How to increase margin on quotes by 20-30% Instantly - EP #066

Howdy, guys. 25th of February, week nine of 2020, and it's time for this week's Shorty. So, as always, these, these shorties always come directly after I've done a coaching call with my video business accelerator clients. Today was an amazing call, actually. We'd covered a lot of ground including, you know, know, pricing, quoting and how to lay things out in a way that your clients understand, not just that works for you. And we had a broad range of discussions, including some great discussions around some great results one of my clients in Boston has been getting with pay per click ads. So we had a big discussion about that. But I don't want to dwell on that. I just wanted to share with you that an idea I had off the back of today's call was to share with you a free resource where we're continually looking at ways in which we can provide more value. And we've got some new products coming online soon to, you know, help people at various stages of their business journey. And I wanted to start today by sharing something we can give you for free. So this is a book that I wrote a couple of years ago that I, I still stand by as being a very, very powerful resource today. And it's called A Filmmaker's Guide to Budgets and Quotes that Increase Profit Margin on Productions by 20 to 30% instantly. And this, the reason I'm thinking about this today is that we were talking to one of my clients this morning about their pricing strategy, and they've got sort of fixed pricing for all the different areas of production. One of the easiest ways you can increase your profit is by adding things like production company fees and just adjusting, you know, different margin as you go. Wrote this book. It actually started life as an article in my paid monthly newsletter, and I expanded it. Now it's only 60 pages, so it's a quick read. But it's a book that I think will really, really help you. And I want to just caveat this by saying I want to give you this for free. There's like, there's no catch. If you go to denleny.com on the homepage or on this actual blog page where the podcast is, you'll see on the sidebar, you simply give us your email address and we send you the book. It's as simple as that. So I wanted to just talk you through this book and give you an idea as to why I think it's really valuable. So it's a short read and it's designed, it's only five chapters to take you through the most kind of important aspects of pricing and quoting based on my, you know, 23 or four years worth of being in this industry. So chapter one is all about presenting your price. So there are two ways that you can present your price and a lot of this done comes down to relationships. But you know, there's the all in figure which is just based on return on investment for the client. And the relationship is like the client says, hey, we've got a good relationship with you. How much do this? You go 15 grand. They're like, yes, sure, no problem. But that's increasingly more challenging to do and especially challenging if you're newer in the business or you don't have those relationships. So my preferred approach is the line itemized breakdown. And the reason that I prefer that is because I, you know, I think it's, it's, it creates a talking point for a prospect to have a discussion and a negotiation. So if you put in line items for everything, they can also see where the money's going and that can be much easier for them to understand. Because a lot of people, let's face it, don't recognize or even understand how much is involved in production. They just reckon you show up with a camera and somehow it magically kind of turns into a film.

So the line itemized breakdown in conjunction with your kind of pre production, pre even discussion about money conversations with a prospect can help them understand, you know, the breakdown of what the processes are. And I always liken filmmaking to a manufacturing process or building a house. You know, you've got to start with the land and then clear the land and create some designs and dig the foundations. There's lots of different trades and skills involved in that. So that's chapter one again. It's only four or five pages, but it's a really good read. I don't want to kind of say this is like a special report or some bollocks like that. It's, it's actually a physical book. You can actually buy it on Amazon. But chapter two is all about the importance of relationships and you know, being able to gauge where you're at with your relationship with the client. You know, I don't necessarily subscribe to the fact that you need to have some fancy proposal software every time you send out a quote. Now some people that works for, in my experience, I've often just sent a spreadsheet with numbers on it. But, but I can, I can certainly see a value in having a system, but I wanted to just kind of break down. There was A quote here we did for a big, big client. And it just shows the exact quote I sent on a spreadsheet. And it breaks everything down. But one of things that will really help is charging a production fee. And you know that that covers a lot of helpful, you know, things that you know are kind of, kind of included in your overall business but you don't really charge for. But sometimes you'll get objections and some people will be like, what's the production fee? So I just say, you know, the production company fee is an administration fee, covers many of the things that are not line itemized. Things like light and power, admin, staffing support, telephone, Internet, banking, credit card charges, banking costs. You know, when you pay someone invoicing, preparing carneys for overseas jobs and you know, equipment maintenance and depreciation for things that you just have as part of your offer. And I've actually got some breakdowns in this book of, you know, what the client's objection was and me sending them actually responses. So it's actually kind of almost transcribed. So you can kind of use this book and just, you know, just, just use it and like word for word. And the other thing that I add in chapter three is about contingency or production overages.

Depending on the size of the job. I'll sometimes put in a 10% contingency just to make sure the client kind of knows the worst case scenario. And this has often been for the bigger productions that we've done. But you know, I remember putting a contingency to this client and then the client was like, oh, what's the contingency for? And so I explained that it's about, you know, I guess, you know, preparing for the unexpected. We were shooting on location for this particular shoot and so we added 10% to budget. Now this does two things. One is.

Actually raises your overall budget by 10%. So when a client looks at contingency and production fee, they go, oh, it looks a bit expensive. What can we do? You can then say, well we can explain the production fee and that's usually a non negotiable or maybe we'll trim it slightly from maybe 15% to 12 and a half depending on the size of the project. And if you fattened the quote in other ways to kind of COVID those, any unexpected things that you can't control.

But the contingency often can boost the overall budget up quite a bit. So when you say to the client, well you can take the contingency off if you like, that's their decision. And then they'll sometimes say, well, I'll tell you what.

I'll cover the contingency if we need it. So then they actually feel like they're getting a 10% reduction on the overall quote straight away. So it's quite a useful sort of psychological process to help, you know, just really.

You know, manage that kind of psychological expectation on the overall budget. And I always itemize all the, all the roles within a quote and I always add a little bit extra on depending on the role. But this book is not all about bigger productions. In chapter four, we talk about what does a smaller production look like. And I still itemize things. I use zero. When I, when I was doing production, I'd use zero to pump out quotes because you can line itemize everything, have it in your cost centers. And it's very, very quick to put a quote together. So we talk about like an $8,000, just a kind of interview shoot. My glasses are not as good as they should be. So I've got the here, yeah, you know, camera package, video producer, director, editing, pre production. So it breaks down that and talks about how I lay that out. So, you know, it's always useful. I think it's always useful to kind of just see how other people do things. I'm not saying this is the only way to do it, but it certainly worked for me. And then chapter five, it's just what should you, what should you do now? Talk about some of the tips that we have. You know, things like, you know, creating a solid rate card if you like, for yourself so that everything's consistent when you're quoting. And zero is good for that. Deciding on how much margin you want to add on top of stuff, you know, setting up a formula for that. I love Xero Xero. It's really great. I know there's some other ones out there, but you can even just create a Google sheet and have a costing template.

And always consider production fee. It's a really good way to increase margin on your jobs almost straight away. And clients in the video business accelerator, the first thing we do is we get them to start putting production fees on. And like on a practical level, it just covers their cost of entry into the program almost immediately because they're just making more money for no extra work. And then I think contingency, depending on the type of job and depending on the environment you're working in, it might be a way, a good way to, you know, use that contingency as a kind of, you know, boost the overall cost by 10%. So they kind of go, oh God, that's a lot of money. And then you can start having a discussion. But what it does, it almost decoys away from your quote because they're just seeing the big extra money. And then, you know, I think, as I say in number seven here, I've got. My preferred way to quote is to break things down. I just think that the all in method leaves a lot of ambiguity. And you know, the fact is people, people are more cost conscious. They want to make sure they're getting good value for money. And so I think those kind of things can be really helpful. So guys, that that book is available, you can go by all means buy on Amazon. I mean, I make about 30 cents, but I wanted to give it to you. So if you go on to the website@denleny.com d e n l e n n I e.

Dash e n l e n n ie dot com on the homepage, you can, you can grab it there on the blog pages. It's there as well. And yeah, just like have a read and I'd love to hear what you think of it. So that's it for me, guys, this week. We've got some pretty cool stuff coming up for you on Thursday. I'm going to be sharing with you why I stopped drinking for six months and what happened as a result of that. And I think you'll find it quite interesting. So, guys, great to speak to you as always. Have an awesome day. You've been listening to the how to Scale a Video Business podcast with me, your host, Dan Lenny. If you're a video business owner who's hit a ceiling and we benefit from mentorship, support and coaching, then check out how you can work with me over@denlenny.com. don't forget to subscribe and rate the show over on itunes. And we'd really appreciate you taking a few minutes to leave a review. And don't forget to share. If you feel you've gotten value from this episode and you think it would be useful for other filmmakers you know, then please do me a massive favor and share it on social media and in groups that you might be in. We'll see you next week.