Starting your own company....

In the end of the day people that are in this kind of business should be the people who love doing it. The whole process of filmmaking from preprod to post. I love this business. People will always think of how much their work is worth but what I learned so far is that unless you a phenom and your style is very distinct ( like Michelle Gondry, Tony Scott, Hype williams, Chris Cunningham) and you always deliver something new then you wont get paid high.

This is why we always try to better ourselves everyday because new ideas and filmmakers rise every year.
 
Don't put the cart before the horse.
I believe (IMHO...and as a successful business person), that the key is a well thoughtout Business Plan. Have you put together a plan? It's very important to know where you want to go & how you are going to get there.
 
I do have a problem with paying a doctor $100 for that, haha. I haven't been to a doctor in 7 years. If I'm not deathly ill I wouldn't waste my time, let alone my money. Nothing worse than going to a doctor's office ;)

I didn't suggest that $25 an hour was the TOTAL you'd take home, but the way you are calculating pay doesn't even make any sense. Pay isn't calculated that way if you run a business, or at least not if you run it properly. You should have company profits, equipment leases, and your time per hour. You don't just mix it all up into one big ball. That makes no sense because the pay depends on the tools and the time. If I'm doing a project with 5 shooting days, one per month for five months, I'm going to bill full price for my equipment usage per day. If it's five days in a row I'm going to bill for a three-day week. Then on top of the equipment I'm leasing to the company for the shoot, I'm going to charge an hourly wage for my time, or more likely a flat project fee. Then on top of all that my company needs to make its 15% markup, which is industry standard for all production companies, so at the end of the day that 15% pays for expenses like office and legal expenses, overhead, etc. Insurance is always billed separately, usually at 4-5% of the cost of the project, because I pay about 3.15% of the cost of production for insurance. That isn't something you have to recoup through your profits, that's something directly billed to the client. I just think your bookkeeping must not be right.

My time at $25 per hour is just fine to make a good living, even with $100,000 in equipment, because if I'm going to bill a project $2,500 for equipment and $1,500 for my time and another $1,000 for the production company or whatever, and a few hundred bucks for my production insurance, etc., I'm going to recoup all of my money one way or another, but if you don't do your accounting properly you won't even know what money goes where. It's a bad way of keeping records. I can tell exactly how much I've made renting my equipment to my shoots, which gives me a good idea how much I've recouped compared to how much I've invested. The same is true with the production company markup. Then you aren't confusing the issue of what you are making per hour for your TIME versus your total income.

And you're wrong, you don't need a college degree to do video work. Sure, most of us have it, but not everyone. At the film school I went to, very few people had a college education. Most were right out of high school and it was a non-degree school. There's no inherent reason why you'd need a college degree to do this work, you just need to be smart. I already knew more than most college grads when I was in high school still, god knows I could write better than them, and whatever I learned of value in life has mostly been on my own, outside of school, not held back by the idiots who are inevitably in every class of school because any time you take a bunch of people and put them in a room you're always going to be subjected to the lowest common denominator. I guarantee there are plenty of good professionals without college degrees.

And high school diploma = $0? Ok, if you say so. I paid $30,000 for mine at a real high school, not some lousy excuse for a school paid for by tax payers.
 
Jonathan, while I respect the effort and information you put into your posts, statements like "And high school diploma = $0? Ok, if you say so. I paid $30,000 for mine at a real high school, not some lousy excuse for a school paid for by tax payers." make you sound so pretentious, I automatically want to discredit anything you say. It's high school for god's sakes.

Smart bookkeeping is most definitely important, but your monetary gain is definitely more significant than what your records show. Unless your "equipment rental" actually goes into paying off your equipment.

Zaza is right in saying that a business plan is one of the more key components in getting your company on its feet. I hired a business consultant when I realized that word of mouth wasn't giving me enough work and we're formulating a business plan that will give my company a direction for the next two years, at least.

On a side note, I agree with Jonathan in saying that a college degree isn't required for this this. If you're smart, hard working, enthusiastic and are able to get startup funds somehow - you can get into this line of work, even if just as a freelancer.

Just my thoughts,

Kegan
 
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JonathanLB said:
And high school diploma = $0? Ok, if you say so. I paid $30,000 for mine at a real high school, not some lousy excuse for a school paid for by tax payers.
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You paid paid $30 000 for high school?

I bet it was worth every penny. All that knowledge... from.. high school...
 
A formal business plan is a strong indicator whether a person has really thought through the process. I started a production business a few years back and the first thing I did was spend a number of months researching, planning and preparing a business plan. I also had a panel of independant advisors review the plan a number of times and provide notes and comments.
 
And you're wrong, you don't need a college degree to do video work
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Hence the "and/or" in my post.

Then on top of the equipment I'm leasing to the company for the shoot, I'm going to charge an hourly wage for my time, or more likely a flat project fee. Then on top of all that my company needs to make its 15% markup, which is industry standard for all production companies, so at the end of the day that 15% pays for expenses like office and legal expenses, overhead, etc. Insurance is always billed separately, usually at 4-5% of the cost of the project, because I pay about 3.15%
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I'm sorry, but I didn't see that in these numbers:

If you get a $10,000 budget, you can't put $2,500 into the project and keep $7,500 or you wouldn't be able to do anything. On my last music video, the location cost $2,250. I paid the crew something like $4,500, I'd have to look exactly, rentals were another $1,800. I brought my own cameras, jib, dolly, and some lighting equipment as well, besides also a pro reference monitor and laptop for capturing on set. Food was about $700. The actual cost of the project ended up totaling $9,400 roughly.
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Anyways, I'm just trying to help, not discredit what you are doing. We can all go about doing things our separate ways and time will be the great equalizer, because no matter what we start off doing, if we are successful over time we will determine what our time is really worth.
 
ZazaCast said:
Don't put the cart before the horse.
I believe (IMHO...and as a successful business person), that the key is a well thoughtout Business Plan. Have you put together a plan? It's very important to know where you want to go & how you are going to get there.
Click to expand...

We are currently in the process of creating one - business plan.
 
My question is - is there a formula on how much to charge that goes to the company? The equipment? sorry but I'm new to the production business. I was just collecting my talent fee when I was an in house director for an ad agency before I relocated here in Puerto Rico.
 
High school can be highly educational if you go to the right one, and have great teachers. If your high school experience was all about fun and the other students, blah blah, etc., that's interesting and all, mine was all about academics and it was a heck of a lot harder than the state college I went to. There was not a single year of college that was harder than any year of high school, and in college I took 20 credits a term for four terms, 24 for two terms, the max allowable OSU credit count. Still, high school was tougher than that. The bio, chemistry, physics, and English classes were inevitably deeper and more sophisticated than the simple primers that college offered. So yes, I'd say it was worth the money. You act like $30,000 is a lot of money. It's not like I spent that money, first of all. It's well worth it to gain a proper education. For grade school, I was at a private school too, it was terrible and retarded, still cost $10,000 a year. Yes, even for first grade. So high school was a bargain by comparison. ;)

Chris - Those were just some example numbers, not a FULL accounting for you. I was just trying to give a broad idea.

And, yes, that money from equipment leases to the company does in fact go to paying the equipment off. When there is a profit, great, but you depreciate those assets over 3 to 5 years and then when there is a profit you are going to pay taxes on that.
 
are there any industry standard on how much the company should mark up for each client? is it true that its 15%? - this will go to the company?
 
15% is standard for music videos. I'm sure that other segments have their own standards, but that's pretty standard I would say.
 
Can somebody help me. I am going to start my own company with a friend of mine. But I am curently investigating all the paper work and technical stuff I have to do (I am also from Puerto Rico). I also whant to insure our fiml equipment. Anybody have any advise or knows the process?
 
Well yeah. It depends what type of company you are running too. I mean if you're doing production work, as a real production company, that requires a bit larger crew, more scope, etc., then you are going to charge for your time as sort of the supervisor / producer of the project, plus the markup for your company in general, etc. I mean I personally think it makes some sense to charge a different hourly rate sometimes depending on what you're doing. Like on the last project, I had one rate I was charging during post production to be the director / extra crew, basically, and another rate for supervising post production, including writing voiceover text, working with the editor, studying the competition, arranging Web work, etc.
 
I'd be very careful using rules of thumb before determining a markup. Certainly no one could properly answer your question without a complete explanation of your product or service, as well as your planned business environment.

For instance, if you were to hire SAG actors for $100 per day, your client upcharges would be far greater than 15 percent. In addition to General and Admin charges, hopefully you will be cross-charging for film insurance, workmans insurance, etc. And don't forget your time to generate a contract, negotiate, communication and manage the project, render bills and book collections, etc.

Then there's the scope issue. Markup charges should vary depending on the length of the contract, dollar value of the product/service, complexity, risk, changes in specs, dependencies of others (including client), etc.

Beyond that, we need to consider to what degree the project will require incremental products or services. Obviously, if you have sunk costs the variable pricing would be less than where it's entirely dependent on incremental products/services. Associated with this is ramp up/down efforts (perhaps barriers to entry/exit, etc.)

OTOH, maybe you're looking to build a relationship with a strategic partner or are hoping to generate advertising testimonials with a certain client or market segment. Just be careful before getting into too much "strategic selling!"

We could go on but you get the idea - without knowing what you're doing, no one could help much with the 15% rule of thumb.

Regards, Michael
 
Depending on the job, I put in anywhere from 10-20% markup. I normally pad my numbers to keep myself safe and because I have such low overhead this generally acts as a contingency. But because me and the other producers do our job well and generally don't go over budget, most of the markup becomes our bonus.
 
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