Making Business Forecasts for Fun and Profit
“The best way to predict the future is to invent it.”—Alan Kay
Many photographers may think that preparing a business forecast is difficult. If Ben Bernanke didn’t know what was going to happen to the economy, how can you expect to nail it down? Most photographers are not economists and instead are are specialists in providing images and services that their clients need. But forecasting doesn’t have to be hard.
One of the major advantages of creating a business forecast is that it forces you to analyze the cost of doing business and helps you set goals at the same time. Ongoing record keeping will tell you the incremental costs that are needed to accomplish these projected objectives. Do you know the cost of sales for each of your photographic offerings? True story: I was at a convention when an attendee asked one of the presenters, “I’m losing $50 on each wedding I photograph.” The speaker, replied, “Then you know what you need to do?” And the wedding shooters instant response was “Yeah, do more of’em.”
One school photographer I know keeps detailed spreadsheets of all his preschool shoots. He knows the average number of frames that are exposed for each child, what payment envelopes and incidentals cost for each school, and what gross profit he can expect per child enrolled in a typical school. He uses a Microsoft Excel spreadsheet to post data from each photo session and over the years has built a useful data history that helps him predict the future.
By keeping track of the average sale and number of sales over a year or two, you’ll soon get a handle on forecasted demand. If you’re brand new and don’t have any records, you should build your forecast on what you would like to make during that time period. Then divide that by the number of assignments or sales that you hope to make to get a cost per assignment, then multiply that by the number of expected or hoped for assignments. Those of you interested in producing the most accurate possible forecast, might consider using a specialized data analysis and graphic application, such as Synergy’s KaleidaGraph While aimed at scientific users, technically-inclined photographers might find it a useful tool.
The flip side of forecasting next year or even next month’s business is that it helps you plan for the necessary resources so they’re in place to meet expected demand. Once you know what things cost, you’re ready to prepare a forecast. One of the easiest ways to do this is to base it on your average sales. Use your favorite spreadsheet program to prepare a forecast of both income and expenses on a month-by-month basis by product lines. You may have already noticed some trends, so be sure to include expected seasonable variables. One commercial shooter told me that his assignments “track the Dow-Jones index and like the stock market this has occasionally been unstable.” (No kidding)
Most of us aren’t mathematicians but preparing forecasts is easier than you think. You take your best guess (that’s all any forecast really is) at what you expect or would like to gross by each month and it’s OK if you initially guess wrong. Be sure to keep records comparing your forecast to actual results and over time, this data will become a valuable planning tool. Remember now matter how bad your first business forecast may be, it’ll be a lot more accurate that the forecast for next Friday’s weather.