In our last article, we discussed building an in-house corporate studio. Assuming that you’ve got the approval to move forward, the next challenge is budgeting for the studio.
If you’re not familiar with how corporate budgeting works, it can be a real head-scratcher. This article will give you some ideas on how to move forward. Since many large companies employ different budgeting techniques, I’ll touch on how to make various budgets work for your new studio, as well as what you need to include in your budget.
TYPES OF BUDGETS
In my years of managing a corporate video facility, I experienced some different budget models for our facility. Those are:
- Incremental budgets
- Chargeback budgets
- Zero-based budgeting
There are other types of budget models; however I’ll cover these three just to give you an idea of what’s possible and what issues you may encounter.
Here’s how an incremental budget works:
With an incremental budget, you just look at the past year, and add a percentage to increase it for the coming years’ budget. For example, if your studio budget was $250,000 last year, you would add 10% to your new budget thus making it $275,000 for the coming year.
These were very common when I started my career, and it was used during some of my time managing an in-house facility. As you can imagine, this type of budget doesn’t take into account how the company is doing financially.
I found that since our budget kept going up incrementally, others in the company saw that as a red flag. I was called on to justify my position’s existence and the studio’s existence every year. That was not fun.
Chargeback budgets are also common. They can be used either as a full or partial chargeback system. During my time managing an in-house studio, we used a partial chargeback for many years.
Here’s how a partial chargeback budget works:
The video department is given an annual budget, and then whenever an internal client requests video services, only the out-of-pocket costs are charged to the client. For example, let’s say that the training department needs a high level training video. In order to get this video shot and edited, you need to bring in a camera operator, an audio tech, a grip, make-up artist and a production assistant. You also need to rent some furniture. All of this additional labor and equipment is then charged back to the client.
Here’s how a full chargeback budget works:
Under a full chargeback model, the video department charges internal departments for the full cost of running the department. So staff salaries, benefits, equipment purchases and maintenance as well as software are all figured into an hourly rate and clients must pay this rate. In essence the company as a whole supports the department.
This type of budgeting is a relatively new model, and I experienced this working as a permanent sub-contractor for an in-house studio.
Here’s how Zero-based budgeting works:
Under this model, a video department’s budget starts at zero each year, and the department must justify its expenses on an ongoing basis. The goal here is to avoid spending money needlessly, and at the same time determine how to run the studio more efficiently.
Which budget model is best?
This is not usually a question most in-house studio managers get to ponder. Usually the model you’ll be working with is handed down to you from above, and you’ll have to deal with what’s given to you.
If you do have some choice in the matter, you can find other models that may work for you, work with one of the above budget frameworks, or you can use a combination. For example, we worked within a Part Incremental/Part Chargeback/Part Profit model for a company studio that used fulltime contractors.
In this combined model, we had a rate sheet for all different services, and when a client came to us with a video project, we provided them with a quote. The quote included the rates for each service, including our contractor rates, sub-contractor fees, and any out of pocket costs. We charged less than it would cost if you outsourced video services, but we also added in some fees so the studio could afford equipment updates and maintenance.
Of all the models, I felt this combination worked best for us. We always had money in the budget, and we didn’t have to continually justify our existence anymore because the chargebacks justified us.
The downside was that we needed to monitor the budget on a weekly basis, and submit the chargebacks into accounting. As you can imagine, there was a lot of paper work.
THINGS TO INCLUDE IN A STUDIO BUDGET
Regardless of the budgeting system you end up with, you’ll always need to make sure you have money available for certain things. Among the major items to include when you’re projecting your financial needs are the following:
Depending on the number of employees in the video facility, salaries can be the biggest expense in a studio. If you haven’t decided on whether to hire a video production staff or to outsource, check out my article on that topic.
Contractor or Freelancer Fees
Depending on the size of the video department, there can be a need to bring in extra help. While working for a large corporation, there were about 3-4 times during the year that we needed to bring in extra crews and editors to meet the high demand of certain projects. For example, a typical global convention could involve producing 12-14 videos in a very short time frame, and some of these projects involved travel. We would usually bring in 2-3 additional editing systems and editors, along with freelance producers and crews, to get everything done.
New Equipment Purchases
This can include new cameras, lighting instruments, new computers and editing software, etc.
We would often rent a piece of equipment rather than purchase it, especially if it was something we used only 3-4 times a year. A good example of this is a camera dolly. For us it didn’t make financial sense to buy a dolly and tracks since it’s seldom used. We needed to take the rental fees into account.
Music Library and Effects Library
It’s a good idea to have multiple music libraries on hand so you always have fresh music for your videos. Also there are many effects libraries out there such as Sapphire or Digital Juice that have effects you can use in your videos to add polish to your corporate videos.
Stock Footage and Images
Joining a stock footage library and image library can also help you add more polish and excitement to your corporate videos. By purchasing credits ahead of time, you’ll be ready when these needs come up for a video project.
Studio equipment needs to be properly maintained on a regular basis. Just like an automobile, as equipment ages, or its use increases, maintenance costs go up. Painting falls into this category. If your studio has a green screen cyc, it needs to be painted on a regular basis, so it always looks great on camera.
This includes things such as batteries, light bulbs, labels, DVDs and CDs, make-up, office supplies, etc.
In the next article we’ll be talking about what types of equipment a corporate studio needs.
Greg Ball is the president of Ball Media Innovations, Inc., a full service video production and post-production company focusing on corporate video production, as well as film and video translation. The company headquarters is in the Miami – Fort Lauderdale area, with crews in South Florida and the Orlando area.