Meeting Your Annual Sales Goal with Jeff & Lori Poole
Your Business Plan and Sales System Are Live…Time to Check In!
For the past 12 months in The Business Corner, we’ve been building Your Dream Studio from the ground up. We started with your vision of your dream business (see The Business Corner articles from July and August 2018 for a discussion on business models and forecasting). With your unique vision in mind, we built your cost-based and demand-based pricing, and examined strategies for digital files (October, November, and December). Next, we built your sales system using your a la carte list (January), your bundled options (February), and your upselling strategies (March). In April and May, we translated all that theory into action with inquiries, consultations, and in-person sales. Now that your Dream Studio is fully live, it’s time to check in and see if your plans are actually working!
Back to the Beginning
To analyze whether your sales system is accomplishing its goals, you need to revisit those goals that you set back at the beginning. In August, you set your initial goal based on your target take-home pay. Everything that has followed since then has been an attempt to meet that goal.
Let’s say your goal is a take-home pay of $75,000. If you’ve been monitoring your expenses (September), and pricing your products appropriately (October-December), then your total expenses should now look something like this:
Cost of Sale = 25% of Gross Sales (same for both home and retail studios)
General Expenses = 30% of Gross for home-based studios/40% of Gross for retail studios
Net Profit = 45% of Gross for home/35% of Gross for retail
The differences here are that home-based studios have lower overhead costs, but they also generally make less total income. Jeff and I like to say that home-based studios take home a bigger proportion of the pie; however, retail studios have a bigger pie.
Now that you’ve been implementing your sales system for several months, you should be able to analyze your income and expenses to see if you’re making that 45% (or 35%) benchmark. If you are not, I recommend that you revisit the articles from September through December to get your income and expenses in line.
For the sake of this article, we are going to assume that you are a home-based studio wishing to keep 45% of your gross for a total net profit of $75,000. You can easily adjust the formulas below by plugging in your own numbers if you keep a different percentage or wish to take home a different net profit.
Based on a target net profit of $75,000, you can do the math to figure out your annual gross sales target. Simple divide $75,000 by 0.45 to get $166,667.
Let’s take this one step further. Let’s divide that annual sales target by 12 to get an idea of what you should be pulling in monthly to meet your goal.
How are you doing compared to your goal? Let’s find out.
Your Monthly Sales Report
Having goals is great, but it’s crucial to be able to check your progress against them. Jeff and I believe strongly that your CRM/studio management software/invoicing software MUST have the ability to generate financial reports. You cannot grow what you cannot measure. One report that is integral to meeting your goals is your monthly income. Generated over the course of a year, it should look like this:
If your software generates the numbers in a table, but not a graph, you can have Excel plot a graph for you.
A visual representation of your monthly sales allows you to see at a glance how you’re doing. It also allows you to see seasonal trends in your business. If you see two or more months in a row of low sales, you can address that by trying to boost sales during your slow season. In this graph, you can easily see that this photographer met their $13,889 goals in some months, but not others. There does not appear to be any seasonal trend in this graph.
Based on the information you see, ask yourself these questions:
- When are your low months?
- When are your high months?
- Is there a seasonal trend?
- How can you explain what you’re seeing in this graph? For example, do your low months correlate to family vacations or convention travel? If you’re a wedding photographer, do your high months correlate to booking season and wedding season? Are family portraits big in the fall? Seniors in the spring?
- Based on the answers to the previous questions, what strategies can you implement to meet your goals?
Strategy 1: Even Out Your Seasonal Income With Payment Plans
The first time that Jeff and I ran our monthly sales report, it confirmed what we already suspected: we were heavily seasonal. The majority of our income came from weddings at that time. Our payment structure was simple: a flat fee retainer to book, and the remaining balance due prior to the wedding. This led to three spikes in our income stream. The first spike was during booking season in January/February. The second spike was just prior to a rush of May weddings, and the third spike just prior to a rush of October weddings. May and October are the most popular wedding months here in Wilmington.
In addition to those peaks, we also had some serious valleys. Early summer, after our May rush, had dismal sales. Late fall, after our October rush, was similarly low. We began to joke and call those times of year “ramen noodle season.” Looking at the graph, I was able to see that each valley was about four months prior to our next peak.
An easy fix was to change up our payment structure for weddings. We still have the initial retainer. But now, we also require a percentage of the balance to be paid four months prior to the wedding date, and then the full balance still paid before the wedding. This helped even out our cash flow by reducing the extreme peaks and filling in the lowest valleys.
Think of other ways that you could encourage clients to send you money in your off-peak months. For instance, you could work on selling more albums after the wedding. You could even allow clients to break their album/product payments up over a few months, which spreads out that income further. If you go this route, I highly recommend that you not deliver their products until paid in full.
If you flip this scenario around, you can also work on payment plans that encourage payment prior to the session. For example, have your portrait client choose their product package at booking, and incentivize or encourage payment in full between booking and the session date.
Strategy 2: Fill the Gaps With Marketing Events
Looking back at our imaginary photographer’s original monthly sales report, we can see that some months were well above the $13,889 target; others were below. It’s not necessarily important that every month meet or exceed the target. Remember that we are working with both averages and totals. As long as the monthly income averages out to $13,889, we would meet our total annual goal of $166,667.
That being said, the months with the lowest total sales WILL translate to a lean month for this photographer. Overhead will not decrease during these months, which means net profit will suffer and this photographer won’t get the take-home pay they are used to. A savvy business person will attack those low months first to bolster sales.
If we were to tally this photographer’s total annual sales, we would find that this photographer grossed $151,305—only about $15,000 short of their goal. I see three obvious low months—April, September, and December—so I would try to add $5,000 to each of those low months to make that goal.
Can you come up with three marketing events that would make $5,000 each? Perhaps to bolster April, you could run a campaign targeting seniors wanting portraits in May and June. Plan your event correctly, and you’ll be receiving your session fees and prepayment plans in April. Families love fall portraits in October and November. Again, plan your marketing so that you’re collecting income in September. A Valentine’s push for boudoir portraits can bolster your December income. For more on this, watch the video that accompanies this article!
Strategy 3: F*cking Hustle and MAKE IT HAPPEN
Get in the habit of running your monthly sales tally on a weekly basis, if not more frequently. Don’t wait until the end of the month—or worse, the end of the year—to realize it’s too late to meet your goal. When you look at these numbers frequently, you’ll become more determined to exceed your targets.
The very first month I committed to doing this for boudoir, I beat my long-term goal. The second month, I realized that I would be just a couple grand shy of my goal, so I searched for ways to make it happen. Could I close a lead? Upsell an old client? Run a sale on wall portraits? I realized that I had an out-of-town client who was still trying to figure out when she could come to town for in-person sales. I called her and offered to do a virtual meeting with her, which she accepted. Of course, then I had to figure out how to do a virtual meeting…but I hustled and made it happen. Goal exceeded.
Keep an eye on your numbers, and challenge yourself to make it work when it’s not looking good. Be proactive and keep up the hustle. Don’t give yourself an out.
It’s a Job That’s Never Done
This month marks the 12th installment of The Business Corner. That’s one full year of vision, business planning, accounting, pricing, selling, and marketing. And after one full year, guess what: Keep going!
Truly successful business owners don’t sit and passively wait for money to roll in. They also constantly revisit their goals, their strategies, and their progress. Coming up with a business plan is not a one-time deal; you don’t just set it and forget it. This definitely holds true for photographers. Get in the habit of examining your goals, running your numbers, and measuring your progress. Depending on your results, either fix what’s broken, or set a new, higher goal. Implement. Assess. Analyze. It might sound like a lot of work, but I guarantee the first time you meet your monthly goal, you’ll be hooked. Then send me an email or pull me aside at ShutterFest and tell me all about how you love geeking out on your numbers.