How We Did It - James & Meridith Walters
James and Meridith Walters’ careful attention to controlling expenditures shows success isn’t how much you’re making, but how much you’re keeping.
By Jeff Kent
Located in Raleigh, N.C., Walters & Walters is a family-run wedding photography business. Husband-and-wife team James and Meridith Walters began covering weddings in 2000 and officially incorporated in 2003.
Going in, James and Meridith had several advantages. James had a degree in commercial photography and more than a decade of experience at a commercial studio. Meridith had a marketing degree and eight years of experience in branding. Good organization and work habits have helped the studio prosper.
From day one, the Walterses focused on curtailing costs. They handle nearly all production in house, outsourcing only printing and album binding. For them, having no employees leads to an efficient, streamlined workflow. They buy high-quality gear and use it until it wears out completely.
The Waltersess also keep a close eye on the accounting. Meridith manages the studio’s finances, monitoring projected earnings, future expenses and current financial obligations. Meridith’s accounting is all about balance. If she projects a shortfall in one area, she and James make changes to compensate in another area. “Every decision we make comes back to the numbers,” she says. “It’s one of the toughest things we do, because we have to put emotion aside, which sometimes means delaying a purchase or putting off a fun project to repair a weak area of our business.”
Everything revolves around avoiding debt, say the Walterses. They have a business credit card, but never allow it to carry a balance from month to month. When they want to purchase something, they save up for it, or sell something and buy the item with cash. When an unexpected but unavoidable major expense arises and they have to use credit, they make cuts where they can to pay off the balance as soon as possible.
“With every new equipment purchase, I ask myself, ‘Is this piece of equipment going to make me money?’” says James. “Usually, the answer is ‘probably not.’ But if it’s something necessary to doing our best work for clients, or something that will help us stand out from the competition, then we’ll budget the funds for the purchase.”
In 2006, Walters & Walters had its biggest year yet. James and Meridith shot a record number of weddings and pulled in the highest gross revenues in the studio’s history. But when 2007 rolled around, bookings fell by 40 percent, causing a 30-percent plunge in gross income. The minute they recognized the
situation, they began cutting back on expenses and refiguring budgets. Sitting down with their accountant at the end of the year, they discovered they’d actually made a higher net profit in 2007 than in the banner year 2006. “We were shocked. We’d done a lot less work, but we kept more money,” says James. “Right then, we realized we needed to better understand the relationship of our expenses to our income, as opposed to measuring ourselves by the number of weddings we shot.”
“We learned that it’s not about total sales or bookings, but how much you’re keeping,” adds Meridith. “Understanding which numbers to look at to measure success is critical.”
The Walterses called PPA Studio Management Services early in 2008. During the initial consultation, they saw their bottom-line profits (net profit plus owners’ compensation) increased from 45 percent of their gross revenues in 2006 to 57 percent in 2007. According to the latest PPA Studio Financial Benchmark Survey, for high-performing studios like Walters & Walters, the average is 37 percent. James and Meridith’s success in keeping more of their
money was due in large part to their extremely low cost of sales—16 percent as compared to the benchmark 25 percent. COS became the new measuring stick for the studio’s success. Rather than evaluating their success purely by net profit, the couple had to consider all of their expenses, even incidentals
like packaging, and how those seemingly small expenditures affect the bottom line.
One big change they made was in album production. Prior to 2008, the Walterses had all album production expenses billed to their credit card. Each wedding ran up $500 to $800 in material expenses, which they immediately paid off with money from the studio’s net profits. SMS helped them realize their accounting was backwards, making it more difficult to determine their actual COS and profit margins. They were paying off the expenses of one wedding with the profits from others.
To fix the problem, the Walterses set up a separate checking account for paying lab and album fees. Their wedding clients pay them in installments, and packages include payment toward the album. Meridith deposits the payment directly into the lab and album checking account, before the production expenses are incurred. When it comes time to produce the album, she has the funds to pay the expenses by check. “This is getting in front of the debt, or in this case our album liability, instead of getting behind it,” says James. “We won’t get into a situation where 10 brides wanting albums all at once leaves us
wiped out from up-front expenses.”
With systems like this in place, Walters & Walters has been able to weather the current economy better than many of its competitors. In 2008, the studio maintained a 16 percent COS and improved the bottom-line profit percentage to an astounding 63 percent. James and Meridith admit that the slowdown has forced them to work harder than in years past, but having a firm grip on the studio’s accounting makes a huge difference. In fact, as of mid-2009, they’ve been able to cut COS even further, to a scant 12 percent. “Knowing the numbers—the right numbers—definitely helps,” says Meridith.