Field Guides / Pricing
Owners who price with confidence know three numbers: the floor a day has to earn to cover their overheads, the margin on each job built from a real cost base (crew at day rates plus direct costs), and the margin per day each client leaves in the business. Revenue isn't profit, and every job has a cost base, so the invoice on its own tells you almost nothing. When you know your floor and your margin, you can explain the number when a client pushes on it instead of dropping it.
Pricing feels like a confidence problem because you're holding a number you can't check. In most cases the confidence problem is a numbers problem, and it goes away once the numbers are built.
I see the same split across the owners I coach. The ones who hold a price have sat with their real margin, their overheads and what the business has to pay them. They can hold the number because it's a fact. The ones who avoid the numbers price from hope, and drop the price as soon as a client pushes.
Two things have to land before any of this works, and most owners in their early years have never sat with either. One: revenue isn't profit. The invoice isn't the earning. What you keep is the invoice less what it cost to deliver the work, and that gap is usually far bigger than people expect. Two: every job has a cost base. Crew at real day rates, plus gear, travel and expendables, is the cost of supplying the work. Profit is what sits on top of that cost base, and it's the only part you take home.
Owners who skip this rank clients by revenue, call a busy month a good month, and quote the next job from the same guess as the last one. The arithmetic isn't hard. It has just never been done.
The three numbers are your floor per day, your margin on each job, and your margin per day by client. Each one answers a different question, and you need all three.
The second number is where most owners come unstuck, because they guess it. So that's where the method starts.
The method builds the margin up from what the job cost, so nothing is guessed. Six steps, done on every job once it's delivered, and quick once the crew rates are set.
Copy and paste: the per-job margin worksheet
Job: [job name] for [client]
Revenue (what the client paid, ex GST): $[A]
Crew at day rates ([role] [days] x $[rate], [role] [days] x $[rate]): $[B]
Direct costs (gear hire, travel, expendables, drives, outsourced edit): $[C]
Job cost (B plus C): $[D]
Margin (A less D): $[E]
Days the job tied up (for example prep, shoot, travel, edit, client time): [F]
Margin per day (E divided by F): $[G]
My floor per day: $[H]
Above or below the floor: [above / below]
An illustrative rate card, so you can see the shape: producer $500, PA $275, DP $800, sound $400, director $1,000, editor $400. Set your own from what you actually pay.
The Client Profitability Calculator does this arithmetic for a year of jobs and ranks the clients for you. Nothing leaves your browser.
The example below is the teaching case from the VBA 12 month audit, in round numbers, so the method reads at a glance. Three clients across a year.
| Client | Total spend | Jobs | Average spend |
|---|---|---|---|
| ABC | $25,000 | 2 | $12,500 |
| XYZ | $12,000 | 3 | $4,000 |
| KLM | $36,000 | 4 | $9,000 |
Rank by revenue and KLM wins, ABC is second, and XYZ is the one you'd think about dropping. Look at ABC on its own and the logic seems obvious: eight more clients like that would add $200,000. That's the trap.
Now bring in the two things revenue hides: the margin on the work, built from crew rates and direct costs, and the days it took.
| Client | Revenue | Margin | Days | Margin per day |
|---|---|---|---|---|
| ABC | $25,000 | $4,000 | 16 | $250 |
| XYZ | $12,000 | $3,000 | 9 | $333 |
| KLM | $36,000 | $8,000 | 12 | $667 |
The ranking inverts. KLM is still the best, fine. But ABC, the second biggest by revenue, is the worst by a wide margin, and XYZ, the client you were ready to drop, beats it.
The 50 day test. You don't have unlimited days. Say you have 50 days of production capacity to give. Same 50 days: ABC returns $12,500, XYZ returns $16,667, KLM returns $33,333. To earn from ABC what KLM earns in 50 days, you'd work 133 days.
The floor under it. Say your fixed costs, including gear replacement, come to $36,000 a year and you can bill 120 production days (round numbers again). Your floor is $300 a day. ABC at $250 sits below it, which means the other two are subsidising ABC. That's a reprice, a restructure of how the work is delivered, or a goodbye. It isn't a client to find eight more of.
Every VBA member commits to reviewing their financials every month, because the performance of the business depends on it. The review is the same short list every time, in a recurring calendar note, so it happens whether or not you feel like it.
Looking at the numbers every month is what turns them from something you avoid into something you know. The accounts side can come straight off your Profit and Loss (in Xero: Accounting, Reports, Profit and Loss, set the period, export). The one thing a P and L will never show you is what your owned gear costs to replace, so that goes in by hand.
Copy and paste: the monthly numbers review (paste into a recurring calendar note)
Monthly numbers review: [first Monday of the month, one hour]
1. Export last month's Profit and Loss from the accounts. Note revenue invoiced, cost of sales, operating expenses.
2. Run every job delivered last month through the per-job margin worksheet.
3. Write down what I kept: revenue invoiced less the cost base. Not the invoice total.
4. Rank last month's clients by margin per day. Mark each one above or below my floor.
5. For any client below the floor: reprice, restructure the delivery, or let go. Decide, and write the decision down.
6. Check the overheads: anything new, anything to cancel, gear replacement line still current.
7. Days billed last month against the days I said I could sell.
8. Did the business pay me a salary this month? If not, why not.
9. One number to move next month, and the one action that moves it.
The numbers go soft in five predictable ways, and every one of them makes a bad client look good.
Revenue isn't profit: build the margin on every job from a real cost base, rank your clients by margin per day, and check both against your floor every month. The benchmark is the floor itself: annual fixed costs, including gear replacement, divided by the production days you can bill. Any client under it is being subsidised by the ones above.
Which of these have you taken on or put in place recently?
What's the one thing you can commit to implementing this week? If you're not sure, start here.
Take your last three jobs and run each one through the per-job margin worksheet: crew at real day rates, direct costs, margin, days, margin per day. Put your floor under them. If you can't say which of the three was worth the time it took, that gap is exactly why quoting feels like a guess.
One thing executed every week creates 50 strategic moves a year.
Questions like these come up regularly on our weekly Elite Boardroom calls. If you'd like someone to hold you to account each week, and to learn from a group of peers who run video businesses too, the Boardroom is for you.
Related tools and guides. Client Profitability Calculator (enter a year of jobs and it ranks your clients by margin per day), How to price a video project (the day rate and the four-section quote), Pricing Calculator, Anatomy of a Profitable Quote, Charging for the invisible work, When one big client owns your video business.