Payment plans for labwork

Brian Rose · March 26, 2011

This is kind of a generalized question about payment when it comes to the client lab relationship.

I find myself in a rather unique situation. I've been doing a lot of archival work lately, mostly transferring home videos to DVD and hard drives. But recently, I've landed a pretty big contract.

The client is a school with a sizeable archive of 16mm footage of past football games. At least 16,000 feet, and as much as 32,000 feet. They want it all digitized, and my bid won. I worked it out so I'll get it all transferred in HD in a proper setup with a lab (no crappy film chain transfers), and it'll be stored on hard drive, as well as put on blu-ray and DVD. It's gonna be excellent!

The thing is though, I've never done a project this large in terms of the money changing hands, and I'm a little unsure of how to best proceed.

You can imagine how much it will cost to transfer all the footage...it's more than I can pay out of my own pocket, even if I would be getting all that money back (plus my profit) from the client. It would still be a period between my paying the lab, and the client paying me where I wouldn't have any money in my account! Can't do it.

So do I ask for a deposit from the client, and if so, how much?

Or do I seek some kind of payment plan with the lab, like, "My client pays me, and I pay you" sort of thing. Do I offer some collateral, like they retain the film until the money changes hands as security, or do I offer a downpayment or deposit?

Or is the solution something in the middle...a downpayment from the client, and a payment plan/fee schedule with the lab doing the transfer?

Any advice would be most appreciated!

Best,

BR

Stephen Williams · March 26, 2011

Normally on a large job one would ask for stage payments. How long will this take from start to finish?

Stephen

Brian Rose · March 26, 2011

Normally on a large job one would ask for stage payments. How long will this take from start to finish?

Stephen

I don't expect the whole process to be terribly long. I've done quite a few video to DVD projects, with footage totaling 24 hours or more. So in terms of runtime, this project is medium sized for what I've done.

Of course the big unknown is that I've never dealt with a film to digital project of this size. It's going to be at least 15,000 feet, and as much as 30-35 thousand.

So I'd imagine all those reels would be too many to ship all at once. So probably at least three maybe four stages.

The goal is for everything to be done by summer for a big reunion planned for past football players, where the footage would presumably be screened and made available.

Stephen Williams · March 27, 2011

I don't expect the whole process to be terribly long. I've done quite a few video to DVD projects, with footage totaling 24 hours or more. So in terms of runtime, this project is medium sized for what I've done.

Of course the big unknown is that I've never dealt with a film to digital project of this size. It's going to be at least 15,000 feet, and as much as 30-35 thousand.

So I'd imagine all those reels would be too many to ship all at once. So probably at least three maybe four stages.

The goal is for everything to be done by summer for a big reunion planned for past football players, where the footage would presumably be screened and made available.

Ask for 50% up front, if that will cover your lab costs, if not try to invoice month by month with a smaller deposit.

Mark Dunn · March 27, 2011

Roger that. The deposit should at least cover your total outgoings and half is fair. But really, if you're in business you should be able to meet your own cost of sale without having to wait for the client to settle (or, at least, for the payment to clear). It should never be obvious to your client (or your suppliers) that it's hand-to-mouth. It may be so, but it shouldn't look that way. From the client's point of view the work should commence as soon as the ink is dry.

IMHO.

Simon Wyss · March 27, 2011

Ask the client for a third or half the calculated costs down. It is no shame to declare to not be a bank. Even those need credits here and there.

Edited March 27, 2011 by Simon Wyss

Brian Rose · March 27, 2011

Thanks for all the great suggestions!

A friend of mine suggested I simply direct the lab to send the bill directly to the client. What do you think about this idea? I mean, the client knows I'll be having a third party do the transfer, but it's not like I'm simply a middleman taking a cut, who can be cut out. Since I'm the one transcoding the files, designing and authoring the discs, and in general acting as a consultant on the project, I don't think I'd be showing my hand by doing it this way.

But are there problems with this?

BR

Mark Dunn · March 28, 2011

If you're not going to a deal like this very often, then that might work. But I'd prefer to keep my costs of sale to myself, rather than share them with clients.

They can see the difference between your fee and the lab bill and are free to draw the wrong conclusions.

If you handled it this way, you can bet that next time they'd go straight to the lab. So would any recommendations.

Pat Murray · March 30, 2011

As someone whose 9-5 is procuring goods and services, do not under any circumstances have your client bill the lab directly. They are your sub-contractors and only you should be dealing with the client. Their contract is with you and it's up to you to deliver. How you do it is up to you.

Knowledge is power and the above poster is correct, you don't want your client knowing your mark up even if you are more than just a middle man. Perception can cloud common sense. You don't want your clients to get the idea that they could just cut you out next time and the labs will do the work and they offer to do your work as well and at a lower price too!

Secondly, you don't even want the labs potentially asking what is the total amount of the contract. Trust me, it's not uncommon. They will be curious and may become an immediate pain in the butt if they think you're making too much money of the back of their work. My filing cabinets in the past have been locked up good and tight and it was with the sole purpose of keeping prying sub-contractor eyes out of them and finding out what their company is charging for their services. Some are even bold and will just walk up and ask to see the contract so that they can, you know, just check something. One colleague made the mistake of letting a contract get into the hands of a sub-contractor and the next day the contractor was calling and freaking out because now the guy was demanding a higher cut etc.

The suggestion of asking for a downpayment is not unreasonable. It is very common for most contractors to ask for this to get the job started. It is understandable that people don't keep a house full of supplies waiting for the next client to come along. I suggest something lower in the 10-20% range. 50% makes you look desperate and hand to mouth. That and I wouldn't pay that much up front anyway. Whether through work or for a personal project.

Stephen Williams · March 30, 2011

The suggestion of asking for a downpayment is not unreasonable. It is very common for most contractors to ask for this to get the job started. It is understandable that people don't keep a house full of supplies waiting for the next client to come along. I suggest something lower in the 10-20% range. 50% makes you look desperate and hand to mouth. That and I wouldn't pay that much up front anyway. Whether through work or for a personal project.

50% Upfront is fairly standard. If the client goes bust without paying, do you really want to cover the loss yourself? It happens quite often, personally I am bored with bank rolling people who are richer than I am. It's a business, making money is important, cash flow kills more business than anything else.

Pat Murray · March 30, 2011

50% Upfront is fairly standard. If the client goes bust without paying, do you really want to cover the loss yourself? It happens quite often, personally I am bored with bank rolling people who are richer than I am. It's a business, making money is important, cash flow kills more business than anything else.

If it's the norm in the industry, then by all means go for it. Just make sure it's in the contract if it hasn't been drawn up yet. He's probably ok with a University client not going under, although I understand your POV otherwise.

If his contract is worth $60K, at 20% that's 12K up front and should cover the initial lab fees, his own salary etc. until his billings start coming in and covering remaining expenses. If he can get half, that's even better and he doesn't have to worry about delivering on time to the client.