Exercise 5-5: Long Run Costs and Economies of Scale

This time, I will think about Long-run, Short-run costs and fixed costs for a potential business I might start together with my wife.

She enjoys taking pictures since her childhood and owns an SLR camera. She has taken some online courses, has a software to get the full potential out of every snapshot and, being a mom of a 8 month old, now she has her own model too. (No, her husband doesn't make a good model)

We are now thinking about offering affordable baby photo shoots for parents, at their home.

While there are many professional photo services in town, not too many specialize in at home baby photo shooting. Having a breast fed baby ourselves, we know how hard it is to commit to appointments at an exact time. Let alone the babies mood at the point of the appointment. And who wants a fuzzy baby on their pictures? Our service would offer parents to book a large window during a day for the photo shooting and we would be visiting the young family at their own home, where the babies feel most comfortable, have their favourite toys, aso.

Now, how come we can be competitive in this business?

By having a home-based service business, with the only machinery being the already existing SLR camera, the already existing computer and software, and the also already existing vehicle, we can keep our explicit costs very low. All we need to get started is a website and some business cards.

My wife, being a stay at home mom and able to bring our daugther to the photo shooting will only have gas as her variable cost. The website will be paid annually and is a fixed cost. Same with her "plant". She can modify, review and print pictures right at her desk in our house, which we own anyways.

Even thought it isn't our intention, a way to expand would be to train other mom's the in's and out's in photography and offer courses. If we would decide to offer this new product, in the short-run we would have to do one-on-one sessions, since we don't have a classroom to host more people. This would mean, that our Average Total Cost per unit of lesson would be high, since the quantity of lessons we can provide per day is limited.

If these lessons would become a huge success and we couldn't keep up with the demand, we would have to consider renting an office/classroom somewhere in order to teach several moms (or dad's) simultaneously how to capture their babies milestones. This would increase our fixed costs, since now we would have to pay for rent, but should lower our Long-run cost, since we can now increase the amount of student's significantly. All the time saved driving from one client to another would be saved.

Looking for a similar business, I have found Marie-Helene Bilodeau's business. Here.

She already offers SLR camera classes and her strength seems to be, that she already has a facility available to her (the North Glenmore Community Centre). The one disadvantage comparing her courses with our idea, is probably that her course is more generic, where we would specifically target young parents and keep the sessions to one single class, focusing on their kids.