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Philosophical Question on Pricing Studio Time

Discussion in 'Studio Lounge' started by jshryock, Jan 27, 2004.

  1. jshryock

    jshryock Guest

    What determines the rate you should charge?

    Is it the amount of money that you *can* get? Or is it the amount of money that you *deserve* to get, based on industry standards and your equipment, experience, location, and skill?

    I know "deserve" isn't the best word to use, but I think you know what I'm getting at. There are guys in my area that charge only $10-15 more than me and they have more experience and better equipment.

    However, I'm a young musician and I have a lot of leads that they don't have. Some of the people I talk to have no idea about recording and what local options are available. I can seal the deal... but what do you think I should charge, given the questions I asked above?

    Thanks for advice!
  2. Thomas W. Bethel

    Thomas W. Bethel Well-Known Member

    Dec 12, 2001
    Oberlin, OH
    Home Page:
    Most people start off with a business plan.

    You can do one too,

    Take a sheet of paper and put in two columns,

    Label on column Income and the other Expense.

    On the expense side list all of your expenses. Things like expendable supplies and maintenance items plus leave a space for what you will add next which will be the figure from the next sheet you are working on. On separate sheet list all the equipment you have and the prices you paid for it when you get a total divide it by 5 (for 5 years of deprecation). When you total up the expense column you will know what it takes to run your studio for one year. On the income side put in that figure you arrived at in the expense side divided by 12. That is the amount of money you will need to generate each month in order to keep your studio going. That does not take into account any profit. Now figure, conservatively how many hours per month you think you will be busy. Divide the 1/12 total by the number of hours you think you will be busy and that will give you what you need to charge per hour to keep the lights and power on to your equipment.

    Now comes the fun part. You have to decide in your market how much to charge per hour. A good way to do this is to call other studios and ask for their hourly rate and their block booking rate. If they say it depends on the project have a project in mind that you have recently done. You will also want to ask them about their setup and what is special about their studio. When you have called 10 or more studios you will know, hopefully, the upper and lower limits of how much others are charging. You will also know based on your notes (you are keeping good notes?) why some studios maybe able to charge what the do. Now you can make an estimate of how much you can charge based on the equipment and the skills you have. Also note that most studios figure that they will replace about 20% of their equipment per year so take 20% of the total you got in the sheet listing all the equipment divide by 12 and the hours per month and add that into the hourly rate. When all of this is done you should have a pretty good idea of the hourly rate you need to charge.

    Remember that hourly rates and block booking rates (about 10% lower) are based on two things. How much people need your services and what experience you bring to the session. Most musicians today ASSUME that you have the right equipment to get the job done. What they are looking for is someone that is reasonably priced and knowledgably. There are GEAR HEADS that will call you and ask if you have the latest (insert name of current hot processing item) but if you can tell them no I don't but I know how to do what that equipment does then you will be on your way to winning their business.

    Fine tune your rates on a six month schedule and you will be on your way.

    Hope all this helps.

    Let us know how things are going.
  3. WDavidW

    WDavidW Guest

    You can get whatever the market will bare for the quality that you are delivering to your clients. For example, I've owned my own painting and contracting business for 10 years. When I first started out, no one knew who I was and I was still learning. In order to build a clientele and eventually generate more income, I needed to provide my customers with fantastic service at a pretty great price. People were willing to pay for my services and loved the quality and the price. After a while, I became so busy that I had to raise my prices to thin out the clientel some because I was unable to meet the high volume demand at the price I was giving. The quality of my work was still fantastic and even improved over the years and my reputation was excellent. Eventually I found myself among a different breed of painters and in some very nice working environments. Almost all my work now is high end and I don't do a job as cheap as some other guys just starting out. Some people will afford(be willing) to pay more for an awesome job and excellent service while others will not. Just look at the price of music gear for example. If SURE sells their SM57 for around a hundred bucks then you 'd be willing to by it but if they tried to sell it for $2500 you'd rather get a Neumman. It's the same principal with a studio. If you deliver a great product, then you can ask for a good price if people in the area are willing to pay for it. If it's not so professional, then you're going to have to charge less to keep people coming.
    BTW Thomas gave some excellent advice. Good luck with everything!
  4. What you "deserve" to get is subjective, and frankly, irrelevant. How busy to you want to be, and who do you want to record? How much you charge will determine what business you get.

    I'll give a "for instance". I am an attorney in private practice. I reject approximately 75% of the potential cases that come through my door. As such, I am not as busy as other attorneys, but after figuring in expenses, I come out at least even with them. I also have more time to do what I want (play music and have a life).

    For you, what do you want to do? The less you charge, the more people you will get - but the less likely you are to move up in the pyramid and get the better gigs. Do you want to price yourself out of the lower-paid stuff? May be boring, but if it pays...

    The markey will help set the price. Get all you can (as long as you are not intentionally ripping off innocent people) - if you charge too much, people will go elsewhere.
  5. jshryock

    jshryock Guest

    A lot of important points have been brought up here, I think.

    One thing I like to think about is how a lot of people aren't paying for the equipment or gear, but they want YOU and what YOU can bring to their music.

    Thomas - that is a really sweet little way of going about getting a budget. I don't know if that took you long to come up with, or you just cut and pasted it, but either way - thank you for sharing that, I appreciate it. Thanks for giving me some of your time. I want to make sure that I don't get swamped by debt a close friend of mine did. He bought a TON of gear, expecting the return on the investment to come sooner than it actually did. So, putting things in that concrete way really helps.

    This is taken from my web site:

    I am pretty pleased with those. I know they are pretty low. People are telling me, "Charge more, charge more!" And I say, "No, I don't have the experience and equipment that I think I SHOULD have to charge those rates."

    They range from 16-25 an hour, based on the amount of time I'm guaranteed. I want the most hours I can get, because I can build the best relationship and do the best job (and of course get more money).

    Another close friend of mine is warning me not to put my rates online. I see a lot of rates on studio web sites. He says that I will have a LOT of trouble increasing rates later, but I don't agree with him. I already doubled my base rate recently. I was running a tascam us-428 USB interface and Cubase VST Score 5.1. I charged $12/hr.

    Just a quick disclaimer about something that may come up - don't rant at me about how I am part of the small studio boom that is destroying commercial studios by underquoting "real" studios and giving a better product. I am not stealing your customers. So far, I have only been paid by high school students who cannot afford anything more than what I'm charging.

    WDavidW - That's a great, proven method, and you put it pretty well. I am totally going to try and follow that. What you said about charging less to keep people coming, I think that's kind of where I'm at now. I want to keep my rates online, because that, and my personality and musical ideas, is a LARGE selling point for me. I feel good about hooking people up and not seeing them get taken advantage of by some studios in the area. Good advice.

    buldog5151bass - what you say about price determining the clients you get makes a big difference. i know that there are some legal billing issues like, do you take the money up front or later? do you put it in escrow and wait for full payment before even touching the case? or do you just hope for the best and bill later, and start work right away?

    i'm trying to bring those concepts, as well as all the other ones, into my studio.

    sooo... thanks for the comments and advice!
  6. Thomas W. Bethel

    Thomas W. Bethel Well-Known Member

    Dec 12, 2001
    Oberlin, OH
    Home Page:
    One thing that a lot of people starting their own studios overlook is that just having a lot of equipment sitting around is not going to guarantee you business. It is knowing how to use the equipment you have and giving client what they need when they need it. It is also showing your clients everytime they do something with you that you are trying to do the best for them and that the prices you are charging are reasonable for the services offered.

    There have been many budget studios that got into trouble when the owner decided to go into the recording business full time. They were charging very low rates and had lots of business when they were still part time and the owner was supplementing the studio with cash from his or her full time job. When he or she quit their full time job and started trying to make a living off the studio alone they ran into problems. First they realized that they could not continue to charge the rates they were charging and stay in business so they raised rates. Their clients, who were happy with the old rates, stopped doing additional work because they did not want to pay the additional money. The owner sensing that he or she was in financial trouble again raised rates to pay for the business and more clients dropped by the wayside. This is a vicious cycle to be in.

    What these studio owners failed to realize is that if you are going to raise your rates you need to offer the client something to justify the additional money. This does not mean that you go out and buy a whole rack of Manely processors or you have a free deli counter set up in the studio but it does mean that you have to show the client that you are now able to offer some service that they have been wanting and asking for (maybe CD duplication) and that by helping them do things easier and with less running around you can actually SAVE them money in the long run. (it is called VALUE ADDED and is what keeps people coming back for more)

    There have been a number of studios in this area that have come and gone very quickly. They were offering recording at rates as low as $10.00 per hour and had people standing in line for their services until the clients realized that just having some equipment and a room did not mean that they had the experience or the knowledge to do what the client wanted. There have also been a couple of studios that started off a $20.00 per hour and have since raised their rates to $45.00 per hour because they could not "make it" on the rates they were charging when they went full time. Some of them have made the transition to the higher rates by adhering to the value added route some of them have fallen by the wayside since their clients found someone else who could do what they wanted for less money. (There are always people who will do things cheaper.) The trick is to provide the service, the knowledge and the value added services that will keep your client with you even if you do have to raise you rates. You want to provide a service at a reasonable price to clients and you want your clients to understand that you have to charge what you are charging in order to stay in business and continue to provide those services for them. Everyone is looking for a bargain and are always shopping around for the best price. what you have to convince them of is that you can provide the service they need at a reasonable rate and continue to offer them value added services.

    The person I consider to be my mentor started his recording business when he was laid off from a radio station a number of years ago. He had no money and no equipment. He mortgaged his house and rented space in the basement of an office building and bought some used equipment. He was told he was going to be out of business within the year. He gave people the services that they wanted at a reasonable price and his business flourished. Most of his work is done in advertising and he was located in the heart of the city. He made a decision to move out of town to a more suburban location and all the people told him that he was crazy and would be out of business in a year. He continued to give people what they needed, added services and was still charging reasonable rates. When digital came in he decided to make the plunge and purchased a very expensive workstation. People told him he was crazy and he would be out of work in a year. He continued to give people what they needed and wanted, added some new services and he still charged reasonable rates for his services. Today he has 11 people working for him and a facility valued at well over 1 million dollars. He has diversified into areas such as video editing and computer programs for controlling remote CODECS and he now has 8 studios that go full time plus. He drives a very expensive automobile and takes month long vacations. He has done all of this because he listens to his clients, gives them services that they need and want at reasonable prices and is always looking our for ways to give his clients more bang for the buck. He also keeps upgrading his facility so that he can offer additional services to his clients as they need them and he seems to be able to spot trends so that he offer services BEFORE his clients even know they need them.

    Best of luck in your studio

    [ January 31, 2004, 04:32 PM: Message edited by: Thomas W. Bethel ]
  7. gumCore

    gumCore Guest

    Thomas, I want to thank you for the time you spent giving us so interesting advice. I'm an 28 year old belgian sound engineer, and still at the beginning of the road. Now I'm willing to evolve better than before, and really do appreciate your comments!
  8. gumCore

    gumCore Guest

    Errr.. Well thanx to other posters as well, not Thomas only! ;-)

    This was very philosophical. :p
  9. moles

    moles Active Member

    Jan 5, 2004
    Winnipeg, MB
    Thank you from me also. It's kinda nice to hear some positive, constructive advice to those of us starting out - especially since you probably spent years finding out the hard way.

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