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The Numbers Game

Today we were busy running numbers on some upcoming projects. Once again I was forced to see the absolute necessity of this process. It's not something that's intuitive for me...

When we first started designing projection (10 years ago now !) I'd listen to the producer or director explain what was desired. Then Colleen and I would try to grab a number out of space that seemed appropriate. We always tried to keep it really cheap (we thought this was critical to getting hired), and we'd try to think it through and wing an estimation. Yeah, let's see... We'll take some pictures, grab the DV and film that little thing... Hmmm, some time in compositing.... Then encoding. Being in the theatre of course.... Uh, how about, uh, $15k ? How ridiculous it is in retrospect.

We work in a BUSINESS. And if you think for a moment that any producer outside of the non-profit arena is doing it for love of his art, then you are charmingly naive ! Same for the vendors. I know plenty of people who occupy those positions who are passionate about this business, don't get me wrong, but ultimately it's business.

As designers, it's not always intuitive to apply good business practices. There is scant instructions on this aspect in most MFA programs. After all we are artists right ? The focus is on creativity.

It gradually dawned on Colleen and I that we were losing money on most gigs. The cost of equipment, of freelance help, of studio space rental, of business insurance, of health insurance, of travel, of attorneys, of accountants, of, of, of... it was eating up everything. The important word is accounting. We weren't accounting for our expenses against what we were charging. If you total up all those factors I mentioned (at least) for a monthly period, and then divided by 160 (the average hours in a work month), then you begin to see what your COB is... Cost of Business. This forms the basic level.

The next step for us was to try to develop a formalized budget process for gigs. Our process would be to sit down and fill in all the cells in a spreadsheet to total the cost of doing the work on a gig.

There are a variety of commercially available project tracking and budgeting spreadsheets. None of them is perfect for our business. Some of the one's that are close include MovieMagic's budgeting app, or even the classic film producer's budget, known as an "A to K".

But as I said, these weren't exactly right... they weren't ideal. SO we set out to build our own budgeting spreadsheet tool, which we dubbed the estimator.

The estimator, simply put, is an excel spreadsheet that we fill out on a per project basis. We break any project down into it's sub parts. For concerts or musicals, that often means musical numbers. For installation or architectural it might mean the different spaces involved. For each one of these columns we then go down through the rows. Will we buy some stock footage ? How much ? Estimated cost ? How many hours of editorial ? How many hours of compositing ? Animation ? These things all need to have an established rate for your estimation. Will you shoot elements ? For us, this opens a whole page within the spreadsheet. How much will the location cost ? Grip package ? Camera rental ? Makeup artist ? Director of Photography ? Generator ? Permit fee ? Transportation ? Catering or food ? Talent costs ? This just touches on it. Once this page is filled out, it yields a total number for the shoot for that particular part/scene/song. We repeat this process for all the various musical numbers or locations, or whatever the logical parts are. The total is our costs. Add a reasonable profit margin. Add a contingency (for the unknown things that are going to pop up). Often the contingency should be as much as 10% of the whole budget number. If you don't use it, you can make the producer happy later with a little reduction in budget as the process plays out. But if you DO need it, it's already there. You aren't going back, hat in hand, to explain how you didn't foresee something, and now you need more money. Boy that's ALWAYS fun, right?

This spreadsheet has taken us years to work out. We discover new things that cost money all the time ! But we also find what we call "Profit Pockets". For instance, it might be much less expensive to animate a partifular thing using 3D CG, rather than shoot practical objects, in terms of hard costs. You could probably charge the client much the same fee though, as the service is more valuable. But your cost is lower. This is a profit pocket. It allows us to think about shows, making sound economic decisions right alongside the aesthetic ones.

The first result when you adopt this process is a bit of shock. Man it can be expensive to do what we do. But the other end result is that after so much carfeul estimation and analysis you have a real road map to completing the gig, AND you have good solid information to share with the client that shows them exactly what they are getting for their money.

The secondary, and critical part of this spreadsheet is a twin space for what the numbers ACTUALLY turned out to be. This allows us to analyze a gig after it's done, and see where we were estimating wrong, so we know where to look in the future.

I know math isn't always fun. And spreadsheets can make you dizzy. But a one time investment in bringing in somebody who does know how to build one, and having them help you build your own estimator can make the difference between having to work non-stop just to maintain a hand to mouth existence, or doing your work and getting paid for what it is worth.

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