An LAPP Guide To Help Photo Booth Operators
Knowing whether you are making money or not is vital when you are running your own photo booth rental business. Without this knowledge you are flying blind through the storm clouds of small business and straight for the tornado that brings most businesses down.
We were recently at the world’s largest photo booth expo “PBX” in Las Vegas. We did a lot of talking to photo booth owners and left concerned that far too many photo booth operators didn’t know how much profit their packages were making. Some didn’t even know if their businesses were making or losing money at all. Whatever the case, the situation is clear: far too many businesses simply didn’t know their financials as well as they should.
The good news is that it’s never too late to rectify things. Here at LA Photo Party we want all booth owners to succeed and flourish like we have. To help, we have come up with a simple guide to help you figure out if your photo booth rental packages are truly profitable.
Understanding Profit and Expenses
Everyone knows that “Revenue – Expenses = Profit”. Being profitable is the main driving factor of why anyone starts a business. We all want to do something we enjoy, but if we are not making money then what’s the point right?
Where many photo booth rental business owners miss the mark is in their understanding of what constitutes “Expenses”. Many boothers underestimate their expenses, especially on a per hire basis. This leads to under quoting and over estimating profit. True profit is what’s left after all the expenses have been accounted for, not just the obvious things.
Let’s have a closer look at all the expenses that should be accounted for in a photo booth rental package.
Determining Photo Booth Rental Related Expenses
Every photo booth package, depending on how the business is operated, will be slightly different. Here is a good starting list on what items you should be including when determining per rental expenses. These items are a mix of fixed costs and variable costs. Fixed costs being where the expense is fixed no matter how many rentals you do (e.g. insurance) and relate to running your photo booth business in general, whereas variable expenses are directly related to a given event:
- Photo Booth Software
- Business Software (eg. CRM, Accounting)
- Business Insurances (e.g. Vehicle, Public Liability, General Property)
- Vehicle Registration (e.g. Car, Trailer, Van)
- Website (i.e. Hosting, Emails, SSL Certificates, Plugins, Themes)
- Marketing (As a cost per booking acquisition)
- Image Gallery
- Gas and Auto Maintenance
- Equipment Maintenance (e.g. Vehicle servicing, Printer servicing, Tag and Testing)
- Consumables (e.g. Print Media, Scrap Books, Pens, Glue, Mounting Tabs, Gaffer Tape)
- Photo Booth Attendant(s)
- Customer Consulting (Pre and post client contact)
- Phones (e.g. Cell and Landline)
- Misc. (e.g. Postage, Printing)
For variable costs like gas or consumables, it’s relatively easy to determine the cost as it’s directly from the consumption of these items per hire. For fixed cost items like Insurance and Software you will need to estimate how many hires you will do in a given period and divide the cost accordingly e.g. if your Business Insurances are $1500 per year and you do approximately 100 hires per year – the per hire expense you should account for is $15.
For marketing and other ongoing expenses not related to a specific job, you should determine a total for your yearly marketing spend (e.g. Facebook, Google Ads, Magazine Ads, etc) and then divide that by the average number of bookings you do a year. This will determine your per booking lead acquisition cost. This and all the fixed cost items should be updated and revised periodically to ensure you are working with the most current and relevant figures.
For Customer Consulting you need to determine an approximation of amount of time you and/or your staff spend on average consulting with clients be it via email, phone, in person or social media.
Going into such detail and assigning a cost may seem like overkill but all these items need to be valued and accounted for if you want to be a professional and therefore profit accordingly.
Create Your Photo Booth Expenses Template
Now that you have a clear understanding of what your expenses are it’s time to create your own template. It won’t take long, but the time you invest now in doing it right will benefit you for a long time to come, as you can use your template time and time again. The template should form the basis for you to revisit your general package pricing (e.g. Weddings and Parties) or for use in quoting non-general packages (e.g. Corporate Activations).
You could create a template using a simple spreadsheet like Excel or to save you time we have created one ready for you to customize.
With your template ready for use now is the time to go back and see if you’ve truly made a profit. Pick a few different types of recent hires you have done to get a good overall feel for the difference in profitability between general events and any larger corporate activations.
Engage A Tax Professional
Do not underestimate the value that a tax professional can bring to your business. They are not just someone you pay to submit your businesses yearly tax return. Correctly utilized, they are there to help you understand the inner workings of your business, what personal expenses you can claim and save you taxes.
One of the best financial documents you get from an accountant is a Profit and Loss report (P&L). A P&L shows your business’s total income and total expenses over a period of time. It is broken down into categories so you can see exactly where your money is coming from and more importantly where it is going.
Only business owners with detailed financial data at their disposal can make smart business decisions that ensure a business not only grows but remains profitable.
Knowing exactly how much profit you are making per photo booth rental is not only vital, it is empowering. Gone are the days of being a boother who guesses and hopes that you’re making money. Finally, you will be able to make smarter decisions about all aspects of your business, knowing you are justified in making that next booth purchase, taking on new staff or upgrading to a new vehicle.
If this article has helped you understand the importance of true profit and how to work it out please be sure to comment and share.