Are you about to start a new photo booth rental business? You are about to make some good money!
However, you need to know how to price the photo booth rentals correctly to maximize profits! We can help you with that.
Deciding how much to charge your customers is one of the most important business decisions when starting a photo booth company.
Price too low, and you leave money on the table that could have been profits. Price too high, and you risk losing customers.
So, what’s the “goldilocks” pricing, that’s just right? This guide will walk you through a simple formula to help you set fair and profitable iPad photo booth rental fees.
Know Your Costs First
To know if your prices allow you to make a profit, you need to first understand your costs of doing business. Tally up expenses like:
- Photo booth purchase/lease
- Props and backdrops
- Travel and transportation
- Marketing and advertising
- Insurance
- Ongoing maintenance/repairs
Also factor in miscellaneous supplies you’ll continually need like photo paper, ink, bubbles, flip books, etc. When you understand your total monthly expenses, you can then calculate how to price rentals to cover costs and make a profit.
The Simple Formula: Costs × Markup Rate
A basic formula is to take your costs of doing business and multiply that by a markup rate that delivers your target profit level. For example:
- Monthly Costs: $2,500
- Desired Profit Margin: 40%
- Markup Multiplier: 1 divided by (1 – Desired Profit Margin divided by 100) = 1/(1 – 40/100) = 1.67
- Rental Price = $2,500 x 1.67 = $4,175 per month to yield a 40% profit margin
Typical markup multipliers range from 1.5 to 3.0 times costs. The higher risks in your business, the higher markup you need to account for uncertainties.
Break Even Point
To calculate the minimum number of monthly rentals needed to breakeven:
Break Even Point = Monthly Fixed Costs / Price per Rental
For example:
Break Even Point = $2,500 Monthly Costs / $150 Rental Price = 17 Rentals
So, you’d need 17 rentals per month at a price of $150 just to cover costs. Any more rentals provide profit. Knowing your breakeven point is key to setting prices that sustain your business.
Value-Based Pricing
Rather than basing pricing purely on costs, savvy entrepreneurs will charge based on the value they provide customers. For example, you may be able to command higher prices for:
- Prime dates like New Year’s Eve
- Rentals over 4 hours duration
- Highly customized packages like green screens, professional printing, etc.
Price premium extras based on their perceived value and the willingness of customers to pay more for added features, times, and customizations.
Competitor Analysis
Research photo booth rental rates in your local market from competitors. Price similarly so you don’t lose out on business. Consider making your baseline pricing competitive but offering extra features or services that justify charging slightly above average rates in your area.
Testing and Adapting
Don’t get pricing perfect on day one! Be prepared to test different price points and adapt based on customer response and booking rates. Offer discounts or deals to first-time customers to acquire business. Once established, raise rates to find the optimal balance of profit margins and customer satisfaction.
Setting the right photo booth pricing that makes a profit while satisfying customers involves understanding your costs, calculating margins, pricing based on value provided, checking competitor rates, and continually optimizing through real-world testing. Master these best practices for pricing your photo booth rentals.