• live
    • archive
    • jonas brothers
    • thrice
    • bea miller
  • people
  • motion
  • blog
  • about
  • tearsheet
  • contact
Menu

CAL ENGEL

photo . video . creative
  • music
    • live
    • archive
    • jonas brothers
    • thrice
    • bea miller
  • people
  • motion
  • blog
  • about
  • tearsheet
  • contact
×

Cost Of Doing Business Calculator

Calvin Engel July 13, 2015

So I've been thinking a lot about what I wanted to blog about.  It's good to just write things down so that I can think through them and to share stuff I've encountered.  But 90% of what I see on blogs is regurgitated stuff from other blogs.  While that works well if you're a strong curator, it doesn't work well if the people reading your blog tend to read the original sources as well. So you won't find a lot of PetaPixel or FStoppers or Gizmodo reposts here.  Those are all great sites, read them every day.  Instead I thing I want to share a little bit about having your own small business.  The things I post apply to the photo/video/agency world but can be adapted to other fields as well.

One of the biggest challenges any creative working on their own faces is estimating.  Let's say you already have the contacts, you get in the door for meetings and then you get a brief.  You need to be able to accurately estimate and have a basis for the costs you send, not just pulling them out of thin air or doing what your friend does.  Hopefully this article helps you with that.

First, how long will it take?  This is something you learn and is subjective.  I've been doing creative projects for 15 years and I've learned how long it takes me to do things.  And you need to be as accurate as possible, factoring in your speed compared to others.  I've worked with people who take much longer than the "average editor" to do an assembly.  The client shouldn't pay for that.  But I've also met people who are extremely fast, and there has to be a balance between how long it takes and how long it takes the average person.  Once you have that number, you need to figure out how much you should be billing per hour.

That per hour cost is where I've found a lot of ambiguity.  I know people who make it up, just hoping it's accurate.  I've met people who just use a friend's number, but don't have the same overhead (office, gear, computers, etc).  And I've met people who know what it actually costs them for every hour they work on something.  I fall into that final category.  Not because I'm someone who loves paperwork, I hate it.  But because I need to know the point at which I lose money.

So, I use a CODB calculator.  I think I got it from Philip Bloom, but I may have sourced it somewhere else.  I downloaded it a few years ago and have tweaked it to what I need... CODB Calculator Currently the spreadsheet is filled with random numbers.  I'll use the ones in there as examples below.  The left column is what the expense is, the B column is the yearly cost, C is the monthly cost, and D is the daily cost assuming you're shooting 200 days a year with it (which would be a lot).  You can see the daily rate at the bottom factoring in everything.  In my personal version I add 150 days/year and 100/days a year.

So for our example, you first need need to look at your gear costs and plug those in.  If you don't own your own gear, you shouldn't just plug numbers in.  You need to make sure the document is as accurate as possible.  Your buddy may charge more per day, but he also may own more gear he has to pay for.  This is for you to see, not your clients.  So if you own your own $6,000 camera and it has a shelf life of about 3 years.  You plug in $2,000 per year.  Use that method to fill in all the categories down the line that apply to you as accurately as you can.  Then you'll get to Salary.  The way I approached this part was to figure out what I would want to be at per year if I was working for another company and then plugged that number in.  We'll use $50k for example purposes.

With all the applicable categories figured out you yearly, monthly, and per shoot (day rate) CODB.  Personally, I think the monthly is most applicable.  You'll have months where you work 7 days a week and you'll have months where you work 2 or 3 days a week.  So you can take that monthly number and have a good midpoint.  To figure out a per hour cost, I took the yearly total and divided that by 2080, the number of hours in a work year not including vacation (52 weeks times 40 hrs a week).  In the example that means you need to be making $47.19 per hour.  Anything less and you will lose money.  But you also need to factor in growth if you're building your own company, vacation time, etc etc.  So I would add 30% and round.  So $65/hr would be the losing money point.

So now you have a base line.  Multiply that $65/hr times the number of hours for a project and you have your estimate.  If you know a client always goes over or changes expectations (which should be covered contractually but that's a different post) then estimate your number of hours to reflect that.  But know that $65/hr is the point that you can't go below.  And once a quarter (when you pay your quarterly estimated taxes) go through and adjust the numbers.  The more experienced you get, the more your salary would go up.  If you start shooting everything 4k, your camera costs go up, thinking of adding a second person?  Factor their salary/insurance/computer/etc in and you'll see where you need to be per month to afford them.

And almost as important as knowing your hourly rate... TRACK YOUR HOURS.  I know, it sucks.  But you need to be able to see if your estimates are accurate.  If you say it will take 40 hrs, but it takes 80, you need to be able to adjust up next time.  If you say 40 and it takes 20, you know you can say yes to that next project the client has when the deliverables are similar but the budget is less.  If you're a professional, you need to know what to charge and you can't be making that number up out of the air.  Hopefully this helps.

- C

← The Weeknd @ Lollapalooza6 months into being my own boss... →

cal@avcollective.com  |  (630) 708-0871