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What is profitable for your business?

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Alan SmithWhat is profitable for your business?
by on Sep 19, 2008 at 1:53:11 pm

I have been working as a freelance videographer/editor/animator/etc for about four years now. I have been an avid reader of the Cow for about two of those years. One of the things I have learned from my experience on the Cow is that is very difficult to make a living doing this type of work. There are tremendous factors that make it this way, but there are obviously many who are making sustainable livings in the video production world.

I am wanting to grow my business to be able to be self sustaining and expanding, but what I am finding is that the cost of doing business (taxes, office supplies, assistance, etc) causes my hourly rate to be to high to generate clients. Most of what I read seems to indicate the "going" rate for an editor is in the $25 - $50 range. Although that is pretty good money if you are able to create 40 hour + billable hours per week for 50 + weeks, one cannot do that much work as a solo act. Time has to be spent doing the daily activities of conducting business.

How are you guys making money? What are the type of work you are doing that allows you to generate a high quality salary/income for yourself while also having the money to cover the cost of doing business. What are some of your secrets?

I spent time this week doing a analysis of my business cost. I estimated cost for everything from office space to equipment purchases/repairs, to insurance, to retirement accounts, to office supplies, to toilet paper. Assuming that I had 100 days out of the year that I could do complete billable time, approximately 3 days per week, I would have to bill $175.00 per hour. That rate is extremely high for my market and not sustainable. How does one meet the cost of business expenses while billing clients a rate they are willing to pay.

So, how do you do it? What type of jobs generate the highest profit? Are you focused on one type of client? How diversified are your services? How are you making a living?

Thanks.
Alan


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Mark SuszkoRe: What is profitable for your business?
by on Sep 19, 2008 at 5:32:46 pm

When you figure it out, tell ME:-)

Seriously though, the number one problem of any small business, and the usual reason for it failing, is that they start out under-capitalized. They talk themselves into betting they can be in the black in a year, and this almost never happens, regardless of the business. The rule of thumb I heard was you should have two to three years' worth of working capital to draw on until the business finds it's level and starts paying for itself. Who has that much in liquid assets hanging around to bankroll the startup? Not many. And if you had that much, why risk it? Include credit in with the capital, and the legal protectiions of limited liability and incorporation, now you see how it's done.

What the whole finance works really revolves on is a kind of ponzi scheme of credit lines and deferred payments. Everybody gets paid and profits except the last guy in the chain. if you can keep the thing going around and around without stopping, it never quite gets to the last guy. Well, it did this week.:-(

You are a juggler, and you must keep x number of balls in the air between billed and collected, while you walk the 30-day tightrope at the same time, living off the cash FLOW the whole time. Businessmen from Trump on down to the corner hot dog vendor all work this same way, using OPM to create a cash flow and drawing off from the flow. As long as enough of the juggling balls (debts) are floating, you can catch the billables and stash a few away now and again towards paying everything off, and a real profit later.

But some successful and large businesses NEVER actually make a profit, if you factor in the debt. All the huge financials that went belly-up this past week? they were all doing it, the SEC permitted them to all run a way larger ratio of debts to actual assets held than was prudent, or maybe even legal. When they failed to keep enough of the debt balls floating, it cascaded down all over them.


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Jason JenkinsRe: What is profitable for your business?
by on Sep 19, 2008 at 6:07:43 pm

I calculated my costs and determined that I need to make $150 per hour, based on billing 20 hrs per week. Figuring out what you need to make and making it are two different things. I think a big part of this equation is confidence. It's taken me nearly 10 years of hard work to build my skills and my confidence, but now I KNOW I'm worth every penny of $150 per hour. A good eye-opener for me was freelance editing at an ad-agency for nearly two years. They billed all my work at $250 per hour. All that being said; getting the right clients is the hard part. I still do a fair amount of freelance work at $75 per hr to fill in the gaps. I have a client that I started working for 5 years ago for $15 per hr. Now I bill them at $100 per hr. That's tough to do unless your work is great. Seven years ago I was making $9 bucks an hour as a midnight dubber! I guess my point is that there is hope! You may have to raise your rates gradually, but when you do you've got to stick to them and keep moving forward. I'm confident that in a couple of years, I'll be turning away work at $150 per hour because I'll be booked!



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Steve WargoRe: What is profitable for your business?
by on Sep 20, 2008 at 6:47:50 am

it's hilarious how people hear that we charge $ X per hour and they immediately do the math for 40 paid work hours a week times 52 weeks a year and figure that we are swimming in cash.

Steve Wargo
Tempe, Arizona
It's a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .


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walter biscardiRe: What is profitable for your business?
by on Sep 20, 2008 at 11:38:38 am

Great post Alan. First off, I have written a 3 part series on starting and running your own business. (and one day I'll write the long awaited part 4!) You'll find a lot of how I have built my business in there.

http://library.creativecow.net/articles/biscardi_walter/ready.php
http://library.creativecow.net/articles/biscardi_walter/shop.php
http://library.creativecow.net/articles/biscardi_walter/running.php

I'm one of the very fortunate ones I know where I have built my business to the point where I won't even be able to continue editing on a full-time basis anymore and will be transitioning to a Post Production Supervisor / Producer type role in 2009. I think there are three primary reasons for this.

1 - Quality of the product. We simply produce a very high quality product for our client no matter what the end audience or format is.

2 - Customer Service. I treat all potential new clients with respect and present them with an honest proposal for each job. We take care of the client while they are working with us including all meals and even transportation if necessary. We don't nickel and dime for every tiny little thing they ask us to do. I build long term relationships that pay out over time instead of on the very first job.

3 - Equipment investment. I spend the money where I have to so the shop can handle pretty much anything that comes in the door. I don't believe in purchasing the cheapest of everything, I purchase what will make the shop more efficient and give the client the most options when they walk in the door.

Of the three I listed, #2 is probably the most important. I'll give you a great example.

One client came to me almost three years ago now to edit a single news story. He was excited when he came to the facility the first time and found out I had a VTR that could play back BetaSX because he has a lot of archived SX material. That led to me cutting a few more stories, which led to a one year contract to cut 8 news stories per month which allowed me to hire a 2nd editor which led to a 2nd contract to cut an international documentary series which led to a major tape library database contract which allowed me to hire a production assistant which led to a renewed contract to continue cutting now 12 news stories per month which led to a 3rd contract to add on four full length documentaries in 2009 and he's added a few more projects to go with that. On top of all of that, a single request by that client to deliver a BluRay disc in November 2007 led to us jumping head first into that format where we've delivered 8 or so titles now and are now jumping into advanced BluRay authoring in the shop. Along the way I've done dozens if not over 100 DVD samples, quick cuts, uploads to our server for potential clients, etc that we never got paid for because I feel that's a part of building a relationship. Anything I can do to help him get more clients and funding for his projects is better for me than charging him for every little thing we do. So that one news story three years ago has led to a major working relationship with this client that has grown our company exponentionally.

One last piece of advice for you, and this is also in my article, "Just Say No." Stick to your guns on price and what you'll do. Do not be run over or pressured by a client to do something you don't want to do or into doing more than you previously agreed. These are the clients you really don't need to be working for. This has been the hardest lesson in my career because I saw every potential client as money that we needed to build and keep the business running. But I found myself wasting more time chasing bad money or sometimes no money before I just started saying no.

It definitely takes longer to build the business if you turn away some clients, but in the long run, at least for me, it has paid huge dividends.







Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!
Read my Blog!
View Walter Biscardi's profile on LinkedIn


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Terence CurrenRe: What is profitable for your business?
by on Sep 20, 2008 at 2:01:57 pm

[walter biscardi] "Stick to your guns on price and what you'll do. Do not be run over or pressured by a client to do something you don't want to do or into doing more than you previously agreed."

Agreed!

The lower priced clients have NO loyalty. As soon as the guy down the street offers a lower price, they are gone. In the meantime, they are the highest maintenance as they usually have the least experience AND they hire the cheapest folks all the way along the chain so you have more to clean up at the end.

Avoid them like the plague. It is very hard to do when you are worried about paying the rent, but it will pay off in the long run.



Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca


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Ron LindeboomRe: What is profitable for your business?
by on Sep 20, 2008 at 3:10:52 pm

[walter biscardi] "This has been the hardest lesson in my career because I saw every potential client as money that we needed to build and keep the business running. But I found myself wasting more time chasing bad money or sometimes no money before I just started saying no."

Great point, Walter. It's important to add that even if you can and do collect the money on some jobs, that still does not classify them as good jobs.

Busy does NOT always mean profitable. As Walter points out, do not let yourself be pushed into the place where you feel that you must have the job. You don't. Some jobs are going to cost your company money and will keep you on the production treadmill long after the money has been technically spent. Again, busy does not always mean profitable.

When you know your real costs of doing business, you have a better idea of which clients to walk and which ones to keep.

Great post, Walter.

Best regards,

Ron Lindeboom

Remember: Burt Bacharach lied. What the world really needs now is an undo button.



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Alan SmithRe: What is profitable for your business?
by on Sep 20, 2008 at 11:32:40 pm

Thanks for the response Walter. I have read your post on starting and running a video production business and found them to be very honest and valuable.

Let me ask this question for everyone as well. What are some of the type of production work that you have found to be most profitable? I know that is rather broad and there are numerous possibilities, but I am looking for expertise in this field. I am working on building a plan that will allow me to do this full time and for my self and not for another person. I firmly believe that when you work for someone else, they gain wealth and you get a salary. I want to be able to be self employed. I know it is not an easy venture and many who attempt fail. I acknowledge that and am willing to take the risk of failling.

However, I think it prudent to devise a plan that will provide a good road to potential success. What are some of the starting strategies you would recommend? As I work toward those clients that become long time clients, what type of jobs/productions will help get things moving in a positive direction?

Thanks for the post. Very valuable!


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walter biscardiRe: What is profitable for your business?
by on Sep 21, 2008 at 11:01:30 am

[Alan Smith] "Let me ask this question for everyone as well. What are some of the type of production work that you have found to be most profitable?"

In the beginning, try to do whatever you're best at. Some people are great storytellers and excel at documentaries and long form. Some folks are great with major graphics and animation type of packages for corporate and events. Others can cut killer 30 second commercials or music videos.

When I started out the company we were 100% corporate work. Internal communications, event presentations, training, etc... because that's the clientele I had. I basically started out with one major corporate client that loved my ability to create very complex graphics packages and looks using a combination of FCP and After Effects. I also created a lot of animations for them as well because it just came naturally to me.

My love is documentaries, however, and when the opportunity presented itself to take on more long form type of work, even in the corporate world, I jumped at it and that has been a major catalyst for the growth of our company.

In the beginning you really can't be that choosy, you need to accept anything you feel comfortable with in your abilities and with a client you can trust. The main thing you're doing in the beginning is building your name. I have never advertised my company, other than my website and here on the Cow, for the 8 years we've been open. All our work is referrals either directly from other clients or through the Cow. So as you start, you're going to have to take on anything you feel comfortable with knowing that you're building a foundation for what is to come.

So in other words, it's impossible to say what's been most profitable for us. Each element is a stepping stone to another thing. What's most profitable to me is high quality clients who generate repeat business. Doesn't matter what the work is, just as long as the clients are happy with the end product and keep business coming in the door. I don't like settling in as a particular "niche" as we find that variety makes for more fun in the office. If we're doing the same type of project everyday, then that gets boring.

So right now our projects include episode television documentaries, corporate image and communications, feature films, 2D animation for television and corporate, branding / graphics design, BluRay & DVD authoring, training / interactive presentations, foundation / event / fundraising presentations, long-form broadcast specials. Oh yeah, I'm Directing my first two television pilots next month. One is my original idea and the other is an idea developed with another host.

So what's the most profitable for me? All of the above really since everything we do is a result of a client or colleague referring us to someone else.

Treat your clients right, complete your projects on time and on budget, deliver a high quality end product. Do these things and your reputation will be your calling card. Your reputation is the most profitable thing you have.





Walter Biscardi, Jr.
Biscardi Creative Media
HD and SD Production for Broadcast and Independent Productions.

STOP STARING AND START GRADING WITH APPLE COLOR Apple Color Training DVD available now!
Read my Blog!
View Walter Biscardi's profile on LinkedIn


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Mick HaenslerRe: What is profitable for your business?
by on Sep 22, 2008 at 2:11:45 pm

While my business is by no means thriving, I am definitely keeping my head above water and paying myself a decent amount and not killing myself. Here's how I'm doing it.

- Cash reserves....say no more
- Low low overhead
- Realistic amount of billable hours at a rate I can live with. For me, it's an average of 20 hours a week at $90 an hour
- Niche bread and butter. For me it's legal work and industrial training, it's somewhat steady, pays well and doesn't require a lot of thought or effort
- Find markets that NEED WHAT YOU DO. I have been building a steady clientele in the non profit world. Now more than ever, winners in business and in non profits need well thought out marketing material which should include video. If they're not using video in their marketing, they will be left behind. Tell prospective clients this with confidence.
- Low low overhead
- Great customer service and communication
- Give back, you cannot receive without giving something, it's a fact

The most important thing though for me, is I BELIEVE IT, THEREFORE I WILL ACHIEVE IT. I believe with all of my being that my business wiil be successful, rewarding and fun. AND IT IS!!! Our most difficult hurdle to overcome is ourselves. I am by no means a great videographer, photographer, sound designer, editor, or graphics designer. But I can put out a professional looking and sounding product and deliver excellent customer service in a timely fashion. Works for me and I have money in the bank, I sail several times a week, spend time with my family, will be going to California for a week next month, enjoy what I do and who I work with. I couldn't ask for anything more and am extremely grateful for these gifts.

I am also grateful to this forum and especially Walter. In the beginning Walter was very generous in sharing information both one on one and in the forums. He gave me confidence and knowledge. This forum is one of the greatest resources in the business. BTW, did I mention the Low Low Overhead??

Mick Haensler
Higher Ground Media



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grinner hesterRe: What is profitable for your business?
by on Sep 29, 2008 at 2:00:11 am

whoever pays my rate.. I'm all cool with.
kind of simple like that.



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