Friday, April 26, 2019

As filmmakers and videographers, we struggle with pricing for our jobs. Charging clients with a high price, we are afraid they will say “no”, or our hard work is not worth if the price we charge is low. What a dilemma! Do you know pricing has a formula that is pretty much easy for us, creative people, and our clients to be happy with how much we earn and what they can get.

This post is suitable for a small production company or a production start-up. Before we dig into this topic, we need to identify what kind of business model for our video production services. I would refer you to read my previous post What business model for our video production?

This post I used PLVisual Company and Adam Forgione’s pricing formula as the reference.

How much I charge for a full-day rate and identify what crew size can handle the project?

This is a really important step. If you don’t have one coming up in your mind, start thinking of it now. Normally, it is related to your skills, reputation, the minimum paid rate in where you work, health insurance (if needed) and etc. So, remember to give a reasonable full-day working rate.

This is a little bit tricky. The best way to do it is knowing your scope of work and what the video is for. Commercial videos, viral videos and any videos related to branding and product or service launch, the large and quality crew is needed. With small-scale video projects like event, party, wedding videos, and so on, 2 to 5 crew members are enough.

With your crew’s wage, it may count as the fixed cost if you pay them periodically. However, if they work billable hour (freelancers also fall into this type), it is a variable cost. This is related to the accounting aspect.

Let uses 2-member crew working billable 10 hours.

Let says $2000 as the example.

Calculate your cost base

In accounting, the cost base is all the costs involved in making a product or providing service, usually the fixed costs. In video production, your crew’s wage and gear cost. With your crew, it’s quite tricky as depending on the roles needed in the project and what gear needing to operate.

First, let work on the gear cost. The cost of gear renting is the minimum cost you must charge your clients. It does not matter that your gears rented or bought. If you rent them, yes, it is clear that your clients have to pay for the equipment and pay for those operating it. If these are your gears, you should also consider this range of charge. This amount of money should be more than at your gears’ depreciable value or at the standard warranty period of these gears’ manufacturer.

You may ask why we have to identify this cost! This is because sometimes you and your crew may show up with gear and do nothing, and this also not your fault, but happens in your clients’ side. This amount of money must be charged.

Let says the price for just showing up is $500.

Pricing formula

Okay, so now you may notice that the show-up and do nothing rate is ($500/$2000) % = 25% of the total amount of money you charge. The amount of ($2000 – $500) = $1500 which account for 75% become the hourly rate.

Thus, we have an idea for pricing which is base + hourly rate.

As the example above, we decided that the crew work for 10 hours, so 1 hourly rate is $1500/10 = $150.

So now, we have a number of the hourly rate for the breakdown quote. You can also think of overtime charge which may be an hour and a half for each overtime hour.

What about post-production

This is up to you as well. Normally, the minimum charge is your editing gear depreciation and software subscription. Normally, all the equipment has their life-spans so the value of the equipment will be decreased time by time. To calculate it, you can check with the professional accountants, or find this information in the taxation office in your business-based country. For example, the computer you bought is $1000, salvage value or resales value is $200, and this computer you expect to last about 5 years, so the depreciable value for a year is ($1000 – $200)/5 = $160. So we know that the depreciable value for 1 hour is $160/365 (days a year) = $0.5. This number adds to the editing software subscription which I refer to Adobe Premiere Pro (around $30/month), which is $30/30 (days a month) = $1 and the other software needed for the project as well.

For instance, if the editing studio we have actually is 1 computer and 1 editing software which is Adobe Premiere Pro, the cost for all of them is $1.5/hour. So, the minimum price we can set is $1.5/hour for equipment.

Let says the price for editing studio we set is $5, it means NET profit is $3.5 (over double the base cost – this is the great margin). We estimate that we also need 5 hours for doing so, we have $25 for editing studio.

And of course, we need an editor, the price I will also use 1 hourly rate of 1 crew member is $150 (because the editor is also important as the other film crew member). So it is $750 for the editor plus $25 for the 5-hour studio, we have $775. This price we should not break down in the quote.

And preproduction

This is the trickiest part of pricing. This includes everything before shooting. Okay, let set it as $150/hour for 1 key person which is the same as the other crew members (assistant salary may be 75% less than this as long as it’s above the basic salary. Again, it’s up to you). This must not include the other parts from our suppliers such as talent fee, costume, transport, catering and etc. So it shows this $150/hour is only the management price we charge and it’s clear. If the clients don’t want these fees, we can remove these from the quote, they are happy and we are also happy, as long as it is transparent.

Let says the project only requires to present the specific idea, this takes you 3 hours to complete without anything else involved. It is $150 x 3 = $450.

So, in the end, we have $3225 for this project with all the aspects above.

Finally, it depends on your business strategies, where you are in the market, and your segment you target. And also sometimes it is the easiest way to know your competitors’ pricing and your clients’ budget as the references for pricing your video production services.

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