People (especially people in marketing teams looking to create more video content internally) tend to think video budgeting is black art. But it can be as simple as bringing a shopping list to the supermarket and buying things accordingly. Simply put, video budgeting means you plan ahead what you need to get done and how much it's going to cost you.
Proper budgeting is especially important because it keeps everyone involved in a project happy.
So in this blog post, I'll guide you step by step on how to budget your video projects, so that you don't under or overestimate the expenses. But there are a few things you need to know before getting started.
4 things you should know first about video budgeting
1. Video budgeting is, in fact, not about the number
Video budgeting, from my experience working as Marketing Director for several start-ups, is a skill rather than just an absolute number and some formulas. Most of the time you can't develop a budget for this month’s project and then use the same figures for the rest of the year. Rather, budgets vary due to a number of factors, such as the nature of the videos, your preferences, your marketing channels, etc., which we will discuss later on.
So you should focus more on understanding the theory and philosophy behind budgeting and not so much the numbers. Once you've got a full grasp of those, you are going to get the right numbers.
2. You need to know your organisation inside and out
Think about it. If you are 3 weeks into the job, chances are that you still don't have enough insights of the company you're working for. Hence, you won't know your company's capabilities and resources, whether you can do produce the videos in-house or hire a freelancer/independent contractor, which makes it harder to give accurate time estimates.
So, if you're a newbie and one of your first tasks is to budget a video production project, be a sponge! Talk with someone who's been with the company for a good period of time and try to absorb everything that they tell you about the organisation.
3. Be prepared to defend, explain and modify your budget
Your budget isn't necessarily correct right from the beginning. Always be ready for the fact that when you present your budget to your team or your clients, you will need to take their inputs into account and make some amendments accordingly.
Also, the template coming along with this post is generic. Therefore, please ensure that you do not limit yourself to the information given in this post, do some research yourself to localize the numbers for your geographic area, your organisation and your project.
4. Synchronise your rates with your area's labour cost
If you're a creative professional, what's really important in budgeting is that you keep a close eye on the local rates and similar projects' budgets, then modify your figures to match the needs.
Having a template is great, yet you need to do some homework with the localisation. Because if the numbers aren't in sync with your labour cost, well, it sure won't work out well.
Alright, with these four things in mind, let's take a look at the steps of developing the budget.
Step 1: Identify your capabilities
The very first thing you need to figure out before rolling up the sleeves and budget are your capabilities, in other words, the products and services that your company can offer. It's very important that you think through this thoroughly.
If you're working in an organisation:
Sometimes you're using the internal resources, such as your existing marketing employees, the camera gear you own or the built-in studio in your office. You'll need to list out all these things that you can handle internally so that you don't double-count them when budgeting.
But there are times you're hiring other vendors to do part of the work for you. If, for example, you're working with them on a fixed-price budget, it's crucial that you determine the rates upfront and go to an agreement to avoid being overcharged.
Pro tips: Doing most of the things in-house can keep the budget down, minimize risk and increase profitability. However, when the scope of work exceeds what your company can do, hiring out is a better choice. For short-order-type turnaround, it's more effective to choose a local vendor highly recommended by your local industry peers. But hiring an national and international freelancer works well for tasks such as script writing and transcription.
If you're a creative freelancer:
It's essential that you have a ready catalog of what you can do on your own and what you want to subcontract. This can free you up to focus more on the creativity side of the work instead of stressing out to meet the deadline with an overwhelming to-do list.
Step 2: Determine the rates for your products or services
For folks in content marketing teams:
Setting rates may sound intimidating, but there are only three major 'categories' you have to think through, including the talents who work for you, the gear that you use and the facility where the shooting occurs.
Remember, that 40-60% of your working hours are not billable. There'll be times when you travel for the shooting, do research on the vendors and their rates, or set up and put back the studio after shooting. There are extra overhead costs to consider, such as electricity and Internet bills, rent, phone line, even lunch and dinners for your team.
For freelancers and creative professionals:
There's a variety of assumptions that you should bill your clients to make a living. First up, the creativity design, in other words, the kick off meetings and time to generate innovative concepts. Then there's the shipping fees and sometimes the charge for rush items. But more importantly, get your client's approval upfront and in writing (if possible) to avoid any misunderstanding in the future. After all, you decide how you run your service, but I suggest you not forget these assumptions to keep yourself and your subcontractors happy.
Pro tips: When budgeting based on the scope of work, keep in mind that as the project goes on, you need to always compare the progress with set targets. Clients always demand good, cheap and fast projects. But in reality, just pick two (i.e. good and fast or cheap and fast) and balance them out in the rates, then deliver a quality product to keep a happy client.
Step 3: Now, create a budget :-D
What does it look like?
Well, if you've now downloaded the budgeting template, you'll probably notice that it breaks down into three elements, namely pre-production, production and post production. Pre-production includes all that's done early in the process, such as creative design, script writing or location scouting expenses. Production is the field or studio portion, containing rates for director, audio engineering, makeup artist, lighting packages, or catering.
Estimate the time
If your company keep a history of the time logs of similar past projects, then I recommend you refer to these information and develop an estimated time based on that. But if you don't have accurate information, you can turn to the formula used by the federal government.
(1 optimistic + 4 times most likely + 1 pessimistic) / 6 = the estimated time
Here's an example. I ask my Marketing Manager how long she thinks it takes to accomplish the commercial video, and she says 20 hours, then it's an optimistic number. It's because people often tend to underestimate their time due to great pride in their abilities. Then I ask her how long she thinks other managers can get it done. If she comes back with 30 hours, I take that as a most likely figure. Now, I ask her what if she hits a dry spell. Her answer of 40 hours will be a pessimistic number. Sum those up, we have: 20 + 4 x 30 + 40 = 180 hours. Divide that by six, we have: 30 hours as the estimated time.
Of course, this might not be the purely absolute number, so make sure you do some research and survey to increase the accuracy.
Break down the project into smaller tasks
This is actually one of the keys to accurate budgeting, besides assigning the tasks with reasonable time values and rates. Now, if you're creating an animated video for your own company, it can be broken down into smaller segments, like Video Assets (i.e. color correction, audio, encoding), Manufacturing (i.e. illustrations, motion graphic, assembly) and Project Management (i.e. asset acquisition, communication, quality control). The sub tasks can be broken down to smaller items for more accurate budgeting, too.
Pro tip: You can use SmartArt in Microsoft Word to develop a breakdown like the sample below. In MS Word, choose Insert > SmartArt > Hierarchy > Organization Chart. Then customize the text according to your needs.
Step 4: Get your budget review
Human have blind spots, things that we tend to miss. While budgeting, you might miss out a task, use inaccurate rates, or assign underestimated time values to some items. Therefore, every budget, before being finalised, has to be reviewed by at least two other team members or external experts.
Step 5: Store your time logs and rates
Remember when I said you can give an estimated time value based on similar project in the past? Yes, that's why you need to keep track of those sound-not-so-important details and ensure accuracy for future projects.