How I Did It - Amber McAdoo

After a reality check, Amber McAdoo cuts costs, works less, and makes more money for herself. What a concept!

By Jeff Kent

In 2004, Amber McAdoo left college with a degree in photography. By May 2005, she’d settled back into her hometown of Benton, Ark., and opened a portrait and wedding studio in a retail space. Business came right away, and her burgeoning workload soon had her shooting seven days a week and working on the computer most evenings. “I was taken off guard by the amount of time the business required,” says McAdoo. “I started to think, how can I make it more efficient so I don’t have to work every night?”

In July 2006, McAdoo attended PPA’s Make More Money conference in Phoenix, where she heard Ann Monteith, M.Photog.Cr.,Hon.M.Photog., CPP, ABI, API, A-ASP,Hon.ASP, speak about effective business management. When Monteith told the audience there was a formula for pricing photography, McAdoo listened closely. “I knew I needed to raise my prices, but I didn’t know how, and I was scared,” she says. “I didn’t understand that I was supposed to pay myself for my time. My studio kept getting busier, but I wasn’t seeing the profits. I thought the answer was to just keep shooting more and more.”

To keep up with the breakneck pace, she added two full-time employees to the parttime assistant she hired in 2006. Still, by the end of 2007, she was working day and night, and seeing no significant uptick in net profits. Her cost of sales (COS) grew from an already bad 30 percent to 39 percent in 2007, 14 points above the PPA benchmark for retail studios, partly because one of the employees did only production work, so that salary went into the COS. Meanwhile, McAdoo hadn’t raised prices, so the ratio of her COS to gross revenue was getting even more out of balance. She was shooting more sessions, but she was also spending more money on making each sale. So, while her gross revenue went up, her net profit and sales average actually went down.

When McAdoo came to SMS in 2007, her consultant, Bridget Jackson, saw a photographer on the brink of a burnout. “She was overworked, and her employee expenses and cost of sales were killing her business,” says Jackson. “At her existing prices, the more she photographed, the more money went out the door.”

Raising prices was the priority in turning things around. As prices increase, COS decreases: COS is determined by dividing the total cost to produce the product by the gross revenue collected for it. McAdoo gradually edged up her prices in 2007, and in 2008 she bumped them up significantly. As new, higherpaying clients began to replace McAdoo’s first, bargain-hunting clients, studio profits jumped while COS plummeted. In one year, McAdoo’s COS dropped from 39 percent to 26, almost achieving the SMS retail benchmark of 25 percent.

Next up, McAdoo had to refine her in-house production flow and trim employee costs. She’d hired those three employees because she was busy, but her revenue did not justify the additional expense. Outsourcing certain tasks made better financial sense because McAdoo could scale the costs of production to specific needs, rather than having to pay a salary regardless of slow times when the employee was idle.

McAdoo saw as well that in charging more, she could make the desired gross revenue with fewer sessions—fewer sessions, less production required, lower COS, higher net profits! And with a less crowded schedule, McAdoo would have the time to develop a more efficient sales strategy.

Her new three-part sales tactic— scheduling a pre-session consultation, a portrait session and a projection sales session—brings in significantly higher sales averages for McAdoo. In 2007, she grossed about $840 per session; that jumped to just over $1,300 in 2008, and then hopped up to $1,600 in 2009. The increases have helped McAdoo cut total session bookings and boost gross revenue. In ’07, she photographed 211 sessions. In ’08, she photographed
only 120 sessions yet grossed about $7,000 more. Projections for 2009 show slightly fewer sessions than the previous year, with a consistent gross revenue.

Prior to renovating the workflow, McAdoo buried herself in Photoshop work, retouching every image.

Now she selects 40 images from each session and retouches her favorite 10. Presenting those 10 favorites as artist’s selections, she guides her clients through the sales session, showing only images they’re likely to buy.

“It only confuses the consumer to show so many images,” says Jackson. “They don’t know about the 60 images from the session that you didn’t show. They want you to streamline the process for them. They are paying you for your artist’s picks, those select images that you prepared just for them.”

Midway through 2009, McAdoo had a baby and needed a set schedule more than ever. She now does afternoon sessions on Mondays and Tuesdays, morning sessions on Thursdays. Wednesdays are for consultations and order fulfillment, weekends free unless she does a wedding. Workdays end at 6 p.m.

McAdoo continues to decrease costs and increase her bottom-line profits (owner’s compensation + net profit). Labor is down to one part-time employee. From 2006 to 2007, her bottom-line profit hovered around 30 percent, five points lower than the SMS benchmark, but in 2008, McAdoo took home 45 percent of her gross revenues, and it looks like 2009 will be even better.

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