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This process may initially feel daunting, but, with a little patience, once you have calculated the fees for a few projects or stock licenses, you will develop the skills and experience to get through this process efficiently and with confidence.
Use your Cost of Doing Business (CODB) as the starting point. You must know your own CODB. You need to know your own minimum income needs to cover your non-reimbursable business expenses and draw a salary. Once you know your own minimum, you can factor in the specifics of a given job, what you bring to each project that is unique, and what you want for profit, to determine your Creative Fee.
Usage or licensing fee
What is the client going to do with your photograph? The more the photograph is used, the higher the usage fee. Is the use commercial, editorial, or retail? Is the client looking for a package of rights or a single use?
Production needs of the job — the expenses
Carefully add it up. Ask lots of questions and make sure all the details are covered. Once you accept a job at an established price, you will rarely be able to increase the expenses with the excuse, “I didn’t think of that.”
Know your market
You must learn what price your market (or the market a particular project is in) will bear for the specific type of work you are pricing. Consider not only geographic and economic conditions, but also the standard for a particular level and kind of work. For example, advertising pays more than editorial, and annual report photography pays more than event coverage.
Warning: If you discover that your cost of doing business is dramatically higher than the prevailing fees charged for the type of photography you want to do, you must reevaluate your business plan. Either change your overhead and salary goals or change the type of photography you are doing. There is no way to build a sustainable business if these two financial aspects are consistently out of sync.
Looking at all four of these factors gives us the formula for setting your price on a job.
1 + 2 + 3 (adjust for 4) = Price
There is no "one true way" to structure your fees. Some photographers separate creative fees and licensing/usage fees, while others combine them into one number.
Take a look at the ASMP Paperwork Share to get some ideas. Develop a system that feels comfortable for yourself and — most important — one that you can articulate clearly when talking to clients.
Next: Details: Creative Fee