How to Go About Setting Your Rates

I think one of the most often asked questions by newbies in the filmmaking or photography world are: what price should I set? Should I go high, or low? How often should I raise my prices? My podcast conversation with David Robin inspired this blog post. But then I started seeing this topic come up more and more. In a coaching session I was giving a filmmaker, we talked about the pros and cons of launching a “low end” brand (another topic that came up with my David Robin conversation). In a Facebook group thread I was reading lately, the topic was “Should you have a cancellation” clause in your contract. All of these are related to how and when we get paid. So let’s spend the next few blog posts addressing these issues, shall we.

Today I’ll talk about setting your prices. Tomorrow I’ll write about strategies for raising them. Monday I’ll talk about the pros and cons of having both a low and high-end business in the event world. Then Tuesday I’ll talk about how to do something similar if commercial work is your main source of income. (If you’d like to get a detailed 75 minute recording on this topic click here. Or, subscribe to my email list and get it for free!)

Let’s begin.

Time is Money

Whenever I see someone post a question, “How much should I charge?” my response is always the same: how much time will you put into it? I firmly believe in charging based on how much time you put into a project. Yes, there are other market-based factors that may adjust that figure, but at the foundation, you need to charge based on what you’re putting into your work. That is why I am so anal about tracking how long it takes me to do a project. The better I am at predicting how long a project will take me to produce, the better quote I can give a client. (Use bit.ly/ronstemplates if you’d like to use one of the free Google docs templates I use to log how long I work on a project).

High or Low?

When starting out in the biz, you need to determine if you plan to market to a higher end clientele, or if your business model will be more volume based (i.e. lower pricing). One is not better than the other. Just because someone charges $500 for a wedding video or a photo package does not in and of itself make them the dregs of the earth. So long as they are giving $500 worth of value. When you start out, you’ll have no choice but to charge very low. The very first wedding video I shot I was paid $800, despite the fact I knew I was going to give them a $3,000 product. But I needed that $3,000 video to show other prospective clients what I was capable of producing. (At the time, $3,000 was considered high.)

When deciding whether to go high or low, keep these things in mind:

• Fulfillment. The main reason I decided to go toward the high end was not because I thought I’d make more money. In truth, the most financially successful studios are the high volume ones that have a lower priced product (assuming they are run effectively). I loved the process of filmmaking and creating art. That is what fulfilled me. The kind of videos I wanted to create were going to take a lot of time. Therefore, I knew I’d have to charge for that time. I had no interest in making “cookie-cutter” videos. (Not that there’s anything wrong with that. 🙂 )
• Processes. Regardless of going high or low, you need processes in place to effectively run your business. However, the discipline and process required to run a high volume business are considerably more challenging. You need to have a keen sense of sales. You need to have processes in place to crank out lots of product at a relative level of quality. You need to be able to manage people. In essence, you need to be more of a business person than an artist. (All you high volume studios out there don’t bite my head off. Yes, you’re an artist too. But the truth is, you don’t have to be artistic to run a high volume studio. You do if you want to be a high priced studio.)
• Differentiation. How will you set yourself apart? You need to know this whether you go high or low. If you go high, what will make your product worth so much more than the next guy? Especially when so many wedding films nowadays look alike, how will you keep from being a commodity? If you go low end where your product is a commodity and price is the key determining factor for clients, how will you get them to pick you over Bella Pictures? (Which offers both photo and video).

Personally, I think it’s harder to create a successful volume business. That doesn’t mean high-end is better. Going high end is hard too. It’s just a different kind of hard. In today’s economy, it will be difficult getting clients to part with more disposable income to invest in your art. For this reason, many traditionally high-end studios have started offering a low end product to capture business they would normally turn away. (More on that topic later). If you got into this business because you were good at your craft, that combined with your unique personality already set the foundation for you to be a success. With some work on your business skills, or by partnering with a strong business-minded person, you can relatively quickly work your way to a business that will sustain itself and allow you to make a living doing what you love. If you want to be a high volume studio though, you’ll need to put in a lot of pre-planning and it may require more up-front capital. And it will definitely require a strong and mature sense of business.

How Much to Charge

So, I never answered the magic question. How much should you charge? Well, I  think if you’re starting out, you need to charge $2,399.99 for your low package. How’s that?

In case you didn’t catch it, that was sarcasm. I can’t tell you how much you should charge. Every person’s situation is different. But here are the things you should consider when setting your rates. This applies whether you do event or commercial work:

• Expenses. How much does it cost you to run your business? You need to charge an amount so that the number of jobs you do cover all of your expenses (i.e. insurance, rent, supplies, equipment, etc.)
• Lifestyle. What lifestyle do you want for you and your family? You need to charge enough to cover that in addition to your expenses. In essence, this is your salary.
• The Market. Although I don’t think you should copy other people’s rates, you do need to know what your market is charging. That may be a good starting point. Again, not to copy, but to gauge. High end to a Buford, GA photographer may be low end to an Orange County one.
• Time. As I mentioned before, how much time you put into a project needs to be factored in. Based on your market research, come up with a good hourly rate for your area that will cover all the expenses and income you need.

There is much more to this topic than I can cover in one post. As I mentioned above, my “How to Set Prices” mp3 covers this and more (yes, it’s a shameless plug.) But this will definitely give you a great start.

Tomorrow I’ll talk about some strategies for raising your rates. Tune in then.