Projects that never end
We landed two huge Fortune 500 clients this summer - one for an edit job and the other for a production/post job that included all the creative work. Both jobs came through international pr agencies and had August deadlines specified in the contracts. Lo and behold, it's almost October and we're still getting hammered with revisions, tweaks to the animations, a new musical score & etc. Our problem is that we work in China - where our competitors are charging "local" rates, which usually amount to 30-40 percent of what we charge, and contracts aren't exactly ironclad. In both cases, we've just eaten the extra work in the hope of retaining these clients (who feel they are paying an outrageous amount for something they could have done by our competitors for less than half our price). What's killing us is that both companies (reluctantly) agreed to 50 percent up front/50 on delivery deals. So every time they push back the deadline, we're not getting paid. We tried to get a hard deadline written into one of the contracts, but the pr agency threw it out and the choice was either go with that or lose the deal. Putting in riders that say that if we work more than x hours the client pays extra just won't float over here where charges aren't by the hour but by the job. In almost every case, there's the budget and that's it - take it or leave it. So, any creative suggestions on how we might protect ourselves against this in the future? We might be able to get away with a rider specifying not more than two revisions - but how to quantify those? The bigger problem is how to bring these projects to an end when we're being paid by the job and it's the client who has the ability to keep pushing back the deadline and to determine when it's finished?
Wow, talk about good news/bad news stories! My initial impression is that maybe your interests are best served by having your competition have to deal with these types of clients.
Everything you complain about in the last deal, you claim is how business is done there; if so, how indeed could you change this?
I like that you got half up front, even if it turned out over time to actually be somewhat less than half. My personal rule is that the up-front money has to be at least enough to cover all my expenses and any rentals or subcontracting I had to do... so that, even if the project dies in the middle of production, I'm not left holding the bag on the preproduction costs. I always plan and budget to pay off all my debts before I even consider my own profit. I made this rule for myself because no matter how big a city or market you live in, the actual circle of people you work with and have to depend on for services is relatively small, and your reputation as a guy that pays his bills in full and on time is one of your most important assets. Once you get a rep for welshing on deals, you might as well sell the house and move out of state. If I ever have to ask someone to float me for something, I want their instant answer to be: "no problem, your word is good, I know you're good for the money."
As far as your deal, and what to ask for next time... You need a more specific contract, for sure. I would think about offering the package of the edit plus one screening of an approval version, and one "free" re-edit for revisions after watching that initial cut. (It's not free really, it's built into your costs using day rate and a guesstimate of the time you'd have to use).
Any revisions after that first free revision are a separate contract, with an up-front fee of 50% and based on an estimate of number of days and day rate to make the changes... This keeps the endless revisions on a "pay as you go" basis. Remember, you are not a bank, and you're not in the interest-free loan business.
How I would market this idea to the client is, I am charging you less up front because you are going to have your "act" together and have all the key decisions made in advance, so there should be near total agreement on the "vision" of the program ahead of time, and no big surprises. This in turn means the free revision may not even be necesary, or it will be quite minor. The additional revision charges only apply to unprepared or disorganized clients.
Another way to approach the issue is to charge a storage fee to keep the project on your active drives past a "date certain". This puts another kind of money clock on the client. You explain that their delays are costing you business with other waiting clients so they have to pay to stay, just like apartment dwellers staying past the expiration day of the lease. If they don't want to pay, the project comes off the drives. Whether that means you nuke their files, or just lay them off to deep storage on DLT or off to videotape is up to you and how acrimonious the relationship is.
Thanks for the advice Mark. And yeah, it's difficult here, to say the least. We're getting close to western rates, but because we're expensive (relative to the rest of the market) everyone thinks they have carte blanche to hit us with as many revisions as they want. We're going to try and work a single revision clause into our next contract, but it remains to be seen if the client will go for it. We might also try the storage fee, which is a great idea.
One question: How do you deal with deadlines that the client pushes back? We've just had another huge client tell us today that a job we're in the middle of both shooting and editing is going to be delayed past the original November deadline. Which means another delay in getting our final 50 percent. What do you do when this happens?
Regarding your last question; I'd say put a clause in your contract that says your remaining 50% is paid in installments, on specific dates, whether they push the deadline back or not. That way the client is under pressure to maintain the deadline. At some point, you're 100% paid, but the client doesn't have the final product. You could also add verbiage that says you receive additional service fees beyond a certain date. Nothing makes the client pay more attention than going over budget. Now, actually collecting that money is a different story!