I'm revisiting some of the topics I posted on my personal blog and making updates and sharing them here. This industry (and our website) is more than just client/agency it's about sharing knowledge within the industry and how someone like me, who has been doing this for almost 2 decades, can share what we've learned.
One of the biggest challenges any creative working on their own faces is estimating. You need to be able to accurately estimate and have a basis for the costs you send, not just pulling them out of thin air or doing what your friend does.
The first question to ask yourself is how long each step will take. This is something you learn over time. I've been doing creative projects for a long time and I've learned how long it takes me to execute each step. I've worked with people who take much longer than the "average editor" to do an assembly. The client shouldn't pay for that. But I've also met people who are extremely fast, and there has to be a balance between how long it takes and how long it takes the average person. Once you have that number, you need to figure out how much you should be billing per hour.
That per hour cost is where I've found a lot of ambiguity. I know people who make it up or ask the budget and then say that's what it will cost. I've met people who just use a friend's number, but don't have the same overhead (office, gear, computers, etc). And I've met people who know what it actually costs them for every hour they work (or don't) on something. I fall into that final category. Not because I'm someone who loves paperwork, I hate it. But because I need to know the point at which I lose money.
So, I use a Cost of Doing Business (CODB) calculator. I think I got it from Philip Bloom, but I may have sourced it somewhere else. I downloaded it a few years ago and have tweaked it to what I need... CODB Calculator Currently the spreadsheet is filled with random numbers. You plug in your costs and can see the daily rate at the bottom factoring in everything. In my personal version I add 150 days/year and 100/days a year.
What it factors in is what EVERYTHING costs. From internet to cameras to computers to stamps. Then you're able to estimate how many days you have shoots, edits, etc and see exactly what you need to make per shoot to pay your bills. If you charge less than that, you lose money and will close doors. If you charge that, you'll break even. If you add a percentage, you'll make a profit and be able to take a day off for a vacation, etc.
Once you have that base line, you can then apply it to all your estimates. As you grow, your costs grow, and thus your rate grows. If you start shooting everything 4k, your camera costs go up, thinking of adding a second person? Factor their salary/insurance/computer/etc in and you'll see where you need to be per month to afford them.
And almost as important as knowing your hourly rate... TRACK YOUR HOURS. I know, it sucks. But you need to be able to see if your estimates are accurate. If you say it will take 40 hrs, but it takes 80, you need to be able to adjust up next time. If you say 40 and it takes 20, you know you can say yes to that next project the client has when the deliverables are similar but the budget is less. If you're a professional, you need to know what to charge and you can't be making that number up out of the air.