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Educating clients from a developing market. How to charge them? Transparency.

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colourblind
Educating clients from a developing market. How to charge them? Transparency.
on Jul 20, 2005 at 1:15:55 pm





The studio I currently work for was recently established and we're trying to establish ourselves on the market. However, lack of knowhow (mainly from the clients part) and a market that still under development and has lots of flaws regarding transparency and fairness (mostly regading financial aspects) and issues with working properly. In time, there has been a not so happy development based on truncated knowhow that people have adopted and reluctant to change, even where other workflows might improve the whole process.
I will not give you further details as I think I might bore you to death with the specifics of loca economy and politics.

Obviously we're aming for the high league, and, my opinion is that trudging through the swamps of low budget (in my country low budget is some sort of mini micro budget in the rest of Europe or in the US) will definitelly not bring us any advantage at all. We had some nice project on our hands but most are just mess dealt with mechanically.

I would very much like to hear about several work procedures you guys use out there. What's good about them, what's not so good etc.

My questions are as follows:
How could we try and educate clients into accepting new workflows?
How could we convince clients to properly pay and respect the postproduction process?
How should we charge? One of the problems here is that clients are used to work with fixed rates that are by no means transparent. Nobody in here is used to work / pay on hourly bases (at leas in post production) and clients are again very skeptical to the idea of paying hourly fees. They all wish fixed rates and obviously, the less the pay the better but everything is lacking both transparency and fairness.
Which would be the best way to charge clients for extra effects work for instance? Effects might vary in complexity and I think that payment should be dependent on that primarily.

Thanks
CB



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Mark Suszko
Re: Educating clients from a developing market. How to charge them? Transparency.
on Jul 20, 2005 at 2:52:55 pm

Well, you could always make a generous estimate on the time required for a job, multiply the hours by the hourly rate, add a premium, and *call* it a flat fee, to be paid up front. The more experienced you get, and the more you know about the elements and the client, the more accurate the estimates can get. Straight cuts and dissolves with a simple lower third key every once in a while, you can pretty much get that done in 2.5 times real time using a linear editing system, tape to tape, that is, if the show is an hour, with only good takes already lined up in sequence, you can throw in simple cuts and dissolves in two and a half hours. You are really gambling though, when you do flat rate work with unlimited client approval cycles. You must set a hard limit of one revision only, or you will always lose money on these flat rate deals.

You could offer a flat-fee service, but position and market it as a take-it-or-leave-it proposition, with more "limited" effects and fewer fancy features and with *any* changes or revisions requiring a completely new flat fee. The rate also has a hard limit of hours attached, up to, but no more than, say, 10 hours. (Whether you charge anything or a reduced rate for pre-edit work like digitizing is up to you)

This approach gets them in the door, then once they've worked with you and established some trust, they may ASK to go to an hourly rate for changes or the next project, as a "prefered customer". Particularly when you show they save money over the flat fee.

You could flat-fee every element of the production process, from logging tape to making dubs, till your rate card looks like a Chinese restaurant menu. I know a guy in town that caters to local folks that lack video knowledge; In the rate card for editing home movies, he actually charges a fee for each time he fades in a lower-third name key or title... even the same name! (!!!) He charges individually for each page turn or wipe! I could never work or bill that way. It's completely the wrong model for the kind of work we do. Uneducated clients accept it because it's similar to billing other things in their world they ARE familiar with: "I'll lay carpet in three rooms for x amount flat fee". Creating a video is more like building a house: no two are exactly alike in price or features. Both homes keep you out of the rain, but other than that, a mansion and a vacation hunting cabin are pretty different in price, detail, and features. Similarly to building houses, the architect and builder have to fully agree before construction starts, because once the roof is on, it's much more expensive to add three more floors to the structure. Your clients may accept an explanation like this. Or do the same example with cars: a new Mercedes will get you across town no faster than a ten-year-old Trabant, you're paying for extra features and details, for extra craftsmanship.


Your real problem, I sense, is structural and organizational.
You start with your expenses and figure out the true costs of the business, the gear, the amortization, maintenance, utilities, insurance, taxes, raw materials like tape, and a little to put aside for future growth/ replacement gear or future upgrades. THEN add a margin for actual profit. Now you know what your true cost of business is, you can calculate the best rate structure to meet those costs and get into a profit. If a competitor lowballs your price, resist the temptation to match him, he's only gambling that he has more savings to live off of than you do, because he's probably losing money on this deal trying to drive you out of business, or he's delivering a much inferior product - if he delivers at all!. After you're gone, he will raise his rates to the real level or even higher.

As to clients that come in with unrealistic expectations, or that become overly demanding, I am always a big fan of breaking the payments into "progress payments" for each major step of the production process. Usually I would go by thirds: a third up-front to start the project, a third after the first version of the edit is complete, and a final third when the master or dubs are handed over. Typically, to be a nice guy, I would offer one revision for free after the first cut edit. Also, mistakes *I* make, like misspelling a key, I fix for no charge, but if I can show the CLIENT supplied the misspelled name, etc. they have to pay for that. When they understand their responsibilities and the costs for being sloppy or indecisive, they will shape up.

If at any point the project is stopped, for whatever reason, with progress payments you are not left in debt for services already rendered. The clients should feel protected too, because they are paying only for work actually done and delivered at each stage.

You don't say exactly what kinds of projects these are; training films, commercials, etc. but let me recommend a wonderful book that changed my life in this business. If you follow the guidelines and examples in it, your projects have a very good chance of being successful every time.


"Scriptwriting for High-Impact Videos" By John Morley
ISBN number 0-534-15066-7
copyright 1992 Wadsworth Publishing, USA

Don't let the title fool you: this book is WAY more than just how to write the script, it will shepherd you thru all the necessary steps and processes to avoid just the kinds of trouble you have been having with the clients.

It's out of print, but used copies have been available at Amazon.com
Good luck to you!

p.s. go buy the book this instant!;-)






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reggie prescott
Re: Educating clients from a developing market. How to charge them? Transparency.
on Jul 20, 2005 at 3:00:48 pm

bid the job to the client. have them sign it. 50% up front. any overages (on their part) should be shown and signed for. receive the remaining 50% on delivery of master. that's how it works for our company here in the U.S. we work with larger budgets ranging from $20k-$450k. as you can see larger budget has quite a range as well.



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Charlie King
Re: Educating clients from a developing market. How to charge them? Transparency.
on Jul 20, 2005 at 3:55:35 pm

I think I understand your delimma.

I was involved in producing commercials for Moldova in two languages, Russian and Romanian. It was a huge undertaking financed by the US congress. We produced several commercials to educate the people about the government auction to allow people to buy a business and these announcements were attempting to educate the people about the benefits of private enterprise in hopes that people would take the opportunity to obtain a business and better themselves.

I was told that after all that work, many of the people never fully understood what was being said and the auctiions were not nearly sa successful as expected. How do you educate people about something they've never had any prior experience, without taking a lot of time explaining one on one.

I don't think there is any easy answer, just work to convince the people how benificial it will be to handle things more professionally, after you have educated them about what professional is.

Sorry I don't have any pat answer for you. This is something we should spend some time researching how to achieve your goals.

Charlie


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colourblind
Re: Educating clients from a developing market. How to charge them? Transparency.
on Jul 21, 2005 at 3:07:55 pm



Well, thank you guys. Feedback was far more detailed and encouraging than I expected.


Many thanks again,
CB


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