Know Your Price Breakdown

In my last post, I discussed the difference between what I called the wholesale and retail price for contract videography work. That post generated some good discussion on one of the common videography boards. Some were under the impression I was suggesting that a subcontractor needs to charge less than what he or she is worth when offering their services to other studios. I just want to clarify that nothing could be further from the truth. I am a huge advocate for service providers getting paid what they’re worth. In that article, I was trying to explain a reality in this business (and other similar businesses) that there are in essence two market rates: one to the end user client who invests in video services, and one to the studios that hire contractors (or employees) to perform those services. In each case, there are different levels of expenses and commitment needed to properly execute the job, and as such, one can still make a great profit and be paid what their worth.

But something else came out of those discussions about this topic. It was suggested that a studio could pay a subcontracted shooter the same amount that studio charges its end user client, and still make a profit from the editing. Although this is true, I disagree with the approach. I strongly believe that when you are pricing your services, you need to make profit on both the shooting AND the editing portion of the job. Doing something like my colleague suggested may be more viable if as the business owner you do everything: shooting and editing (although still unrecommended IMHO). But, many videography and photography studios have business owners who do very little shooting or editing (relative to the whole). In fact, in many larger studios, there are entire staffs that do no shooting or editing. So, how do they get paid? Simple. From the gross profits, i.e. your revenue less the direct expenses that go into your product. In this case, that would be the contractors the studios pay.

Naturally, in order to make a profit on both the shooting and the editing, you need to know what portion of the rates you charge are allocated to each. Whether you charge by the hour or have “packages,” it’s imperative that you know the following allocations:

  • Pre-producton (e.g. where applicable, your time to write scripts, prep shot lists, audition actors, etc.)
  • Production (the actual shooting)
  • Post production (the editing, DVD authoring, graphic design, etc.)

You don’t need to show the client your breakdown, but YOU must know internally how much each of these areas contributes to the total rate you’re charging the client. And you must make enough profit in these areas so that, if necessary, you can hire the contractors (or employees) to perform these tasks. And, furthermore, there must still be enough profit left over, so when combined with all the other jobs you do in a year, you can still pay…

  • Your salary (the amount you as the owner take home)
  • Rent and utilities
  • Equipment
  • Sales and marketing
  • Etc.

Bottomline: even though you may have entered this business because you love the work, the operative word here is “business.” As a business, you have to consider all these things. If not, you run the risk of being one of those small business statistics, wherein 4 out of 5 fail in the first five years. Don’t be a statistic.