How to Create a Pricing Guide: Hourly, Percentage Based or Profit First?
Working as a freelance videographer is a delicate dance between artistry and business. For videographers, and other creative professionals, setting the right pricing is akin to composing a symphony; each note, each beat, and each pause must be in harmony to create a masterpiece.
So, how do you navigate the labyrinth of pricing strategies to find the approach that works best for your videography business?
In this article, we’ll explore three popular approaches — hourly rates, percentage-based pricing, and the profit first method — to help you create a comprehensive pricing guide that aligns with your business goals and professional aspirations.
Hourly Rates: The Traditional Approach
Many videographers on Funnel opt for the simplicity of hourly rates, especially when they’re just starting out. This approach involves charging clients based on the time spent shooting, editing, and other tasks related to the creation of video content.
While hourly rates provide a straightforward way to calculate earnings, they may not always reflect the true value of a freelance videographer’s expertise and creativity.
Pros:
Easy to calculate: Hourly rates are straightforward and easy to calculate, providing clarity for both the videographer and the client.
Flexible for short projects: Hourly rates are ideal for short-term or small-scale projects where the scope of work is well-defined.
Cons:
Limited earning potential: Hourly rates may limit a videographer’s earning potential, since there’s a cap on the number of billable hours in a day.
Doesn’t account for expertise: This method may undervalue a videographer’s skills and experience, potentially leading to lower overall income.
Percentage-Based Pricing: Reflecting Value and Expertise
For freelance videographers looking to align their pricing with the value they bring to the table for clients, percentage-based pricing is a compelling option. This approach involves charging clients a percentage of the overall project cost, considering factors like equipment, time, and expertise. Percentage-based pricing allows videographers to convey the value they offer while still maintaining some flexibility.
For example, consider a videographer working on a wedding project. With percentage-based pricing, the videographer would assess the overall project cost, considering aspects like pre-production planning, shooting, editing, and equipment usage. If the total project cost is $5,000 and the videographer decides on a 20% fee, then the client would be charged $1,000 on top of the project cost. This model allows the videographer to tailor the pricing to the specific demands of the wedding, accounting for the significance of the event, intricate editing requirements, and the unique expertise brought to capturing once-in-a-lifetime moments.
Pros:
Reflects value: Percentage-based pricing allows videographers to charge more for complex or high-profile projects.
Encourages efficiency: As the videographer’s efficiency improves, the overall project cost decreases, creating an incentive for productivity.
Cons:
Complexity: Determining the right percentage can be challenging, requiring a comprehensive understanding of project costs and market value.
Client perception: Some clients may be hesitant about percentage-based pricing, preferring a more transparent model that’s easier to understand.
Profit First: Prioritizing Financial Stability
The profit first pricing model was popularized by author Mike Michalowicz. This model focuses on prioritizing profits over expenses. In this approach, videographers allocate a predetermined percentage of each project’s revenue to profit, ensuring financial stability and sustainability.
A videographer who adopts the profit first approach would designate a fixed percentage — for example, 10% — as their profit margin. If a project brings in $2,000, for example, the videographer would then allocate $200 directly to their profit account before addressing any other business expenses. This intentional focus on profit ensures that videographers consistently build financial stability and secure a portion of their earnings for future investments or unexpected costs.
Pros:
Ensures profitability: By prioritizing profit, videographers guarantee a steady income and build a financial buffer against unexpected expenses.
Forces financial discipline: Encourages fiscal responsibility by emphasizing the importance of setting aside profit before covering expenses.
Cons:
May be challenging to implement: Shifting to a profit first mindset requires a change in perspective and financial habits, which can be challenging for those accustomed to different pricing models.
May not suit all projects: Profit first may not be suitable for short-term or low-budget projects, since it requires a minimum profit allocation.
Videography Pricing: Choosing the Right Approach
Selecting the best pricing model for your videography business depends on multiple factors, including your experience level, the complexity of projects, and your target market.
Consider the following steps to help you decide:
1. Know Your Costs: Understand your overhead costs, including equipment, software, insurance, and other business-related expenses. This information is crucial for setting a sustainable pricing structure.
2. Research Market Rates: Research market rates in your area and industry. Tools like Funnel can help with this. Knowing what competitors are charging can help you position your services competitively, while ensuring you’re not undervaluing your work.
3. Consider Project Scope: Tailor your pricing approach based on the scope of each project. Hourly rates may be suitable for straightforward assignments, while percentage-based or profit first pricing may be more appropriate for complex, high-value projects.
4. Factor in Your Expertise: Consider your level of expertise and experience when determining your pricing. If you bring unique skills or have an established reputation, a value-based approach may be a better way to go.
5. Client Relationship: Understand your target clients and their preferences. Some clients may appreciate the transparency of hourly rates, while others may value the perceived added value of percentage-based or profit first pricing.
Creating a pricing guide for your videography business involves a thoughtful analysis of your costs, market rates, and the value you bring to each project. While hourly rates offer simplicity, percentage-based pricing and the profit first model are oftentimes better for ensuring financial stability.
Ultimately, the key is to choose a pricing strategy that aligns with your business goals, suits your clientele, and allows you to thrive in the competitive world of videography. By carefully considering these factors, you can set prices that not only cover your costs but also reflect the true value of what you bring to the table.
To learn more about turning your videography hobby into a professional business, and start generating real revenue in the process, visit Funnel today.