According to dictionary.com the last (6th) line item in the definition of estimate is, "a statement of the approximate charge for work to be done, submitted by a person or business firm ready to undertake the work." Of course, there are five preceding definitions. That should give you some idea about the clarity of the word. It should also tell you that estimates are not as simple as they sound. Bids, RFPs, estimates, and requests for pricing "just off the top of your head" are some of the phrases we all encounter when dealing with prospective clients. Wouldn't it be nice to know exactly how to respond to each?
Unfortunately, there's no one formula but it might be helpful to make a few distinctions between these many words. An estimate is just that, in your case, an approximation of the costs associated with producing an image or images. Approximation is the key word. A bid, on the other hand, is a firm statement of price unless it clearly indicates a plus or minus amount to account for contingencies. An RFP (request for proposal) is really a request for an estimate in most cases, but it's important to understand whether the recipient will view it as a "bid" (firm) or as an "estimate" (approximation). If you're asked for a price "off the top of your head," please be sure to have that head examined if you plan to comply. More photographer-client relationships have been soured by financial misunderstandings than by any other issue. Don't guesstimate - estimate. If you are forced into a rough estimate without sufficient information, be sure to indicate in writing, as a follow up, that it is an approximation based on experience and that you will need further details to be more accurate. Make it clear that you won't be held to it and that you would be happy to follow up with a final written estimate or bid.
Incomplete is Worse than Over or Under
Many photographers believe that it is better to bury line items in their estimates so as not to call attention to them. Things like mark-ups, rentals, and even assistants' fees are often bundled into broader estimates to avoid scrutiny. While this idea might be tempting, it's really a false assumption. In fact, your estimate in all its detail can be one of your most important negotiating tools. If you outline each and every item, including contingencies, you will not only appear to be more professional (wow, this guy really knows what it will take...), you will also have more to negotiate with. It's far better to include too much than too little and easier to give away a small item or two than a major number. If you're concerned that too many line items might be confusing or overwhelming, feel free to summarize them by category. If your buyer questions the category, you can suggest a line-by-line review. That will at least give you the opportunity to defend your estimate.
The idea that you can hide an expense may be correct with an inexperienced client but any buyer worth his/her salt knows what goes into a shoot. Buried expenses can be seen as missing, creating a different kind of red flag. And even with that inexperienced client, hidden expenses can come back to haunt you. The next time you negotiate with that client and he/she insists that you cut something and you respond with, "oh, but I really need the assistant," you've spilled the beans. Expect a response like, "Why? You didn't include one last time!"
It's All in the Details
"What should you include in an estimate?" It's an often-asked question. I can only offer general suggestions because you will have your own unique requirements. Remember, YMMV. ("Your mileage may vary.")
Creative Fees and Licensing
No one can tell you how to run your business, and your pricing model is up to you. There are still photographers who shoot based on a day rate, a work-for-hire agreement, or even a per-print cost, though almost no one recommends these pricing models and they all have significant disadvantages. The best estimates, however, will include two key items in addition to expenses: 1) Your creative or shooting fee and 2) Your charges for specific usage rights which really comprises the licensing of your intellectual propertyâ€"for specific use and for a specific period of time. The creative/shooting fee covers your time, talent, experience and your creative vision. Your licensing covers the use of your images. By separating these items you are being clear with your clients what each is worth and that both are of value. You're also reducing the possibility of misunderstandings and, in some cases, legal costs.
Expenses
Under the overall category of expenses, here are some that are commonly used. You will, no doubt, have others:
- Archiving, backing up files, assistants, catering, casting, crews, computer techs, digital file preparation, digital processing, digital retouching, film & processing, film retouching, generators, insurance, location scouting, location fees, messengers, models, permits, props, rentals, scanning, sets, shipping, styling/stylists, travel, transportation (including van/RV for changing room, client waiting area), telephone, and wardrobe
You might further break these expenses out in terms of overhead and out-of-pocket, for instance. Some photographers charge an equipment fee or a rental fee for equipment, especially optional items, even though they might already own the items in question. By doing so, you are posing an important question to the client. "Do you want to have equipment there I may or may not use but might possibly need?" "Is it worth it to have these items as a backup or as "insurance?" This can be especially helpful when there is some additional inconvenience associated with bringing an item you might be otherwise be tempted to leave behind. I prefer to travel light and shoot available light, so I often charge an additional fee for lighting. I am essentially renting my lighting equipment to the client for this particular shoot. Why? Because my lighting gear is heavy, fragile and difficult to manage. It takes up a lot of space and it's difficult to transport and set up. I incur greater porter/bellman charges. Modeling lights and flash tubes are expensive and often have to be replaced when I fly.
There are photographers who don't own an ounce of equipment. They rent everything and pass along the cost to their clients. Why? Because digital cameras are expensive, they depreciate dramatically and they're outdated in a year or two, at most.
Mark Ups
Another line item that is often intimidating has to do with mark ups. While some photographers try to bury their mark ups, others feel that it is important to call them out. (Personally, I agree with the latter.) Why? Because it establishes the value of your services, space and time. Your vendors are often paid promptly even when you might have to wait 30 or 60 days to be paid. It takes time and effort to obtain products and services for your client and these products have to be stored, transported and protected. There are costs associated with things like these that justify a mark up. And last, most clients demand receipts for expenses and will come to understand your mark up anyway!
The Rest...
There are several other things you should include in your estimate to help present a clear and complete picture. Here are a few:
- A summary of your understanding of the project at hand. Putting it in writing protects you and helps reveal any discrepancies in the respective parties' assumptions. It also lets the client know that you have a thorough understanding of what it will take to execute the assignment.
- Your terms for payment including any discounts offered for accelerated or advance payment, exactly when you expect payment and, in the case of international work, the currency you expect to be paid in. You might also include any penalties that will be imposed for late payments. You should also clearly outline what payments will be required in advance.
- Specify your policies regarding delays, rain days, transportation/travel days, your or the client's policy on illness or accident and other causes for cancellations including penalties and the time frames in which they apply. Sitting in Aruba waiting for a sick client may be fun, but it's also costly!
- List the responsible party for certain expenses/tasks. For instance, do you or the client provide airline tickets? What about hotel reservations? Who is responsible for over-the-weight-limit airline charges for shipping gear? Estimating these charges can also help point out the rationale for rentals, which, in some instances, can be less expensive than shipping and more convenient for you.
- Prop and wardrobe terms. What happens if a prop is damaged? If a garment is sweat stained or damaged by makeup, will you pay for it or do you expect the client to pay? Who will own it if it can't be returned? How much will you have to expend for props? Who pays prop/wardrobe charges? Does your stylist require payment in advance? Does you stylist require a credit card for deposits? Whose card? Some stylists are now routinely donating after-shoot clothing to charitable causes, which is a win-win for you, the community and your client, who appreciates the deduction.
- Specify your insurance coverage and be clear if additional insurance is needed and who will be responsible for the resulting costs.
- Outline a clear path for dispute resolution, responsibility for legal fees and, if applicable, the need for arbitration in lieu of court costs.
- Advances and deposits should be specified and your policies regarding how much you will keep and/or return under certain circumstances, such as cancellation, should be explained.
- A statement of your desire to work with the client can be a powerful motivator. Make sure your estimates include, in some form, a statement asking for the job and, if possible, reasons why you want the assignment. ("I am really excited to travel to Jamaica for you. These images will be a valuable feather in my cap!") It sounds simple but it's true. Simply providing the estimate isn't an indication of true motivation, so spell it out.
- A Thank you can go a long way. Be certain to thank/credit the necessary parties, especially on the client side. Address your estimate to the specific party that requested it.
Estimates as Contracts
You might want to include your contract language on the reverse side of your estimate with a place for client signature. That way, a client can sign and return your estimate as the final contract. It is important that multi-page estimates be clearly labeled "page one of three," "page two of three," etc. Professional photographic trade associations are a good place to start for suggested contract terms. You should also consider consulting with an attorney in your area regarding all contracts and your unique circumstances. Key association estimate- and contract-related Web pages follow:
- APA: http://www.apanational.com/i4a/pages/index.cfm?pageid=3340
- ASMP: http://www.asmp.org/commerce/legal/terms_conditions/index.php
- EP: http://www.editorialphoto.com/ep/forms/
Customize, Personalize and Tailor
The above suggestions are based largely on advertising and/or commercial shoots. Obviously, the process can be very different for wedding, portrait, event, sports and other kinds of assignment photographers and photojournalists. No matter what photographic discipline you practice, however, custom tailoring your estimate to each situation, while time consuming, can give you a real advantage. Clients can spot a general estimate a mile away. Personalization with the details relevant to each shoot can go a long way.
Think of it this way: A clear, easy-to-understand, dedicated estimate is one of the ways you can differentiate yourself, create a professional image and improve your winning chances. Plus, the right estimate can help with your delicate negotiations. And, creating a professional estimate will, in my humble "estimation," improve your overall business.