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Something that I never ever thought I would say that I love to talk about is…numbers!

Specifically, the numbers that we need to know and understand in order to grow our business. It’s not so much the numbers per say that I love to talk about but rather business growth and money management. And in order to grow our business and our profits we need to know a few important numbers. Because here’s the thing, what gets measured gets managed.

Numbers are nothing to be afraid of, they’re neutral in fact – they are nothing more than bits of information and data points. We can leverage them to grow our bottom line or to tell us what step we need to take next to grow our business.

Let me preface all of this by saying that I wasn’t “good” at math in high school. At least not in the traditional sense, I think I got bumped down in my math class because I struggled to grasp certain math concepts. I do think there is a lot to be said about the teacher I had and the way that I learn but I digress.

I tell you this because you don’t have to be a math genius or an accountant or a bookkeeper or a graduate of business school in order to take control of these numbers in your business or to become wildly profitable. It really doesn’t matter how “bad” you think you are at math, so that negative self talk can go. What’s far more important to your business than knowing pythagoras theorem, is knowing how and why to measure and track certain metrics.

Today we’re going to dive into 5 of the most important numbers that every photography business owner needs to know in order to have a healthy, profitable business over the long term. Understanding and tracking these numbers is so important so that you can make informed decisions that are going to help you grow and thrive. Let’s get into it.

1. Profit margins 

First up, this is a critical one. If I asked you right now what is your profit margin on your most popular package? Or what was your profit margin from the previous tax year? Or what was your profit margin from the previous quarter? Could you tell me?

If you were anything like me before I got serious about growing my business, then you probably don’t know the answer to these questions. We need to know this number because it’s the most important measure of your business’s financial health.

If you’re not making a profit my friend, then I’m afraid what you have is an expensive hobby. That might be a bit ouchy to hear, but sometimes we need a bit of tough love to catalyze us into action.

Think of profit like the petrol gauge in your car.

Imagine if the gauge was totally covered up and you couldn’t see it, or that it was faulty somehow and gave you an inaccurate reading. You’d be rolling the dice every time you got in your car and it would only be a matter of time before your car just stopped going.  

To calculate profit, subtract your total expenses from your total revenue, then divide that number by your total revenue and multiply by 100 to get a percentage.

Here’s an easy example, if your total revenue is $100,000 and your total expenses are $60,000, your profit margin is ($100,000 – $60,000 which is $40,000) / $100,000 * 100 = 40%. A healthy profit margin varies by industry, but for a lot of service-based businesses like photography, a margin between 20-40% is generally considered good.

2. Cost of doing business and cost of goods sold

I’ve lumped these two together because they make up the bulk of our business expenses, aside from the salary or wages that we pay ourselves. The cost of doing business is also known as our operating expenses and this includes all the expenses necessary to operate, for example all your software subscriptions to Pic Time, Studio Ninja, Adobe, etc. It includes your equipment, insurances, marketing costs, travel expenses, professional fees like hiring an accountant, a bookkeeper, or a graphic designer and so on and so forth.

Then we also have Cost of goods sold (COGS) which are the direct costs associated with carrying out each job that you’re hired to do. Some typical COGS for a wedding photographer could be:

1. Physical products – think prints, albums, USB’s, thank you notes or any other physical item that you choose to deliver to your clients
2. Second shooter fees
3. Editing services if you like to outsource your editing
4. Travel costs directly related to the wedding day, including mileage, tolls, and parking, or if it’s a destination wedding that might be flights, taxis and car hire, plus your meals and accommodation
5. Equipment rental if you need to rent any additional equipment specifically for the shoot.

This isn’t an exhaustive list but the takeaway here is that COGS are directly tied to each specific job and are necessary to produce and deliver the final product to the client.

So getting clear and dialed in on your costs of doing business and your COGS helps you set pricing appropriately and ensures you’re covering all of your costs while making a healthy profit to boot.

3. Number of enquiries

This is the number of potential clients who reach out about booking you, and tracking them can help you understand how well your marketing efforts are paying off and; it helps you to identify trends over time.

When you track this you’ll spot patterns about what months of the year you tend to receive the highest number of enquiries and make the most amount of bookings and what months are the quietest. When you know this data, you can prepare yourself financially for the slower months and you can take that into consideration when managing your cashflow. A steady increase in enquiries is a good sign that your marketing activities are effective.

4. Number of bookings and sales conversion rate

Very closely related to your number of enquiries is your number of bookings. This is the actual number of clients who decided to book you. And by comparing the number of bookings to the overall number of enquiries, you can calculate your sales conversion rate, which is just the percentage of your enquiries that turn into bookings.

This is a vital metric that tells you how good your sales process is. To calculate it you divide the number of bookings by the number of enquiries, then multiply by 100. For example, if you had 20 enquiries in January and 8 of them booked, your conversion rate would be (8 / 20) x 100 = 40% conversion rate. Which is a fantastic conversion rate by the way.

A high conversion rate tells you that your sales process is working and that you’re doing a great job of communicating your value to potential clients, so you should keep doing more of what’s working. If your conversion rate is low, then it’s time to look at your sales process and see if there’s a better approach you can take, or find new ways to upskill in that area. There’s plenty of training out there that could help you with learning how to sell.

5. Lead sources

Finally, understanding where your leads are coming from is essential. Depending on the marketing strategies that you use, your potential clients could be coming from Instagram, Pinterest, TikTok, online directories, search engines, referrals, or even paid advertising.

Knowing and tracking these numbers will make it very clear what results you’re getting from each source and most importantly how they compare to each other. This will really allow you to double down and focus your time and energy on the channels that are really moving the needle for you by driving the most traffic to your website and bringing you the most enquiries.

By keeping a close eye on these numbers, you’ll be so much better equipped to make informed decisions, increase your profitability, and ensure that your business is on the path to success. Here’s a quick summary of the key numbers you need to know:

1. Profit Margins – this tells you the overall financial health of your business
2. Cost of Doing Business and Cost of Goods Sold – Helps in pricing your services correctly and in managing your day to day cashflow
3. Number of Enquiries – Measures the effectiveness of your marketing
4. Number of Bookings – Indicates how many potential clients convert into actual clients and your sales conversion rate – Reflects the effectiveness of your sales process.
5. Lead sources – Helps in understanding where your potential clients are coming from so that you can double down on those channels.

That’s it for today’s episode. As always I hope you found this information valuable. Remember, keeping track of these numbers isn’t just about staying afloat; it’s about thriving and building a business that supports the lifestyle you desire.