Outsource markup rate

[vee]

Hi,

We fairly recently broadened our marketing services to include photography and video - this has worked well for the punters who appreciate a one-stop-shop. However, what we are seeing is a fairly large amount of admin time for what is not a massive slice of the pie. Typically we make around 10% of a video contract and 15% of a photography shoot. We are making a few hundred out of this, not thousands per instance. So worthwhile but not not massive considering the admin we do.

Keeping in mind that all of the work comes via us and not wanting to be too greedy, do those rates look a bit low to you folks please? Both of the outsource guys are very good and the video guy in particular is working below market rates to build his portfolio. So we don't want to harm that.

Thoughts and advice appreciated please.

Thanks
Vee

[Tony]

All depends on 10% of what really and how much work is involved on your part.

Are you taking a cut of their (photog & Videogs) pie rather than adding on your work to the customers bill? If your taking a cut of the production cost to cover the marketing as well, then I think you're doing it wrong as that should be in addition to production. Marketing has a budget - marketing material (which is what these guys produce for you) is one part of that budget, the hard work of getting the content under the noses of your customers' potential customers is a different part of it.

Or am I off track?

[familychoice]

Funnily enough I had a meeting last week with a video company that want to join forces with mine so we can both offer more services.

I haven't worked out exactly what I'll charge but we'll probably work it two ways: I'll markup the original video costs by 25% when the video work is part of a larger project that also incorporates my own services. As this will leave us responsible for support and admin work there needs to be sufficient funds to cover this.

For jobs that are purely video work I was going to pass the work straight on but charge a 'finders fee' of probably 10%.

It's all hypothetical at the moment, and it also depends how they outsource work to my company, but this is roughly what we had in mind.

[suedenem]

I think you're right to be cautious of pricing here, but more for the long-term implications.  How will you justify the price rise to your customers when your video guy pads out his folio and ups his own price?  Or would you take time out of your business to find and build a relationship with another up-and-coming freelancer? 

OTOH, a 10% referral fee may be more worthwhile than it seems.  The admin may be a hassle, but:

• does it take longer than the equivalent £X00 worth of design work?
• is the augmented product offering helping you attract and keep customers?

FWIW... for small jobs we tend to simply recommend a handful of providers for work outside the scope of what we do (precisely because of the hassle), but for more lucrative corporate-level work we tend to work on a finders fee basis.  This way we don't have to act as middle-men and concentrate on the stuff we're good at.

Any other related co-ordination (project management, art direction, work review and so on) is charged at our consultancy rates.

Any work we outsource due to lack of capacity would be charged at our normal rates, and we'd take the hit on extra admin.  The customer wouldn't be aware that we'd outsourced the work in this situation.

[vee]

Hi Folks,

Thanks for the useful feedback. For sure, the "hidden" value that has been added to our business is that we now attract the guys who want a package of services and this has been quite significant. We also make more on the % cut than we would spend on the associated admin, so overall we are still in decent shape. However, the video guy is now getting a fair proportion of his work directly as a result of our presence and he's starting to do build quite quickly. The feeling at the moment is that we don't try to push the % too hard but maybe look for another 5% if work continues to come in.
I think we may also have gone in too low initially which always causes problems later! Another lesson learned.

Cheers
Vee