Cost of Doing Business Calculator

It’s important for every self-employed photographer to know what it costs them just to “turn on the lights”. Before the first customer comes calling, a photographer can spend tens of thousands of dollars to equip themselves. They then have to continue to spend on new equipment, office supplies and many other business expenses as their business grows. All of these expenses, called “business overhead”, have to be earned back or else the photographer will lose money.

Business overhead includes all costs, except wages or salaries, necessary to operate your business. It does not include any expenses that are billed directly to the customer.

A photographer’s “cost of doing business” is their business overhead plus their salary and divided by their number of “billable days”. A billable day is the time during which the photographer is actively working for a paying customer.

The expense categories below were taken from Canadian tax form T2125 Statement of Business or Professional Activities and more information can be found in Canada Revenue’s publication T4002.

But it’s very important to note that we’re trying to calculate your annual business overhead, not your annual income tax. The two are quite different. For examples: advertising your business in a foreign publication is a business expense but it’s not tax deductible; the real cost of your cameras is often higher than the allowable depreciation rate; your home office is a business expense but may not be tax deductible if it’s a dual purpose room; business meals cost more than the allowable 50% rate for tax purposes; going to conferences, conventions and seminars is a valid business expense but only two per year can be tax deducted.

This calculator is for general informational use only and should not be used for income tax or accounting purposes.

You may need a pencil, paper and calculator to properly figure out some amounts. When in doubt, it’s better to err on the high side. Enter only annual amounts and do not include taxes. Any expense field left empty will be assumed to be $0.

Click on each item’s name for more information.

 

Your Expenses

Money spent on advertising and promoting your business. Include the cost of your web hosting, business cards and any promotional items that you use. Does any photographer still use Yellow Page ads?

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Tax law can be a bit complicated here. But to determine the true cost of doing business, include the full cost of your business meals and entertainment expenses. You should always keep receipts and, on the back of those receipts, write the names of anyone who joined you and what business was discussed. General travel meals should be included in another category below.

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This includes any business insurance, camera insurance, health or dental insurance, errors and omissions insurance or disability insurance that you may have. Do you have insurance for your office or studio?

Vehicle insurance, home insurance and travel insurance will go in other categories below.

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Any interest that you pay on any business expense. For example, if you buy a $12,000 lens with your credit card and pay it off over two years at 19% interest, the $2,500 you pay in interest becomes another business expense. Interest paid on a car loan will be included in another category below.

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Include the cost of your NPAC membership and any other business-related membership fees. What do you pay for government business licenses? Do you subscribe to online seminars or other online courses? Do you subscribe to any photo magazines?

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Letterhead, envelopes, pens, paper, toner cartridges, ink, optical discs, etc. It’s pretty much whatever you buy at an office supply store like Staples.

For non-consumables such as a desk, chair, laser printer, etc., how often do you (or should you) replace them? A chair might be replaced every three or four years but a desk might last ten years. If you think your $180 office chair will last three years, add $60. If your $500 desk will last 10 years, add $50. If your $300 multi-function printer will last four years, add $75.

Do you have a label printer? Filing cabinets? Office stereo system? Special shelving for your gear? Do you still have a fax machine? Look around your office and add up every item.

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Include only what’s not billed to customers. Do you pay delivery charges when you buy business-related items online?

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Fees you pay to a lawyer, accountant or any consultant.

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This includes bank fees and credit card fees but not interest. For example, you might be paying for a business banking package that costs a few hundred dollars per years.

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Are you renting office or studio space?

If you work from home, you should calculate the cost for that even if you’re not deducting it from your income tax. You need to know the cost associated with your office space.

In general, if your home office occupies, for example, 15% of your home’s total square footage, then your office expense is 15% of your home’s total expenses (heating, utilities, insurance, taxes, maintenance, repairs, mortgage interest, security system).

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This is a big one. How much do you spend on camera gear and computers each year?

If you buy a new $2,000 laptop every four years, add $500. If you have a desktop computer and monitor, how long do you keep them, four years? Do you have an inkjet printer or scanner? A half-dozen external hard drives?

While it’s possible to use the same cameras, lenses, lights, bags, etc. almost forever, that’s simply bad business. You have to stay reasonably current because that benefits your customers and you. And that costs money.

How often should you replace your cameras lenses, camera bags, flashes, light stands, softboxes, tripods and the thousand other items you have? Certainly it would nice to get new gear every year but how frequently should you be replacing your tools? Every three years? Four years at most?

If you buy a $6,000 camera, use it for four years and sell it for $1,000, then that camera cost you $1,250 per year. Do this type of pro-rated calculation for every other item you have. Resale value can’t be relied upon since a lot of gear has no real resale value after a few years of professional use.

Do you regularly rent gear? Include any rental charges that are not billed to the customer.

Do you own a generator for location shoots? Do you have dollies or other carts to transport your gear?

Of course you have software. If you rent software, then your annual cost is easy to figure out. But if you “buy” software, then it’s tougher to determine the average annual cost. Perhaps assume a two or three year software life? For income tax purposes only, the federal government assumes a one-year software life except for operating system software.

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This includes all the little things and consumables that you buy: batteries, memory cards, card readers, various cables, adapters, gaffer tape, sheet filters, background paper, a multitool or other small tools, flashlights, extension cords, camera cleaning supplies, camera straps, A-clamps, etc. Generally, these will be under $500 each.

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How much do you spend to maintain and repair your camera gear and other business tools? A single “minor” camera repair is a few hundred dollars. A major repair is at least many hundreds of dollars. All camera equipment should go in for routine servicing every once in a while.

Vehicle maintenance and repairs will be included in another category.

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This is for any travel you do to help earn a business income. Expenses may include: airfare, hotels, taxis, car rentals, bus fare, meals, travel insurance, travel permits or visa, carnet and any other travel expenses. Include only travel costs that are not billed to the customer.

You can also include the cost to attend the annual NPAC conference and any other business-related conference or seminar.

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The annual cost of your cellphone, landline, fax line(?), Internet access, long distance charges, etc.

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The CAA has an online driving cost calculator to help give you a reasonable idea of the expense associated with your model of vehicle and your general type of driving. But your mileage may vary. :-) If you know your actual costs, use them instead.

Generally speaking, if you use your vehicle for, let’s say, 60% business then your business expense is 60% of your total vehicle expense. The percentage is based on mileage driven not time spent in the car. :-) You must track all your business mileage throughout the year in a log book, either electronic or paper, and keep all auto-related expense receipts.

Expenses include the cost of the vehicle (including any loan interest), maintenance, repairs, insurance, vehicle registration and fuel.

To be accurate, once you have calculated the business portion of your car expenses, you should deduct any mileage fees that clients paid you during the year. Although, this amount may be impossible to predict for a future year.

Parking expenses and road tolls incurred while driving for business, and which are not billed to the customer, are not pro-rated and should be included in full.

And just to point out, if you have a car accident while driving for business, the full cost of the repairs is a business expense and is not pro-rated.

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Take a few moments to remember if you have any other business expenses not covered above.

Do you have a photovest or other specialized clothing? Rain gear, cold-weather gear or hip waders? How many ladders and step-stools do you have? Do you buy books to help you run your business? Do you take business-related college or night-school classes?

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Your Salary

You need to earn a salary otherwise you’ll be the “free” in freelance. Ideally you should be earning a salary AND your business should be earning a profit.

According to StatsCan, as of December 2014, the average Canadian salary before deductions and income tax was $49,036/year. For what it’s worth, 90% of Canadian income earners make less than $80,400/year (using 2011 data).

Also remember that while employees pay only 50% of their Canada Pension Plan (CPP) contributions, you have to pay 100% of your CPP.

If you don’t earn a salary, you can’t put money into your RRSP, TFSA or other savings account. You also won’t be able to buy food, clothes, a vacation, or anything else.

Remember to give yourself a raise from time to time, at least equal to the rate of inflation and the increasing cost of living.

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Other Income

Do you earn income from stock sales, prints sales or book sales? Do you teach photo classes or are you involved in photo workshops? Enter the annual amount you earn from all other activities. The time spent on these activities is not considered billable days.

The amount entered here will lower the amount of money you need to earn from shooting but still meet your overall salary expectation and cover your overhead expenses.

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Billable Days

How many days each year will you be directly working for a paying client? A newspaper staff photographer and most other types of employees work less than 236 days per year, assuming two weeks vacation, five sick days and ten statutory holidays.

A freelancer cannot work seven days a week. You must have days off for yourself. You also have to spend time working on your business. These are not billable days. No one pays you to update your web site, answer e-mails, take gear in for repair, send out estimates and invoices, organize and archive your images, run errands, learn new software, etc.

How many days each year will you be working on a paying job? If you think 200 days, then good luck with that. If you hope 150 days then congratulations, you’re above average. A rough average might be around 100 days per year, although some photographers work about half that.

Your Results


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This is the *minimum* average amount of money you should be earning for every billable day. It does not include any job expenses. This daily cost of doing business does not include any profit for your business.

You can accept jobs for less money but you’ll have to compensate by finding other jobs at a much higher rate. Otherwise you will end up not paying yourself and/or losing money by not covering your overhead.

You can lower your cost of doing business by increasing your number of billable days and/or decreasing your overhead.

Increasing your number of billable days requires you to do more effective marketing. Decreasing your overhead could require driving a less expensive car, using lower-end equipment, or finding other ways to cut back. The problem with reductions and cutbacks is that they might negatively affect your photography and your customers.

Peter Drucker, author, political economist and management consultant, was credited with pioneering the most important social and management theories of the 20th century. He was quoted as saying:

Because the purpose of business is to create a customer, the business enterprise has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.

A 2012 study (link to PDF) which looked at 25,000 companies over a 45-year period, found that the most successful companies, regardless of what business they were in, all followed this advice.

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