The Cost of Starting and Being in Business - Photography, part 1
(this is a reprint of a series of posts I wrote on Facebook in 2009)
So everyone thinks it is so easy to start and run a business, Really??? I tell them. Do you know everything about what it costs? Do you know what Businesses pay in rent or their licenses? etc...
The answer to these questions is almost always no, spoken with a downward glance and an change of subject.
Well I'll fill you in on some of the details. Let's start from the beginning as if we are starting a new photography business.
Question one, what type of photography will you be doing? portrait, wedding, commercial, journalism....Oh yes I'll be doing that kind of photography, says our subject. Wait a second, I tell them Each of these example areas is a dedicated field in photography that have unique markets and skills. Pick one of these areas and focus on it.
After some debate our subject says they want to do weddings and maybe portraiture, and maybe commercial. (thinking to myself, didn't I just explain that commercial is a different market?) Weddings and portraiture might be able to be combined but commercial is a very different animal and market. Lets focus on Weddings and portraiture we'll come back to the idea of commercial later.
What do we need to get a wedding and portraiture business started?
First we need a business type, Doing business as (DBA) registration, Obtain a sales tax license, and business license for the city we are going to base the business in.
I ask our subject what type of business do they want to be? A photography business they say confused and a bit indignant while thinking didn't we just discuss this. No I'm talking business ownership form, do you want to be a sole proprietor, a partnership, an LLC, or an S-corporation? What does all that mean, our subject asks? Each form of business ownership has advantages and risks, some even have limited protection for you as the owner. In general sole proprietors have the most risk but are the easiest and cheapest to start. Partnerships would be the next on the risk scale. LLC's and S-corp providing the most protection but also the largest cost to start.
After some consideration and doing some research on the web our subject comes back and says I think an LLC would be best for me. All right then, You should get a lawyer to write up your business documents. Expect to pay $500 or more to get a lawyer to draft the documents.
Next you need to file the LLC documents with the state. In the state of Utah it costs $52 dollars with a $12 annual renewal fee.
Now What shall we call your business? This is a the name or DBA that your advertise your business under, it does not need to be your LLC name. Our subject speaks up with a name they want. Ok lets get that registered with the state. In the State of Utah DBA registration costs $22 dollars annually.
Sales tax license is free and just takes registration with the State tax commission
Now where shall the business be located? Salt Lake City, our subject announces. Ok but when we talk about space to rent Salt Lake is a higher cost then some other places, but less then Holiday and cottonwood. Ok maybe I'll do West Valley. Ok. A business license for West Valley Costs $110 annually plus $50 your First year.
We also need to get a Location and bank account.
The Bank account is easy it takes filing some documents and paying some fees. At my bank it costs $25 for minimum deposit, plus $20 for your endorsement stamp. We'll talk about taking credit cards later as merchant services are a different service.
Now on to the location, In reality this is one of the first steps as you need a location before you can get your business license.
So for a portraiture and wedding business you could do it out of your home but but the portraiture side is better from a retail location. Typically you will need 500-1500 square feet to build your studio in.
Doing a quick search on a commercial real estate site the only property near that range available today is a 3000sqft space. The rent is $1500/month modified gross (modified gross means that your rent will increase with property tax, insurance, etc) You will still have to pay for utilities separate from the lease. Your first year rent is $18,000 plus utilities.
Now before we can open your doors we need to build out your space for doing photography and get equipment, last of all we need to do marketing to bring people to the business to buy your photography.
Before we get that far lets recap our current costs. $500 for lawyer to draft LLC documents. $52 to file LLC with the State. $22 for the DBA. $160 for Your first year business License. $45 to open your bank account and $18,000 to rent a space. Total $18,779 and there are more costs coming.
Build out furnishings, and equipment will be your next biggest cost and is a large variable. Build out costs can range from $5 to $50 per square foot. Unless you have a license to do construction you will likely have to hire someone to do all the work. so for 3000sqft you looking at $15,000-$150,000 for our current purposes we'll say you got a great deal and it costs you $15,000
Equipment, you will need a Camera, lenses, lighting, lighting modifiers, computer,software, printer, electronic storage devices, etc. There are also Tax implications if you use any of your personal equipment or if you use business assets for personal use (talk to a CPA or Tax attorney about specifics). We'll estimate a budget of $20,000 for equipment
To our Cost of $18,779 we add our build out of $15,000, and equipment of $20,000 totaling $53,279 plus utilities, now for Marketing....
Wait that's too much money, I'll never be able to save that to start a business. Our subject laments.
You could run your business from home eliminating the build out and rent costs reducing the $53,779 by $33,000 leaving equipment costs and start up costs of $20,779.
Our subject laments more, that's still out of my reach, It would take me 15 years to save that much. Can we reduce the Equipment to the minimum? Ok I say, If you shoot natural light with one lens and use a print house we can drop some cost of the equipment. Camera $3,000 Lens $700, Computer $1200, Electronic Storage $120/1TB total minimum equipment cost $5020 plus your $779 Start up costs
Total Start up cost $5799
Our subject laments more I have some equipment can I use that to get me by.
Shrugging my shoulders, if you would like to just get by, You could use your old equipment and write your own LLC documents. That will cost you $279. Again there are also Tax implications if you use any of your personal equipment or if you use business assets for personal use (talk to a CPA or Tax attorney about specifics).
Would you like to be able to take credit cards? Sure our subject says. OK, merchant services will cost you $300 for the equipment and another $8 per month plus 1% of your transactions and another $.3 per transaction. So that adds $396 for your first year so your up to $579 in your first year plus on going fees.
You will need to do marketing and come next year you will have $240 to pay. Plus by the end of the first year you may need to replace some of your camera equipment, and begin expanding your equipment.
How much business will you need to do to make your money back, pay yourself a small wage and replace your equipment? We'll discuss that in the next post
So to recap Starting a business in Utah will Cost you from $279-$54000 to start not including utilities and marketing.
So everyone thinks it is so easy to start and run a business, Really??? I tell them. Do you know everything about what it costs? Do you know what Businesses pay in rent or their licenses? etc...
The answer to these questions is almost always no, spoken with a downward glance and an change of subject.
Well I'll fill you in on some of the details. Let's start from the beginning as if we are starting a new photography business.
Question one, what type of photography will you be doing? portrait, wedding, commercial, journalism....Oh yes I'll be doing that kind of photography, says our subject. Wait a second, I tell them Each of these example areas is a dedicated field in photography that have unique markets and skills. Pick one of these areas and focus on it.
After some debate our subject says they want to do weddings and maybe portraiture, and maybe commercial. (thinking to myself, didn't I just explain that commercial is a different market?) Weddings and portraiture might be able to be combined but commercial is a very different animal and market. Lets focus on Weddings and portraiture we'll come back to the idea of commercial later.
What do we need to get a wedding and portraiture business started?
First we need a business type, Doing business as (DBA) registration, Obtain a sales tax license, and business license for the city we are going to base the business in.
I ask our subject what type of business do they want to be? A photography business they say confused and a bit indignant while thinking didn't we just discuss this. No I'm talking business ownership form, do you want to be a sole proprietor, a partnership, an LLC, or an S-corporation? What does all that mean, our subject asks? Each form of business ownership has advantages and risks, some even have limited protection for you as the owner. In general sole proprietors have the most risk but are the easiest and cheapest to start. Partnerships would be the next on the risk scale. LLC's and S-corp providing the most protection but also the largest cost to start.
After some consideration and doing some research on the web our subject comes back and says I think an LLC would be best for me. All right then, You should get a lawyer to write up your business documents. Expect to pay $500 or more to get a lawyer to draft the documents.
Next you need to file the LLC documents with the state. In the state of Utah it costs $52 dollars with a $12 annual renewal fee.
Now What shall we call your business? This is a the name or DBA that your advertise your business under, it does not need to be your LLC name. Our subject speaks up with a name they want. Ok lets get that registered with the state. In the State of Utah DBA registration costs $22 dollars annually.
Sales tax license is free and just takes registration with the State tax commission
Now where shall the business be located? Salt Lake City, our subject announces. Ok but when we talk about space to rent Salt Lake is a higher cost then some other places, but less then Holiday and cottonwood. Ok maybe I'll do West Valley. Ok. A business license for West Valley Costs $110 annually plus $50 your First year.
We also need to get a Location and bank account.
The Bank account is easy it takes filing some documents and paying some fees. At my bank it costs $25 for minimum deposit, plus $20 for your endorsement stamp. We'll talk about taking credit cards later as merchant services are a different service.
Now on to the location, In reality this is one of the first steps as you need a location before you can get your business license.
So for a portraiture and wedding business you could do it out of your home but but the portraiture side is better from a retail location. Typically you will need 500-1500 square feet to build your studio in.
Doing a quick search on a commercial real estate site the only property near that range available today is a 3000sqft space. The rent is $1500/month modified gross (modified gross means that your rent will increase with property tax, insurance, etc) You will still have to pay for utilities separate from the lease. Your first year rent is $18,000 plus utilities.
Now before we can open your doors we need to build out your space for doing photography and get equipment, last of all we need to do marketing to bring people to the business to buy your photography.
Before we get that far lets recap our current costs. $500 for lawyer to draft LLC documents. $52 to file LLC with the State. $22 for the DBA. $160 for Your first year business License. $45 to open your bank account and $18,000 to rent a space. Total $18,779 and there are more costs coming.
Build out furnishings, and equipment will be your next biggest cost and is a large variable. Build out costs can range from $5 to $50 per square foot. Unless you have a license to do construction you will likely have to hire someone to do all the work. so for 3000sqft you looking at $15,000-$150,000 for our current purposes we'll say you got a great deal and it costs you $15,000
Equipment, you will need a Camera, lenses, lighting, lighting modifiers, computer,software, printer, electronic storage devices, etc. There are also Tax implications if you use any of your personal equipment or if you use business assets for personal use (talk to a CPA or Tax attorney about specifics). We'll estimate a budget of $20,000 for equipment
To our Cost of $18,779 we add our build out of $15,000, and equipment of $20,000 totaling $53,279 plus utilities, now for Marketing....
Wait that's too much money, I'll never be able to save that to start a business. Our subject laments.
You could run your business from home eliminating the build out and rent costs reducing the $53,779 by $33,000 leaving equipment costs and start up costs of $20,779.
Our subject laments more, that's still out of my reach, It would take me 15 years to save that much. Can we reduce the Equipment to the minimum? Ok I say, If you shoot natural light with one lens and use a print house we can drop some cost of the equipment. Camera $3,000 Lens $700, Computer $1200, Electronic Storage $120/1TB total minimum equipment cost $5020 plus your $779 Start up costs
Total Start up cost $5799
Our subject laments more I have some equipment can I use that to get me by.
Shrugging my shoulders, if you would like to just get by, You could use your old equipment and write your own LLC documents. That will cost you $279. Again there are also Tax implications if you use any of your personal equipment or if you use business assets for personal use (talk to a CPA or Tax attorney about specifics).
Would you like to be able to take credit cards? Sure our subject says. OK, merchant services will cost you $300 for the equipment and another $8 per month plus 1% of your transactions and another $.3 per transaction. So that adds $396 for your first year so your up to $579 in your first year plus on going fees.
You will need to do marketing and come next year you will have $240 to pay. Plus by the end of the first year you may need to replace some of your camera equipment, and begin expanding your equipment.
How much business will you need to do to make your money back, pay yourself a small wage and replace your equipment? We'll discuss that in the next post
So to recap Starting a business in Utah will Cost you from $279-$54000 to start not including utilities and marketing.
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