One of the most frequent questions I get asked, mostly from new or younger freelancers, is “what should I charge for my services?” And when you’re just starting out trying to find the right price for you can be tough - you don’t want to charge too much and price yourself out of the industry or land a project you can’t handle, and you don’t want to charge too little and price others out of the industry or land projects that aren’t worth your time. So you have to come up with a number that works for you - but for most freelance video producers or freelance professionals of any kind, figuring this out can feel daunting. However, even though this seems like a really complex part of running your own business, it’s actually dependent on a lot of really simple things.
But I guess first we should define the cost of doing business, or CODB. At the most basic level, this is literally just the cost it takes to run your business while making a profit. If I can’t make a profit producing videos for clients, then I can’t afford to provide those services. It’s really that simple.
When I first started out doing freelance work I didn’t know what to charge for my services, so I asked some other people in my industry what I should charge, and I heard things like $1,000 per finished minute of video, $150 per hour for everything, and so on. And this worried me - I mean the money sounded great, but for one I didn’t have the experience, equipment, the knowledge, or the relationships that some of these seasoned men and women did, so charging what they did seemed like it would only get me into trouble - my fear was that I would actually land a $5,000 project and then not be able to deliver, ruin my reputation, and have to go work in a cave or a FootLocker somewhere. So I came up with some arbitrary amounts that I thought my services were worth - and more importantly, would sound affordable to a client - amounts like $100, $250, and $500 per project. In a way I had just come up with my own CODB.
But I realized pretty quickly that I was charging too little for what I was offering - in order to make enough money for my business to stay open, let alone pay for my personal bills, I’d have to work well over 100 hours a week. And I should throw in that you won’t get paid for every hour you work when you start a business, a lot of hours are spent on non-billable things like networking, sending invoices, continuing education, and so on - these are all part of running a business. And it was at this moment I knew I needed something to help me come up with a better amount to charge for the services I was offering. I needed something that I could plug information into, regardless of where I lived, or my gear, or my experience - I could plug this information in and get a better, more accurate number, for my CODB.
So, like the good former mathlete I am, I created a spreadsheet and started keeping track of every penny that I needed to run my business - things like how much I spent on cameras over X amount of time, how much my yearly health insurance premiums were, what I spent on office supplies, and how many hours I worked. At this point things really started to take shape, and I was able to see what I NEEDED to charge just to run my business - not make a profit, but just keep my business open.
Then I added another line item to my CODB spreadsheet, and it was income - basically what I needed to make to pay my other personal bills, like student loans, mortgage, buying fancy dog food for my picky dog and so on. And my rates skyrocketed - instead of charging $100 or $250 or even $500 per project, it looked like I needed to charge several times that amount. And seeing this number initially freaked me out, but I had to remind myself that this is the amount my services were worth - this was my CODB, and this is what I needed to charge to run my business.
And by now you’re probably wondering why you've read halfway through a blog post about calculating your CODB without actually reading about how to do it - so how exactly do you calculate your CODB?
Here's a link to the spreadsheet I created to determine mine - this is available for you to use to calculate your CODB - I’d recommend you make a copy or download it. This spreadsheet has some numbers already filled in so you can see how it works and what the cost breakdown is, but here's a little walkthrough to help get you started....
The left column has info on what the item or service is, some with additional details, and then the yearly total is where you enter in your numbers. After that the sheet breaks down the costs by month, and then by day (and the numbers - 200, 150, 100, and 50 are how many days in a year you'll work). Having owned my business for awhile now, I can tell you that you likely will not have 2000 billable hours a year like a typical full-time employee, in all likelihood you’ll have 16-24 billable hours a week, and the rest will be filled with non-billable things like invoicing clients, networking, continuing education, etc. - which are all part of running your business. If you’re just starting out, and this is a side hustle, or you're just a total slacker wiseass you’ll probably use one of the further right columns, because you’re probably only going to work 50 or 100 full days a year. But as you work more, get more clients, and your business grows, these numbers will change as well and you might need to use one of the further left columns. If you know you want to work like 150 days every year just delete the other columns and don't worry about them.
So taking a look at the numbers.... If you know you’ll spend $3,000 every three years on a new camera, then you’ll want to have $1,000 every year saved up for that purchase. When you enter that in you’ll get a little over $83 a month that you need to earn. Break that down further and if you work 200 days a year, or 1600 hours, you’ll need to bring in $5 on each day you work to pay for that. Doesn’t seem so bad, right? 200 days of work right off the bat is a lot, and I am betting a lot of you, if not all, will fall into the middle two categories. So you’ll likely need to earn, and save, between $6 and $10 a day for a camera in this scenario. Again you’ll want to save a copy for yourself, and then go through and enter in what you need. In some these categories you might have $0 - I don’t have an office since I work from home, so that, in my CODB sheet, is at $0 - your costs will change as you gain experience, get better equipment, and start doing bigger and better projects.
Remember, one of the biggest costs of doing business is being able to make a profit - if you don’t make any money doing this you won’t be able to offer clients your services. To account for this just adjust your salary accordingly. All of this is editable and you can adjust, add, or get rid of anything that make sense for YOUR business. At the bottom you’ll see what you need to make, per DAY and per HOUR, to run your business. I included these options because there are scenarios in which you want to give out hourly rates, and scenarios in which you’ll want to give out day rates. The numbers at the bottom will give you both of these so you can use whichever one you’d like.
So hopefully after reading this you’ve got an idea and some tools to help calculate your CODB. When I was starting out there were so many unknowns but I want to help inspire and educate anyone who has an interest in this stuff, and to pass along what I’ve learned and what I’m still learning. So if you have any questions about calculating your CODB or want to know more about freelancing or filmmaking please let us know!
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