Hi everybody, I need some advice.
After graduating college, I decided to start up my own video production business, purchasing a gl2 and G4 with Final Cut (among other things). I know my way around cameras and editors after having worked, mostly school related, in this area for about 5 years now. My first project began about two months ago with a small "get comfortable" production. I knew nothing about what or how to charge, so we agreed on $50/hr for shooting and $100/hr for editing. This small production soon grew bigger and bigger. Every time I spoke with my client (also a family friend) he added more and more variables to the production. Each variable, of course, complicates the situation exponentially. After borrowing as much as I could (a second camera, two wireless mics, and soon a dvd burner), I had to purchase other equipment and, even with all the extra hours, it looks like I will be making very little from this job. I have a feeling that I'm not getting as much out of this as I should be.
This has been a long process, but we're finally nearing completion. Now I am dealing with the final stages of post production and realizing how extremely time consuming it is (all my other projects have been much smaller scale so I didn't pay all that much attention, unfortunately).
My first concern is what exactly counts as production time. Besides the basic shooting and editing, there is also all the processing time involved... digitizing, rendering, de-interlacing, exporting to different formats, etc. I'm sure this comes into account, but how? Technically my equipment is part of the "Nicholi" package, so would it be ethical to charge for the computer's think time?
I know all of this comes into account when calculating a person's value. I just can't establish how. I've even had talks with other, much more experienced business owners, but all they ever want to talk about is how to weasel out of taxes, which doesn't help me out much right now.
My attempt here is to get on the right track before getting hit too hard. I hope my questions aren't out of order here, but I figure they're worth asking. Any kind of advice would help me out so much, and I thank you all.

nicholi

I did a similar thing about a year ago (starting my own video biz) I can tell you that at least in the first couple years you won't make much money. Most of the money you make you have to put right back into the buisness to buy equipment. Once you get past that stage you can then start to actually make some money if you can keep that equipment busy.

To try to answer your question of pricing, what you have set for rates so far seems pretty good, it all really depends on your market. Here I charge usually $90 an hour for editing and $30-$75 an hour for shooting depending on the complexity of the shoot.

Charging for rendering times has always been an issue because nobody really knows what to charge, you're not really doing anything during a render, but your equipment is and it is preventing you from doing other projects while you are rendering (for the most part)

What I normally do is charge half the hourly rate while rendering, so if I normally charge $90 and hour for editing, I would charge $45 an hour while the computer is rendering. IF you get into 20-30 hour renders which can happen I will usually cut a break because that can get really expensive, maybe go down to $20 an hour.

Basically set prices that you think are reasonable and see how they work on the first few projects, also call production companies in your area and just make up a project and try to get a price quote on it. IF you get people saying that your rates are unbelievably good, then you can raise them. IF they say they are too high, then you can take another look at them and lower them.

Some good thoughts Jason.

I only bill out production days (shooting) in half or full day increments.

A half day is 4 hours, no meals. A full day is 9 hours with an hour lunch. This is when I have a crew. If it's just me shooting I don't really mess with taking the lunch break.

I bill a half day at 60% of the full day because it's not like I could ever get 2 half days from 2 clients in the same day.

Editing is logging clips, digitizing, and editing. This is billed on an hourly rate.

Rendering and encoding, etc. is half the cost of an editing hour. This is critical to charge for because it usually puts your machine out of commission until it's finished.

Always budget in pre-production time and bill for it. Including planning sessions with the client, scripting time, consulting with any graphic guys you'll be using, etc.

And of course, always have a signed contract explaining the pay schedule and the scope of the video. Any changes to the scope results in additional charges (which sounds like what's going on here).

You've got to run your business like you are hiring someone else for everything. But instead you're hiring yourself. You won't expect Joe Blow to come in and edit for free for you so don't let yourself do it.

Of course there are times when you'll give a little more to make the client happy, you have to do that. But don't become a doormat and let them keep piling stuff on without additional charges.

Thank you Jason and Bryan for the replies. Great advice. So great, in fact, that your advice has spawned new questions. I feel much more comfortable with the whole rendering issue now.
Treating myself as an independant contractor is an excellent way to look at this. I find it much easier to find value in others than in myself, so that new perspective will help. I do have a couple more questions though.

Bryan, you mentioned billing for pre-production. Obviously you can never know exactly what will take place and how long it will last, but do you just make an initial educated calculation and stick to that? or do you charge pre-production by the hour as well? Or maybe allot a specific amount of time based on that initial calculation?

Bryan hit it dead on regarding "improvements" to the video. Just to put it into perspective, the first time (project was actually done twice, the first was turned down because he wanted to make some changes in his speach as well as the entire set) only used 2 tapes for raw footage. After the modifications kicked in... I'm now up to 11 tapes and counting. Anyway, my question is, how do you approach those changes? Do you sign an entire new contract? Do you make an additional contract, almost as a different, yet related project? Is this situation taken into account in the original contract (i.e. if you want to make changes, you have to sign another contract).

Also, what do you do when the client decides he doesn't like the product? I tried to make it a point to do just enough work to show what the result would look like, then wait for approval before continuing. Thankfully the first attempt at this project was rejected early because he didn't like his side of the video, but he did like my work. However, I'm sure there are instances when either I screw something up (which I would fix for free) or the client just rejects the work and wants a reshoot. Is there a good way to approach this?

Right now I'm on a very small level, but seeing how you guys treat similar situations (which seem to be quite common) helps add perspective to my approach.
Thank you again for the replies.
nicholi

Preproduction - Yes, this is billed hourly as well. You put this in the budget just like everything else. I estimate how many meetings there will need to be with the client and who needs to be there (my director, my graphic designer, me, etc.) and come with an esitmate for that. You then have to budget for writing the script, which is also an hourly deal.

Of course you never hit these estimates right on the head, and you almost always go over a bit in actual work time but that's just life.

Anything outside the original scope falls under a change work order. These are specific contracts that are additions to the original deal. If the client wants something changed that's different from the original deal then you work it up in a change work order and have them sign off on it.

This is important for a couple of reasons. First, it insures that you get paid for extra time spent on the deal. And secondly it gives a hard record of how much the client is changing around things. Many clients don't realize how often they are "tweaking" and this helps them to see the history of the project.