’t bother. Because you will find the sacrifices too great and the rewards too few, and you’ll go sprinting back to that “real” job before you can say “Bruce Weber and Annie Leibovitz.”
That little four letter word: fear. Human beings are funny animals. We fear failure. We fear success. And in either case, that fear can make us abandon ship.
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THE MYTH OF BUSINESS-CHALLENGED PHOTOGRAPHERS
All right, I’ll admit that I am one of the culprits who has bought into the “I’m a photographer, not a business person” myth. I actually like to think I’m bad at business—it makes me feel more artistic. But as my less artistic, more business-oriented friends point out, I must be good at business or I wouldn’t still be here after twenty-one years. Erica Stoller, owner and operator of ESTO Photographic, Inc., said it best: “Photographers clearly have a visual bias, but I’m often surprised at how well they deal with the written word (a skill important in every profession). And how good their instincts are for business. But there’s a strange cultural divide: art versus business. In fact, business arrangements can be creative and not all that difficult.” Erica posits that the trouble comes in when the photographer/business owner is wearing both hats at once because “… it is hard to concentrate on one job while thinking about the last job and worrying about the next.”
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KEY INGREDIENTS FOR SUCCESS
There is no recipe for success. However, there are some essential ingredients. Since I’ve told you some of the things that can help you fail, it’s only fair I highlight some of the things that can help contribute to your success.
Adaptability. Imagine you started out shooting family portraits in 1988. Direct color, white on white was big. It was so big you didn’t take out your canvas backdrop for four years. You even named your studio Blanc de Blanc (not a particularly good name choice, since not everyone speaks French). You never thought you’d have to shoot anything else ever again. You set your sights on coasting into retirement as a one-trick pony. But business dropped off and you studied your market to see what everybody else was up to. It appeared that black-and-white fine art prints were enjoying a resurgence. You told yourself that you are adaptable, you can learn how to change with the market—and you did just that. You did it before you needed to take out a loan just to keep the doors open, and before you became a dinosaur. You changed your business name, but not too much: Blanc Avec Negra, perhaps. You went back to school, or back to the darkroom, or back to square one—whatever it takes to learn how to make top-quality black-and-white art prints. And business picked up again. You have adapted. And you didn’t have to rise out of your own ashes.
Common sense. Over the years I’ve learned that common sense is a real premium. If you have it, you’re in the minority. If it goes without saying that you pay your bills on time, keep adequate records, answer your phone, return all your calls, provide the best product you know how at an appropriate price and view every client as a person as well as a source of income, you can parlay this unique sensibility into a successful career.
Talent. Talent is important. It is necessary. If you don’t have talent, you won’t be able to deliver a satisfactory product, and you’ll never have a repeat client. Talent is the yin to your good business practice’s yang.
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It can be daunting. Entities, tax-exempt numbers, choosing and protecting a name, and leasing space is just the beginning. This is not exactly the stuff you had in mind when you were dreaming of becoming a photographer. But the very trait that makes you want to make images creatively can be applied to your business endeavors to bring your financial goals to fruition. It seems that creativity is not, after all, a handicap for a photographer running his own business, but a necessity.
Vik Orenstein is a photographer, writer and teacher. She founded KidCapers Portraits in 1988, followed by Tiny Acorn Portraits in 1994. In addition to her work creating portraits of children, she has photographed children for such commercial clients as Nikon, Pentax, Microsoft, and 3M. Vik teaches several photography courses at BetterPhoto.com.
Excerpted from The Photographer’s Market Guide to Building Your Photography Business © 2010 by Vik Orenstein. Used with the kind permission of Writer’s Digest Books, an imprint of F+W, a Content + eCommerce Company.