Ok, you now have the idea and you have the passion, determination and belief, where do you start?
As we mentioned way back in the beginning, you need to formulate a professionally written business plan and write it down. Not only does this help to make it clear in your own head, it also helps should you wish you request financial help in the form of a small business loan or grant.
Here are some guidelines on making a comprehensive business plan courtesy of Entrepreneur.com:
From Anati Neiffer:
“I’ve provided an outline for a photography business (the actual outline of my business plan) for your review:
Note: Each Summary header will include a written 1-2 paragraph summary of the points below. Each point should be discussed in detail as an individual paragraph to each section.
- Mission Statement: we all know what this is…
- Keys to Success: list of key concepts that will lead to business success such as marketing, client relationship, etc.
- Company Ownership: Who are you?
- Start Up Summary: This outlines the initial financial cost to start the business. Includes furniture, equipment and your lease (if applicable).
- Company Location: Where your business will operate including a description of the accessibility to the client, signage, etc. Since some studios are on-location only they will need to define their home base of operations and materials they offer for working on location.
- Products & Services: This could be a long list – but give a blanket statement as well as an individual breakdown of each.
- Competitive Comparison: What is your competition? Don’t name-names – just define them.
- Sales Literature: Define your logo, business cards, brochures, website and display ads and how they will be presented. Talk about your “branding” and how it relates your business to your client.
- Technology: How do you employ the latest technology into your business? This is a really important place to talk about your image backup system.
Market Analysis Summary
- Market Segmentation: Breakdown each individual area of your market to include demographic information about annual income.
- Target Market Segment Strategy: Who are you targeting, why and how do you plan to reach them?
- Market Growth: Describe the rate of growth you based your information on for the Market Segmentation Portion. Think citing and footnote.
- Market Trends: What is the trend of need for your target market? (Digital, CD, Prints)
- Market Needs: What does your target market want? It doesn’t hurt to conduct an actual survey for this portion.
- Industry Analysis: This is again, comparing what you can offer the market as compared to your competition. This time based on their needs that you just defined.
- Main Competitors: You should briefly define them without naming names. Talk about their price range and market strategy.
- Competition and Buying Patterns: How is your target market locating your competition – yellow pages, referral, online, etc.
- Distribution Patterns: Location proximity to your studio. Talk about home-based studios as well since they don’t have a home base you will need to discuss their area of service.
- Industry Participants: Who are photographers? Education level?
Strategy and Implementation Summary
- Strategy Pyramid: Marketing tactics for reaching your target market. Example: Beautiful Baby Contest, Etc. Describe how these will help you reach and maintain your market.
- Competitive Edge: What do you offer that the competition does not? How can you market that to you clients?
- Marketing Strategy: How do you plan to market yourself in a unique and non-traditional way that sets you apart from the competition?
- Distribution Strategy: How do you physically get your name out? Flyers, locations, signage.
- Marketing Programs: Define them…Yellow Pages, Website, Direct Mail, Etc.
- Positioning Statement: Think…Marketing Mission Statement.
- Pricing Strategy: Doesn’t need to include exact amounts just how you measure up with your competition, why you are at that amount and how to will perceive the value of your price to your clients.
- Promotion Strategy: How are you going to use your Marketing Programs specifically.
- Sales Strategy: Talk about any specials you will use to “rope-in” clients and make them “lifetime” clients.
- Sales Forecast: This part isn’t fun but required. You should estimate how much you plan to make on each type of photography you offer over the course of the first year in business. This is a forecast and only a goal to shoot for – so don’t tear your hair out over these numbers. In the same aspect, don’t overshoot them either. Think average.
- Milestones: Goals you would like to achieve for the first year. These include website publication, direct mail program, radio spot, etc. Set a budget for each one.
Web Plan Summary
- Website Marketing Strategy: Discuss how you will use this medium to attract your target market. Include promotional offers, who will link with you and how you plan to share the URL.
- Social Media Marketing Strategy: Discuss how you will use this medium to attract your target market. Include promotional offers, what other companies will link with you and how you plan to share the URL.
- Direct E-Mail Marketing Strategy: Discuss how you will use your email campaign to gain attention. How will obtain and maintain address?
- Management Team: Define your management staff, if any. Include yourself.
- Management Team Gaps: Who will cover the phone, store, etc when you are on a shoot or on vacation? If you don’t have a staff member, explain how you will handle the situation.
- Personnel Plan: Breakdown each staff member and annual salary. If this is a commission job, explain the % the company takes and why.
- Start-up Funding: Spreadsheet of all costs to start-up.
- Important Assumptions: This is a blanket statement about the economy for your region and that your figures are based on said assumption.
- Break-Even Analysis: How long will it take you to make up your start-up costs?
- Key Financial Indicators: Set benchmarks to show a quick comparison of Sales, Gross Margin %, and Operating Expenses over a several year period.
- Projected Profit and Loss: Overhead + Profit Chart
- Projected Cash Flow: Show your account balance in relation to your cash flow. Appropriate how the cash flow is spent.
- Projected Balance Sheet: Show projected totals for several years of business for all line items above.
- Sales Forecast Spreadsheet by Month for 1st Year
- Personnel Plan Spreadsheet by Month for 1st Year
- Pro Forma Profit and Loss
- Pro Forma Cash Flow
- Pro Forma Balance Sheet”
Use these as a guide to creating your own plan suited to your business adding as much information as you can. If you are going to request financial help, print the plan off and have it bound in a professional sleeve or wallet.
The more information you can give your bank in a professional manner, the better. How you finance your business is up to you.
Refinance your Home (Home Equity Loan)
This is quite extreme and should only be considered if you intend to really go for it and you have some serious plans in place. You need to be 100% confident that you will be able to sustain the amount of paid work that will cover repayments and also 100% confident in the quality of your work.
You need to have done your homework here:
- Where will the work come from and is it ongoing and steady
- Will it start to pay immediately
- Do you have a ton of good, reliable suppliers on board
- Do you have a reliable team behind you for support and the ability to leverage your time
- Do you have a proper plan in place for a successful business launch (see next chapter)
- Once launched, will you have the infrastructure in place (studio, equipment, website, marketing, finance etc)
- Do you have a backup plan for financing and paying bills should work not come as regularly as planned (savings, other income from you or your spouse)
Business/Personal Bank Loan
This is the route many people go for but think long and hard about it before taking out your own, long term loan.
If you have been in work for around 3 years or more and have good standing and a good credit rating with your bank, you should have no problem in obtaining finance through a personal loan and you should also set up a business account if you haven’t done so already. You will probably have to settle for a personal loan to start with until you have been trading for a while at which point you could look to get a business loan if needed.
Having some form of equity in a property for example would help
If applying for a business loan, make sure you cost everything into it that you need. It is better to be liberal and borrow too much as it is hard to go back for more but easier to use the excess as working capital.
You need to budget and plan ahead to make sure, and convince the bank, that you will be able to make the repayments…again, this is where a decent, well prepared business plan comes in very useful.
Make sure you account for things like taxes, National Insurance contributions and other “unseen” costs.
If you can convince someone to invest in your company, you had better be sure that you follow up any cash injection with a lot of hard work. Getting someone to invest in you and your new company will require a lot of convincing and for that, yep, the business plan comes into its own again.
You need to show any contracts that you already have in place that will give you steady work as well as good ideas for expanding the business quickly.
The investor is going to want to see a return on their investment even if it is just your good old parents (the return they would most like to see is your success but be careful as you run the risk of damaging your relationships)!
If you are looking for investors (other than family), I would wait until the business has been going for at least 6 months to 1 year (no matter how small) to show that you have continued and consistent growth.
This coupled with projections for the next 2-3 years would go a long way to helping someone decide whether or not to invest in you and would give you a better idea of how much you need.
You also need to decide what return you are offering (a % stake in the business or dividends each year) and this is where professional help is most likely needed. You also need an exit strategy in case you get so successful that the investor is getting more out of your business than you anticipated.
For example, you may agree to a small investment of say $5,000 for a 10% stake which equates to around $4,000 per year on your $40,000 profit after a few years. What if this then goes up and up? After 5 years or so, your investor would have reaped at least $20,000 from their $5,000 initial investment.
Great for them but frustrating for you
Maybe write into the contract that once they have recouped their initial outlay plus a predetermined profit cap, they then leave the business. For example, they get back their $5,000 plus an additional $2-3,000 within the first 2 years.
As long as it is generally better than any other investment (i.e. the banks), it is still a good investment for them. However, this is only a suggestion should you not be able to get finance or a business start up loan. After all, you will probably end up paying a lot more back than you would on the interest on a bank loan so the idea is to make the deal:
- Better than other investments available to the investor, a higher return
- Not too much more to pay out for you than a standard bank loan
- Both parties need to be happy with the deal
My advice is to think very carefully before taking on any investors. I once had to pay back tens of thousands of Euros to an investor because after just a short while, I could sense that it was going to go bad. Be prepared to accept the fact they will probably want some sort of say in how things are run regardless of their experience in your field.
If you have savings in the bank I would recommend personally that you still go for some form of business start up loan or other financing.
If you were to plough all of your savings into a new business venture that didn’t work out as planned, you have no money left to fall back on and getting finance on an already failing business would be nigh on impossible. Whereas if you have a loan in place, you still have your savings which would cover your loan repayments and living expenses until you get back on your feet again.
The idea is to MAKE it work though, right?
I would suggest that you go 50/50 and borrow just half the money needed to get going, this would look good to the banks as you are clearly prepared to stump up your own money too and it shows determination and commitment! Write this into your business plan.
It would also mean you have lower repayments and still have money available as backup and for living expenses.
Earn as You Go from Profits Generated (Most Recommended)
This is for the real go getter and is better known as forward profit generation.
If you have the time and income to do this (current employment), it is a great route to go and one that most people take when starting a photography business. You don’t need any start up capital, there is no pressure to move too quickly or make loan repayments and you have no-one on your back to make it work other than yourself.
If you already have even the bare minimum of camera equipment, you can start to make a living using a few of the ideas in previous chapters. As you already have money coming in, put any money made from your photography business into a separate account and don’t touch it.
Once you feel comfortable and happy with your progress, sit down and decide what route you want to take (weddings, portraits, commercial etc) and by this point, you should have some size-able savings to spend on new kit, marketing, websites and so on.
Remember though, even during these early stages this is still a business and you have to account for and pay your taxes. Set some of the profit aside as we discussed before.
The Prince’s Trust (UK)
The Prince’s Trust Business Programme in the United Kingdom provides money and support to help people start up in their own business.
You need to be (as at 2010):
- Aged between 18-30
- Unemployed or currently working less than 16 hours a week
- Living in England, Wales or Northern Ireland.
Help and finance available (as at 2010):
- A low interest loan of up to £4,000 (up to £5,000 for a partnership)
- Ongoing advice from a business mentor
- A grant of up to £1,500 in special circumstances (subject to local availability)
- A test marketing grant of up to £250 (subject to local availability)
Simply put, sell anything you really don’t need by having a garage sale, jumble sale, boot fair or even sell things on eBay. I am sure you could make more use of a new, high quality lens than that pile of old computer games you haven’t touched for years?
You could even ask friends and family to donate their unwanted bits and pieces to you…it all adds up!
Quick and easy way of funding initially to get going but be careful. High interest rates for cash advances and low monthly minimum repayments can soon start to add up and tempt you to spend more so watch how you use them…personally I don’t like them…
Normally set aside for larger firms dealing with commercial customers but if you fit into that bracket and start off with some huge contracts, this could work for you.
In a nutshell, you get an advance on a 30, 45 or 60 day invoice (or whatever the company pays) from a factoring company. Let’s say you have done a photography job for the National Geographic earning you $10,000 (nice work if you can get it) and they agree to pay your invoice in 45 days.
You need the funds immediately for whatever reason so you sell your invoice to a factoring company for immediate payment. They issue you with around 70% – 90% of the total immediately and then when the invoice is paid by the client, they issue you the balance less a small financing fee.
Quite a good way of keeping the cash flow working within your company and only something very few photographers will ever need to use but it is good to know it is available.
There are a few requirements to fit the bill for invoice factoring and you can read more about it here…
New business financing created by the modern internet. You can register at a site like Prosper.com (USA) and post a loan request for a fixed amount at the maximum interest rate. Interested lenders will then bid for your loan and once you reach a formidable interest rate, you go ahead.
As far as I am aware at the time of writing, all loans made this way are 3 year, unsecured loans.
LendingClub.com (USA) is a similar way to borrow on the internet but uses a system based on your credit rating. The site will give you a credit rating based on your circumstances and then offer you an interest rate based on that rating.
Loans accepted are immediate and repayments taken directly from your bank account. Read the small print.
UK Social Lending Sites:
Helpful Financing Websites
Launching Your Business
Ok, launching your business and heading off down the exciting road of self-employment!
Most people make the mistake of doing months if not years of research and hard work to get their business ready. They get everything in place having spent thousands of Pounds or Dollars only to simply “open for business” without anyone knowing.
The idea is to build up to your launch and let everyone know you are coming well in advance.
Your launch and marketing should begin long before you are ready to open. You should get the word out that a new business is coming to town soon and get people interested early on.
Start your website before you launch and have the homepage say something like…
“Coming Soon. New Portrait Photography Business Coming To Weymouth Offering Free Portrait Sittings in the First Week of Business!”
“New Wedding Photographer in Weymouth Opening for Business on June 1st 2xxx and We Are Offering Free Parent Albums With Each New Booking – Enter Your Email Address Below to be Notified When We Officially Open”
…and include some of your best work along with your contact details etc. Make it look enticing.
Use localised Adwords ads or other methods of advertising (word of mouth, local paper, newsagents windows, flyers, Facebook, Twitter etc) to send people to your homepage and have an “opt in” page (using someone like AWeber) where they can leave their email address to be informed of the launch week. That way they can make the most of your opening offer of free portrait sittings.
Once you have that list of interested parties and their email addresses, when you launch, you let them know and in comes the work! You could use this for all other types of photography with an introductory offer.
You could also send people to your website and list by doing a few press releases online. These are either paid or free as we discussed before but definitely worth doing.
Each press release gets viewed by thousands of people and many will cut and paste your press release onto their own website. This will create traffic and links into your site which is all good!
If you have a studio, you could do all of the above and on launch day, have Champagne flowing with nibbles and free, fun portrait shoots for all people attending your launch party.
Again, you make your initial profits from reprint orders and the more Champagne they have, the more likely they are to get their credit card out ; )
Doing a launch for your business won’t be very effective if you are shooting stock for example but if shooting portraits, weddings or commercial and even if you are creating books, calendars and so on, an “official” launch is worth doing.
You just need to choose a specific date on which to officially start and stick to it and get as many people interested beforehand as you can.
Even if you have been trading for a while, you can still do a launch or “re-launch” with new products or premises (even hire a hall for your home-based business launch). Remember to make an offer that is too good to miss with a limited timescale and/or limited numbers to create the “fear of loss” attitude in people if they don’t take you up on it!
Next Page – Equipment and Costing