Defeating the budget monster
A couple weeks back I put together a rant and rave about digital production companies undercutting themselves (see: “We’ve created a monster – on a tight budget”). The gist of the story was that by outsourcing work to cheaper overseas markets we’re really only creating a false economy for ourselves, which will inevitably result in unrealistic prices that will fail to meet the bottom line.
Despite standing on my soap box saying “we’re not gonna take it,” I do realise holding tight on budgets is easier said than done.
But here are a few tips that can help.
1. Discounts. “Help me out this time and I’ve got another project coming down the pipeline.” We’ve all heard this and I bet 9 times out of 10 the second project never comes along, so you eat the discount. While this doesn’t seem that big of a deal as long as you’re breaking even, it tends to be a problem in the long run. If your margins are always at break-even, how are you going to retain talent or attract new talent? You can’t even afford to give people raises.
Don’t get me wrong: I fully believe in discounting. But get it in writing. “Sure, I’ll give you a 15% discount for this project and the next.” Have them draw up the paperwork and commit to the second or third project in writing. That way, you’re protected and helping both each other out. But make sure there’s a time limit. If you don’t put on a time limit (i.e. the second project has to start and finish within the next 12 months), you’re basically accepting the second project isn’t going to happen.
2. Hourly Rate. If the work’s going to take 200 hours, then charge the appropriate rate for those hours. Often times we get bullied into lowering to appease cost consultants, but shaving $10 an hour off a project that lasts four months is a massive discount.
Instead, buff out the hours. If they want a rate that’s 20% then add that into the hours. If 5+1 scares them but 2+2+2 is just their style, then, hell, play the numbers game.
Seems unbelievably obvious but it can easily slip through the cracks when you’ve got lawyers, producers and cost consultants pressuring you to get the contract signed because you’re already two weeks into production.
Do yourself a favour and have the numbers prepared by creating a little cheat card or even better set up an Excel sheet with the four rates you’re willing to accept and what affect that has on the same amount of hours.
3. Over Delivering. Now this is by far the hardest one for me. Last minute cuts and client changes often affect the integrity of the project, but you decide you want to work the extra hours anyways. After all, the quality of the work is your calling card. But to what extent?
The solution to this: descope, descope, descope and then when you’re done with that descope again. This is the best way to protect your work and your team. Sure, we’d love to make those last minute changes, but more work and less time never ends well. Not to mention the toll that it has on your team.
Working in digital we’ve all had those late months instead of nights, but it’s best to remind yourself what to descope in each project so you’re ready to negotiate as soon as the topic comes up.
4. Negotiation. Hire James Gandolfini: negotiation will become way easier. At least if your clients are scared shitless you’ll get what you want.
Obviously that’s not going to work; but save yourself a few headaches by having mock negotiations, then your company knows exactly what to do in different scenarios. This will allow you to stay calm, put forth the terms you can work with and leave the entire negotiation process stress free on both sides.
Okay, soap box put firmly away. Until next month, good luck with the contracts.