Monday, May 17, 2010

Budgeting - Part 1

This is this first in series of posts on budgeting.

Budgeting is both simple and complex.  There are a lot moving parts, and a lot of things to cover but address everything individually and accurately and it becomes pretty easy.

Most of this applies to independent (unfinanced) productions as well as contract jobs.

We'll start with a few general procedural concepts. 

Most important: KNOW THE JOB'S PARAMETERS

How long is the piece?  What's the deadline?  What's the delivery format?  What elements will be provided?  Who is responsible for audio (music/voice)?  Casting and voice acting?

Second: before you even begin to budget dollars, time and talent need to be budgeted.  Even a simple schedule, lets say 8 weeks for a one minute of animation, will determine how to allot finances.

Here's a cover page to a budget.  The numbers are generic to demonstrate relative value and procedural starting points.


The cover page or "top sheet" is a synopsis of the line budget.

The top box lists logistical information: who/what is producing/being produced.  The bottom box should contain "comments" and disclaimers.  These include what is not covered in the budget and any other special considerations which need to be delineated.

Here's how the SUMMARY OF PRODUCTION COSTS works.

This budget is a variation on the AICP budget form.  That is designed for live action.  That budget form contains (literally) one line for "animation".  Each of the production categories are culled from there.

We figure there are 5 phases of production as far a budgeting is concerned.  Future posts will explain these in detail.

In general, it's best if "animation" covers about 30% of production costs.  When we get into categories, you'll see this means labor/production costs of animators, assistant animators, inbetweeners, etc.

In this model, lines A-E total $90k.  All of that should be detailed in the body of the budget.

Now for the next lines.

In work-for-hire, the producer isn't supposed to mark up director/creative fees.  When we get into line items, we'll describe what this does and doesn't include.   It's customary for a director to be budgeted somewhere around 10% of A-E.  This is listed as "Creative" under "Subtotal A-E".

"Production Fee" is "mark up".  This includes a lot of things.  One thing is profit.  Another is contingency.  Another is operating expenses (like tax preparation, water, and daily costs of running a company).  This is not entirely overhead, a lot of your overhead should be covered as line items.

In the good old days of advertising, it was common to mark a 28% production fee.  These days it seems like 15% is closer to the norm.  Some clients will insist on it being even lower.  In those cases -since the Production Fee represents many real costs -those numbers just get shifted to line items. 

Insurance is another figure which doesn't figure into the Production Fee.  This is figured at 1.5% of A-E.

4 comments:

Paul B said...

Hey, Thank you so much for this information! It really helps independent animation.i

Rob Kohr said...
This comment has been removed by the author.
Rob Kohr said...

Richard,

First off really great post, seems like a really promising series and something that is definitely needed on the internet.

What I found the most interesting was the transparency of the directing and creative costs. I typically work in web and gaming and usually these costs are baked into the total value of the project. I can see a benefit of addressing these on an inter-studio level but why is there a need to be transparent with the client?

roconnor said...

Rob, there are several reasons the director is kept separate.

This form comes from commercial production where the director is frequently a somewhat separate entity from the production company, even if s/he is a principal.

It also feeds into DGA concerns since the guild dictates minimums based on budget. Additionally, DGA members have 15.3% "fringe" cost (payroll, pension and welfare)
that has to be handled by a guild signatory.

Obviously some directors command more than 10% and there's a sad trend of hiring n00bs and paying them much less.

Regarding transparency -a budget must be transparent for it to be effective. Even when you're fudging/inflating numbers they have to be based in reality. A director is a person on the job, they get paid a real number so that number (or some semblance) should be outlined.

The most common fudging/inflating that happens is when running multiple jobs. A director might only get paid (for simple argument's sake) $1000/week. S/he might be directing 4 projects, each billing at $1000/week. The director only takes home one salary.

That sort of thing makes up for slow times inbetween jobs and development and other costs. It's also customary for a contract director to get bonuses for a heavier work load.