The Photography value chain

In another article about the pace of change in the photography market, I discussed the current pressure on prices, and the need for any commercial photographer to adapt to the changing business environment.

This time, I’ll look at the cost-side of running a photography business, as everything you do can be expressed in money. Acquisition, the needed investments in hardware, software, model fees, the time to organize, plan, shoot and process, traveling to and from clients or shooting locations, to stationary and stamps and even switching on the lights. In the end, it all comes down to earning more money than you spend.

Most articles and posts I’ve read, discuss the technical and practical side of optimizing your workflow. Of course, it makes perfect sense to enhance your skills, and it may even increase the monetary value of your work. Increasing the monetary value of your photos, however, can only be successful, if you also manage to control the expenses side of your business – the two go hand in hand, in my opinion.

In business management, there are numerous methodologies and approaches to gain control of the costs of running a business. From my experience in the more traditional industry of manufacturing, a useful method can also be applied to photography. This method involves both the cost side as well as the value of the product – your photos.

The value train

Imagine your workflow as a long train, being pulled by a locomotive. The locomotive represents the revenues, generated by your efforts (selling photos, income from workshops, etc). Each of the carriages represent the costs of activities in the workflow, adding weight for the locomotive to pull. If the weight of the carriages is lower than the locomotive can pull, you’re effectively making a profit.

Step 1: Describe your activities

The first step, is to describe each of the carriages. Label them appropriately. In the traditional industry, this is usually done by categorizing generic value-adding activities on business unit level.  see example visualization, source

In photography, something similar can be achieved by splitting up the workflow into:

Primary activities:

• Research and planning. (increasing skills, organizing shoots, etc)
• Operations (photo shoots, processing, lectures, workshops, etc)
• Acquisition, Marketing & sales (Distribution, client-relations, etc)

Support activities

• Business management (taxes, business strategy, etc)
• Procurement (Hardware, software, travel, etc)

As the size of most photography businesses stand in no comparison to the big traditional industries, the activities are different. In the example above, I’ve used one possible division of activities, but, obviously, another grouping might suit your business better.

Step 2: Value your procedures

The second step is to value each of your activities by dividing them in procedures, and using three factors: time, expenses and capacity.

Think of an procedure to be a log of wood, carried by each of the carriages. It has a volume and a mass, respectively translated into time and expenses. Then, realize, a carriage can be overloaded, or half empty. This would be the factor Capacity.

• Time: the time spent on a procedure
• Expenses: The physical out of pocket expenses for a procedure
• Capacity: How much of each factor is used effectively? For example, running a single handed operation, you won’t use your camera when your processing images.

As a simplified example, I’m using a particular workflow.

• You put your camera aside, and take the card out. Won’t be using the camera, until you’ve done your post production.
• You use a card reader to transfer the images to your $5000. computer.
• You spent 3 hours with lightroom, photoshop or something similar to make a selection and run your post processing.
• This requires a monitor or two, a spacious desk in an office. Rent alone is $1500 per month. And you drink a lot of coffee. With a few too many cookies than is good for you.
• Then you need to save your work, archive them, and make backups on the 10TB NAS you’re running. Although idle since your last shoot (and with 6TB left unused), it was a bargain.

All the above procedures may make up the activity of post processing. Each of them take time, and (or) require monetary investments, even though not all your hardware is constantly in use.

In stead of spending considerable time getting this data together, you might consider using guesstimates, and comparing the total of guesstimates for each of the activities with your bank account and the hours you work.

Don’t forget to value your “locomotive”, too. For many, this is easier said than done, as it requires you to determine the monetary value of your work, as well as get an insight into what your clients are willing to pay for your work. The figures entered may well be different from the current situation.

Step 3: Do the procedures add to your products’ value?

The third step is to answer the following question for each of the carriages: Do the steps in my workflow add value for the customer to my product? In other words, which steps of your workflow processes does actually generate you money, and how much? Does the required input in assists time and money stand in good comparison to the amount that steps generates?

For the locomotive, the question is more complex: What is the value of the product? And what might a customer be willing to pay for it? This too is liable to changes  compared to your current business structure, and the answers may vary from business case to business case..

Another exaggerated example: A customer may be willing to pay you more for receiving your images in various sizes, than it would cost you – in time – to produce them, so he can go over the web sized images on his old laptop without having to open the 16bit tiffs you sent him for his brochure, but he’ll probably be less than thrilled if you charge him for presenting him with 50-odd photos to choose from, if he only requires three images.

Note, the costs in time and expenses, as well as determining whether a step in your workflow adds value to the product for the customer may be different for various fields of photography. This may require you, to draw up one of such diagrams for each situation.

Step 4: Rearrange your work flow

Once you’ve got a good insight which phases in your work flow are more costly than others, and which will actually increase the value of your product for your customer, you can start optimizing your work flow.

The easiest way to go about this, is to first assess whether a procedure can be changed. Some procedures are simply required by law (like filing your tax forms in time), and others are critical to your process. Usually, these procedures are very difficult to remove, but in some cases, restructuring your work flow may result in a more cost effective work-around.

The table on the right provides a simple overview of what procedures to change:

Typical methods to optimize your value chain:
1. Remove procedures, that do not add value to the end product, and aren’t critical to the processes.
2. Rearrange procedures, in order to make the workflow run more smoothy
2. Find cheaper alternatives, replacing costlier steps in the current workflow:
- Change suppliers
- Change workflow routine
3. Introduce new steps in your workflow, that circumvent – current – inefficient routines

How to change your procedures in order to optimize your workflow is based on experience, personal preference, accessibility of alternatives, feasibility, but also common sense. It makes sense not to change everything overnight. In most cases, the gained awareness of the bottlenecks, resource-consuming procedures by analyzing your value train already has a positive effect on the way you go about your daily tasks. Changing the procedures in small batches also makes it easier to monitor their effect, and fine-tune them accordingly.

The most common problems discovered during the value chain analysis are:

• Inefficiency: Not the right procedures per activity
• Ineffectiveness: Too many procedures per activity

The benefits and uses of the Value Chain analysis

• Although time-consuming, the value chain analysis will give you a profound and objective insight in your business’ operations.
• The value chain analysis can help you to make structured and rational choices in increasing the effectiveness of your business. Save you time and money, and potentially increase the perceived value of your product.
• The value chain analysis can provide you with a more thorough understanding of the value of your product.
• From the findings in the value chain analysis, you can easily generate important Key Performance Indicators in your day-to-day routine.
• The above described method, can also be used to determine the value chain of photo shoots, and can, once you get the hang of it, be easily converted into a selection filter used to choose between ideas and concepts.

Dangers of using the Value Chain analysis

• Remember, that the accuracy of the outcome is as reliable as the figures you put in. Plain and simple: Bullshit in = bullshit out.
• A full value chain analysis can become extremely time consuming, and thus a potentially costly exercise.
• The value chain analysis should be used as a tool to make your business more efficient and lean, but completing one should never become a business objective.
• By itself, the Value Chain analysis method does not add to your products (perceived) value.

Disclaimer

• My apologies for the simplistic and somewhat childish imagery. They do, however, serve a purpose in explaining the value chain principles.
• These tips are derived from my personal experiences, and may or may not work for everybody.
• The steps described can be applied and will have a positive effect, but there are other ways, too, which might even work better.
• Writing this article definitely took some time, and the prospected revenues are expected to be marginal, if not, none.  Applying the method discussed in this article to my own activities, I’d most certainly will have to stop writing these. However, somethings are just too much fun to do, and will hopefully remain a part of my presence as business owner.
• If you have any thoughts on his please share them by leaving a comment!