Podcast

Revenue vs. Profit

February 3, 2022

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Revenue vs. Profit
Revenue vs. Profit
Revenue vs. Profit
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When you started your creative business, did you realize how much you’d have to quickly learn about finances? I mean, didn’t we go into the creative world to not have to think about taxes and profit margins?

I know that learning all of the business parts of running your creative business can be challenging and can lead to burn out. I’m here to help you find focus and feel confident in the business part of your business so you can put your energy into the creative part! We are starting with a very important topic: revenue vs profit.

Revenue is the sum of all your accounts receivable (aka bookings). Your accounts receivable includes income from weddings, sessions, passive print sales, and any other revenue streams your business may have.

Revenue streams are the different ways your business can make money. In some cases, your revenue streams may be very diverse (shooting weddings, an associate team, educational content, coaching, etc.) or it may be more focused on a niche area, like newborn sessions.

Even if you niche down to a specific area, like newborn sessions, there are revenue streams you can create within that area that contribute to your overall revenue. This could include upselling add-ons to a session, having print or album sales, or coaching other newborn photographers!

Revenue = the sum of all revenue streams 

Example Revenue from One Revenue Stream:

Let’s say you focus solely on shooting weddings in 2022.

You charge $3000 per wedding and you book to shoot 30 weddings.

Your revenue would be $90,000.

Example Revenue from Multiple Revenue Streams:

Let’s say you have multiple revenue streams in 2022.

You shoot weddings, family sessions, and coach photographers.

For weddings, you charge $3000 per wedding and you book 20 weddings in 2022.

For family sessions, you charge $500 per session and you book 50 family sessions in 2022.

For coaching, you charge $1250 for a mentoring session and you book 2 mentoring sessions per month in 2022 coming to a total of 24 mentoring sessions.

Your revenue would be:

Weddings: $3000 x 20 = $60,000

Family Sessions: $500 x 50 = $25,000

Coaching/Mentoring: $1250 x 24 = $30,000

Total Revenue = $115,000

Profit is your revenue less all expenses and taxes. Your expenses are made up of variable costs and fixed costs:

  • Fixed costs are costs that will exist no matter how many sessions or weddings you book. They are things like: business insurance, accounting & bookkeeping, website annual fees, etc. Fixed costs can also be referred to as overhead expenses.

  • Variable costs are the costs that occur with each booking. They are things like: credit card processing fees, client gifts, outsourcing editing, etc. Variable costs are the costs that occur because you booked a session, wedding, or what is applicable to your industry.

I also lump taxes into expenses because they are required costs that decrease our profit line. Taxes are a fluctuating expense that are closer to a variable expense than a fixed cost. However, I will often work my forecasted taxes into my fixed costs so I am already factoring in those costs.

Prior to moving to an S-Corporation and being on payroll, we were a general partnership entity (many entrepreneurs would be a sole proprietor or S-Corp). As a general partnership entity, I would operate taxes as a variable cost and instantly removed 30% from all of our collection prices because 30% was the tax rate we would be paying in our state, which is Indiana. A sole proprietor would do the same for taxes. With an S-Corp, we pay taxes through our payroll instead. An account is a great resource if you are deciding if your business would benefit from making the move to an S-Corp!

If we go back to the earlier examples for revenue, we can find profit by pulling out the fixed and variable costs (and taxes).

Example Profit for One Revenue Stream:

Let’s say you focus solely on shooting weddings in 2022. You charge $3000 per wedding and you book to shoot 30 weddings. You have fixed costs of $15,000 and variable costs per wedding of $500. You are a sole proprietor so your tax rate is 30%.

Your revenue would be $90,000.

Your fixed costs are $15,000.

Your variable costs are $15,000.

Your estimated taxes are $27,000.

This means your profit is $33,000.

Example Profit from Multiple Revenue Streams:

Let’s say you have multiple revenue streams in 2022. You have fixed costs of $15,000. You are a sole proprietor so your tax rate is 30%.

You shoot weddings, family sessions, and coach photographers.

For weddings, you charge $3000 per wedding and you book 20 weddings in 2022. Your variable costs per wedding are $500.

For family sessions, you charge $500 per session and you book 50 family sessions in 2022. Your variable costs per session are $50.

For coaching, you charge $1250 for a mentoring session and you book 2 mentoring sessions per month in 2022 coming to a total of 24 mentoring sessions. Your variable costs per session are $100.

Your revenue would be $115,000.

Your fixed costs are $15,000.

Your variable costs are $14,900:

  • Weddings: $10,000

  • Family Sessions: $2,500

  • Coaching/Mentoring: $2,400

Your estimated taxes are $34,500.

This means your profit is $50,600.

It is so important to look at your potential profit when setting your pricing and deciding how many sessions or weddings you have capacity for.

If you have questions about your revenue vs. profit, let’s set up a coaching call and ensure you’re setting yourself up for success!

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