When you operate your own photo booth rental business, you need to be aware of your earnings. Knowing whether you’re making money or not is a vital component of managing a successful operation. Without this knowledge, you’re essentially flying blind through the storm of small business and straight for the tornado that brings most businesses down.
We recently had the pleasure of attending the world’s largest photo booth expo “PBX” in Las Vegas. After speaking with several photo booth rental business owners, we left concerned that far too many of them didn’t know their profit margins. Many of them were unaware of what their individual packages brought in, and some didn’t even know if their businesses were making or losing money at all. Whatever the case, the problem is clear as day—too many photo booth rental business owners simply didn’t know their financials as well as they should.
The good news is that it’s never too late to get on track. Here at RevoSpin, we want all photo booth rental business owners to succeed and flourish—just like we have. To help you get started, we’ve come up with a quick guide to help you figure out if your photo booth rental business packages are truly profitable.
UNDERSTANDING PROFIT AND EXPENSES
Everyone knows the business formula “revenue – expenses = profit”. Becoming profitable is the motivation behind anyone starting a business. Of course, we all want to do something we enjoy, but if it doesn’t make money, you might find an unexpected passion in running a successful photo booth rental business.
One of the biggest challenges most photo booth rental business owners face is underestimating expenses. Many boothers miscalculate their expenses, especially if they work on an inconsistent schedule, like on a per-hire basis. This leads to quoting too low and overestimating profit. Authentic profit is what you have left after all your expenses have been accounted for, not just what you see on the surface.
Let’s take a closer look at all the expenses that you need to account for in any photo booth rental business package.
DETERMINING PHOTO BOOTH RENTAL BUSINESS-RELATED EXPENSES
Depending on how you operate your photo booth rental business, each package will be slightly different. If you want to determine your expenses, you need to consider your fixed costs as well as variable costs. Fixed costs are what you are going to pay regardless of how many rentals you do (e.g. insurance) and include those related to running your photo booth rental business in general. On the other hand, variable expenses are directly related to a given event.
Your photo booth rental business expenses will include:
- Photo booth software
- Business software (e.g. 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 food, it’s relatively easy to track the total—as it directly correlates to a per-hire job. For fixed-cost items like insurance or software, you need to estimate how many rentals you will have in a given period and divide the cost accordingly. For example, 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.
When it comes to marketing and other ongoing expenses that aren’t related to a specific job, you should determine an allowance for your yearly marketing spend. Think about what you’re willing to spend on Facebook ads, Google Ads, and other marketing channels, and divide that by your average number of jobs in a year. This result is your per-booking lead acquisition cost. Make sure to evaluate these figures regularly to account for any changes in performance or revenue.
If you want to determine your expenses related to customer consulting, you need to determine how much time you and your staff spend on it (in person, email, phone, social media, etc.)
It might seem redundant to assign a cost value to every possible item, but you’ll thank yourself for it when you have a clear picture of your photo booth rental business earnings and are informed to make good decisions.
CREATE YOUR PHOTO BOOTH RENTAL BUSINESS EXPENSES TEMPLATE
With a better understanding of what your expenses are, you’re now ready to create your own expenses template. It isn’t something you want to put off, because doing it now means being organized and prepared later. It doesn’t take long to put together, and the benefits are well worth it.
The template you create should outline for revisiting your traditional package pricing (like weddings and parties) and for use in custom quoting and non-traditional packages (like corporate activations).
Creating your custom template is as simple as opening a new Excel spreadsheet. If you want to save time, you can use one of the templates we’ve created for you to customize.
Once you have your template ready, it’s time to fill in your photo booth rental business information and determine if you really made a profit. Make sure to include data from all different types of jobs to get a good picture of how profit and expenses may differ across the board.
ENGAGE A TAX PROFESSIONAL
Never underestimate the value that a qualified professional can bring to your photo booth rental business. Your tax professional isn’t just some person you pay to submit your business’s yearly tax return. They have the skills necessary to help you understand the inner workings of your business, help you determine what personal expenses you can claim, and help save you taxes.
One of the most valuable documents you can get from your accountant is a profit and loss statement—commonly referred to as a P&L. The P&L shows your total business income and total expenses over a specified period. Then, it’s 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 to ensure the longevity of a photo booth rental business.
When you know everything there is to know about your photo booth rental business financials, it’s not just professional, it’s empowering. You’ll never have to think about whether you’re generating profits or not again. Instead, you’ll be able to make better decisions about all aspects of your business. You’ll know when it’s the right time to invest in another booth, hire more staff, or even upgrade to a new vehicle.