One of the smartest things I’ve ever done with my business was admit to myself just how dumb I am. The date was april 2003, and I was getting ready to start a new business venture: that of ‘professional pet photographer’. I had no idea what I was getting myself into, and had no idea where to start. Because I realized I was dumb, I decided to smarten up, starting with taking a simple, basic, boring business class.
In the class I learned many things, like how to write a business plan and what to put in it, how to pick a good business name, which type of business structure to pick, how to calculate costs of goods sold, how to create profit and loss statements and do marketing research and a feasibility analysis.
It was this last part- the feasibility analysis- that I’d like to talk about in this post, because it’s so important for a new business to do, and yet I see so few photographers out there that have actually created one. If this is you, and you are just starting up or in the early stages of your business, it’s not too late to go back and do it! It will be so important for your business, for reasons you will soon see.
First off, lets define what a ‘feasibility analysis’ actually is (also called a feasibility study):
Analysis and evaluation of a proposed project or business to determine if its a) technically feasible, b) is feasible within the estimated cost and c) will be profitable.
In super simple terms, a feasibility analysis is research a person does to determine if starting a particular business is a good idea in their area, and if they will make any money at it.
What should a feasibility analysis contain:
1) Market analysis.
In simple terms, is there a market for your products and services? If you are selling photography of rocks for example, are there enough buyers of rock photography to keep you in business? Research online, look at the census information, see if there are other businesses in your area serving rock lovers. Prove the market exists, and paint a clear picture of who the people are in this market before trying to sell to them.
Through your market analysis you may come up with a picture of your target demographic that looks something like this: “the average rock lover is a male, 64 years old, drives a chevrolet, goes to a barber instead of a ‘salon’, loves black and white photography, shops at Sears, and tinkers on electronics gear.” You have painted a very clear picture of the type of person who may buy your rock photography services.
The more you have your market defined, the easier it will be to find them and sell your services to them. The less you have your market defined, the harder it will be for you to get your business off the ground, as you don’t know who your customers are or if they even exist in the first place. Think of family photography for example. How many different types of families are out there? There are families who take weekend hikes together, families who rarely see each other, families who fight a lot, families who are active in sports, families who spend time reading and playing piano, etc, etc. In other words- lots! The point of market analysis is to nail down the specific type of consumer who you are confident will buy what you’re selling.
And in an ideal world, you already have a demand for your services that you haven’t started charging for. Perhaps some of the members of your rock collector meetup group have already been having you photograph their rock collections, and loving your photos, and now you just need to determine how much to charge for the services you’ve been doing for free. You’ve already done the hard work of determining the market for your services exists.
And it’s not necessarily true that “if you build it they will come”. Determine your market first, and find out where the buyers are before attempting to create something to sell to them.
2) Competitor analysis.
In simple terms, who else is providing this service in your area? A good feasibility analysis will list each competitor, direct and indirect, and list the products, services, strengths and weaknesses of each. A really really good competitive analysis will try and determine who the target demographic of each competing business is. If you want to go really nuts with it, you can even develop a competitor matrix in the form of an excel spreadsheet, and list costs, benefits, locations, products, etc, of each. That is, if you are totally anal like me.
In my business class it was suggested that we call our direct competitors posing as fake clients to get all of this information. I never did this because it felt wrong to me because it’s, well- lying- and I thought it was unethical, so I don’t recommend it. Plus most pro photographers can usually spot a ‘fishing’ email or call from a mile away- and that’s a great way to get on a competitor’s bad side permanently. Usually you can gather everything you need from websites and google. If not you just make your best guess.
All you really need to do is spend a few hours in front of your computer, and use google to research the competition by using keywords your competitors may have used on their website. “Seattle rock photography” for example. Then compile the information in written form. This will give you a really good idea of where you stand as a newcomer.
The most important piece of competitor analysis is determining what sets *your* business apart. Each new business needs to have something different and unique to offer, or they will have a very hard time finding new customers, as customers are generally wanting to spend their dollars wisely. Most potential customers will do their own research to explore other options out there on the market before making a decision, especially in the state of the current economy, especially if they are spending a few hundred dollars. Custom photography is a very personalized service, and clients make informed and careful decisions about who they hire.
If you have a unique selling point, which in the case of photography, is almost always translated to a unique style or look not duplicated by anyone else in your area, OR, you are doing something similar, but doing it *better* and being innovative, it will greatly increase the chances those new customers will pick you once they’ve done their research on other options. I should also note here that just because a potential customer picked up *your* business card, or met *you* at a dinner party, does not mean they aren’t still looking at your competitors as options. Often folks just want to know what else they could be getting before making a decision. And- this is important- most customers don’t buy based on price alone, so there have to be more and stronger selling points than just being ‘the most affordable’ or ‘the most expensive’ option. Of course, there is a lot more that goes into building a successful photography business than style and price, but here we’re just talking about whether it’s a good idea to start in the first place; if *your* business is feasible with all of the competition that’s already out there.
The photography industry is a very competitive industry, with new photographers entering the market every day. It’s no longer enough to be average. If a new photographer wants to become successful and make a living at their craft in an area where significant competition already exists, they need to be exceptional. If you have no competition? Then more power to you! Be as craptastic as you like, but just know that the first exceptional photographer to come along will probably blow you out of the water.
I also want to say here, that if a person does a competitor analysis and sees that their market is already oversaturated with photographers doing the exact same thing they want to start a business doing, there is no shame in doing photography as a hobby. There is a HUGE different between running a business and having profit (your ‘bottom line’) be your foremost concern and priority, and doing something for fun, for the love of it. Sometimes running a business can kill a person’s creative spirit if they are really struggling, so in some cases it’s better to keep doing it for fun, not money. You don’t have to call it your ‘hobby'; you can just call it your passion.
3) Financial analysis:
Is the risk worth the estimated reward? A good feasibility analysis will have a profit and loss statement, or at least, a P&L ESTIMATE. This usually looks like an excel spreadsheet with columns and rows for all income and all expenses. The actuals will be completed ‘after the fact’- the projections take place ahead of time.
This part of the feasibility analysis requires you to answer the following questions before moving forward with starting a business:
1. How much money will you need to invest in this business before starting it? What exactly are your expenses both starting up, and then 6 months, 1 year and so on?
2. What is your monthly overhead?
3. How much revenue do you expect to generate in your first 6 months? Year? 2 years?
4. How do you expect to generate that revenue? What specific products, and in what quantity to you plan to sell to generate that revenue? How many clients will you need to generate that revenue? (Note: you need a solid marketing plan as well- very important!).
5. Will you need a loan?
6. Will you have the equipment you need to start?
7. Do you have the money for the business taxes, accountant and lawyer fees?
8. *Is the market strong enough to bring enough revenue in to your business to keep you IN business?
*If you aren’t sure, how much financial risk are you willing to take on? It’s always good to have an actual number here, like: “I’m going to do every single thing I can to make this business work, but my maximum limit of expenses before seeing a profit is $10,000″ or something like that. Most small businesses aren’t profitable until between years 3 and 5, which means, your business expenses exceed your business income for the first 3-5 years.
9. Do you have enough padding to float you for the first 2-3 years? Will you have another job for 3-5 years to pay the bills?
It may be possible that you are in the minority of photographers who break even in the first couple of years and never have to worry about money, but this happens very rarely, because a photography business is so expensive to start. Of course, if you come from money, or have a spouse who can take care of all of your financial expenses while you go for many months without doing a shoot, the financial analysis isn’t as important, because it doesn’t matter as much if your business is profitable (in which case, it’s a hobby, not a business. I know few business owners who can go for many months without any income and still survive! You need consistent, regular income in order to have a successful business).
If you have a clear financial picture and know what your monetary risks are going into a new venture you can help to minimize those risks.
Those are the 3 main components of a feasibility analysis in a nutshell: Market Analysis, Competitor Analysis and Financial Analysis.
Of course, you can totally decide not to do a feasibility analysis, and just say “I’m going to wing it, it will all work out!”. You can do this, but it’s a great way to make the process grueling, and increase your chances of disappointment and failure. It’s far better to be prepared ahead of time when it comes to something as important, challenging and expensive as going into business for yourself. Prepare yourself by doing the feasibility analysis and you can pave a much smoother, and more informed road for yourself well into the future.
“But Jaymeeee, I did the feasibility analysis and it doesn’t look good! what do I doooo??”
Well, it depends. If the problem is in the first area- your market, and you’ve determined that the market doesn’t exist for what you are selling, that’s a pretty tough problem to solve. You need buyers in order to make profit! You need profit in order to be a business. You can either move to where there is a market, travel regularly to that market with your services, or create a market where there isn’t one (the hardest option). If you are a marketing GENIUS, you can market the crap out of a pet rock or a piece of pottery that has sprouts that grow out of it and make a killing. The average human being? Not so much. But also don’t discount what I said above about doing something for the love of it! You may even find that you are creating a market just by following your passion, doing it for fun and not worrying about all of the business complexities.
If the problem is in your second area- your competition, that’s also a pretty hard problem to solve. If you are in an over-saturated market where there are already tons of photographers serving all of the clients you want to work for, you can’t very well eliminate the competition (not literally anyway), but you *can* wait until you’ve developed something really unique, or so exceptional that everyone will want it no matter what the other options out there are. How do you know if it’s exceptional? If lots of people who AREN’T your friends and family tell you it is. (Your friends and family love you, they will lie to you, don’t listen to them, lol).
I think the smarter thing to do is to travel regularly to an area where there isn’t as much competition. Where the demand for your services will naturally be higher. Perhaps there are already 50 rock photographers in your city, but if you drive 90 minutes you’ll get to a place where folks are just hungry to have their rock collection photographed, and are willing to pay a premium for it. Your travel expenses may be offset by the higher demand and being able to charge higher prices.
Another option is to develop a different, but very similar, type of photography. Perhaps you love photographing pets, but you also love photographing wild animals, and your state has great opportunities to do so, not very many photographers doing it, and plenty of companies willing to buy the imagery. It may be a natural transition for you to make, and adjusting your photography may be just the key to finding success.
If the problem is in the last area- financial, that is the easiest thing to deal with, by simply keeping your start up costs very very low. It may mean it will take you longer to grow (in some cases much longer), as you deal with slow equipment or gear that doesn’t work well. You may have to settle for homemade everything- a homemade logo, a homemade website, etc, but it doesn’t mean you can’t still become successful. Just know that the likelihood you’ll be able to quit your day job anytime soon is low. The old adage that “you have to spend money to make money” is really, unfortunately, true in the photography industry. (Take it from Miss Frugal here, I know). But don’t let lack of start up capitol sway you, if that’s your biggest challenge. I started this business on a shoestring, and while admittedly, it made it a lot harder, it certainly didn’t prevent future success. I just had to work a lot harder for it. But sometimes things fraught with the most challenges offer the sweetest rewards.
“But Jaymeee, I don’t get all of this mumbo-jumbo. Isn’t there somewhere I can read more about these analysis and marketing and costs stuff?”
Sure! Take a look at these links for more resources:
Writing a feasibility analysis:
Marketing plan samples.
PPA benchmark survey. This will give you a clearer idea on financial averages in the photography business, and what successful photographers need to gross in order to make a living. Note: you need to be a member and logged in to view the content: http://www.ppa.com/studio-management-services/benchmark-resources.php
Hope that helps someone out there! And if you have a new (or nearly new) business, start doing your feasibility analysis my young friend! You will thank me later.
Charlie and Seymour say: “do a feasibility analysis or else…”