What's Your Percentage?

[Sareesh Sudhakaran]

Hi,

I am slowly transitioning my video business. Currently I shoot talking heads and I tend to quote 200% of expenses. E.g., if a day's work costs me about $500, I quote $1,000. The scope of my work, and my clients, are quite limited so I've never had to worry about thinking about this much.

Now, I want to get out of shooting talking heads and get into more varied kinds of projects - all paid work. I know how to budget for my expenses and the project. What I'm thinking is, if I'm doing a project that requires a lot of expenditure, say about $5,000 or so per day, can I continue with my 200% rule and quote $10,000?

Is that being greedy? Don't get me wrong, I know I can charge for whatever the market will bear, but I'd like to get a feel for what others do. Furthermore, I don't have a mind-blowing showreel to backup exorbitant quotes anyway.

To put it another way, if the market can only bear $1,000 per day, should I start assuming I need to get the job done for $500?

I don't want to know how much you make, only how much you mark-up for your services. What's your cut? What factors do you base it on?

Would appreciate any help. Thanks!

[Stephen Brenner]

I only do video part time so I'm no expert, but I like to charge an hourly rate for my time and a separate charge for whatever expenses I might incur. The hourly rate may include the long term cost of maintaining/ replacing equipment used that I own. I don't inflate the out-of-pocket costs for rentals, travel, crew etc.

[Garrett Low]

Sareesh, I think you are going about this the wrong way. From a business perspective you can't think of it as a pure markup. That's a simplistic analysis that works for manufacturing but not for consulting which is what the video business really is. I know some people will say that it isn't consulting because I produce a product, the video. That is not correct. It is a consulting business in that you do not manufacture a product without a specific client in mind.

So, you first need to determine your minimum required income. This includes all expenses as well a what your minimum salary you pay yourself is. Here's a handy little sight to give you an idea of what needs to go into your calculation:

https://nppa.org/calculator

Then you need to determine your billable percentage or the ratio of work hours you will be billing vs. overhead hours. Overhead in this case will generally mean hours you spend on admin and marketing and unless you are really lucky, you will not have a full years worth of paid work. but then, as a small business owner if you have work hours that you are not doing paid projects on you should be marketing. In any case you that will go into your overhead hours. With that billable vs. non billable rate multiply the number of hours you anticipate to work a year. That will give you the number of billable hours per year. Take that and divide the required income amount calculated using the web site or some other method. That will give you your minimum hourly rate. From there, you can calculate how much you need to bid on a job.

In a way, you could us this calculation method and then say it costs me $x in expenses so I need to charge $x * y dollars to do the job. But the problem with that mentality is that you start looking at individual jobs instead of your business as a whole. The problem in the way you are looking at it as you are not accounting for yourself as an expense. You are, so you have to take your salary into account. If you don't you will quickly find that you are not making enough to live on.

[Sareesh Sudhakaran]

Originally Posted by Garrett Low

Sareesh, I think you are going about this the wrong way. From a business perspective you can't think of it as a pure markup. That's a simplistic analysis that works for manufacturing but not for consulting which is what the video business really is. I know some people will say that it isn't consulting because I produce a product, the video. That is not correct. It is a consulting business in that you do not manufacture a product without a specific client in mind.

Garret, I fully agree with you on the consulting part.

To both Garret and Stephen -

Actually, I framed my question incorrectly. When I said 'expenses' I meant all the costs of the business plus the lifestyle that I'm after. This includes home, medical, a fancy car, maintenance, new gear, taxes and everything else under the sun.

But what's the mark up over all this? As an extreme example, many kids sing, but Justin Bieber charges a lot more than the average talented kid. As I mentioned, as far as my current work is concerned, I tend to charge twice what it will take over a period of one year to satisfy me. If I need $X to run my life and business, I charge $2X as profit or growth or markup.

Now that I'm changing lanes, I realize I might have to start from scratch, but just wanted to see what established professionals feel.

I hope this clarifies it better than my original post. Thanks!