A Question about Markup Prices -- what is reasonable?

[TheLoneReader]

I've been self-employed for over a decade now and a lot of my work involves contracting with different businesses for work. I work in the video production world and mainly work on the post-production end of the pipeline. Basically, I get hired by companies to edit and put together what they have filmed, whether it's a corporate video, a commercial or similar type of content.

I've had a good working relationship with a colleague for the better part of the decade (even sharing an office space at one point) and through our collaboration we have received some awards and accolades along the way. He trusts me to handle direct contact with clients and has often commented on my reliability and work quality.

A month ago he asked me to bid on a project and told me the probable range that this client could afford. This project was basically a tweak of an old video that we had done years ago for the client. There would be no filming or anything else involved.

I bid a price that he was good with and also that the client was happy to agree to. Long story short, I get the revamped project done on time and the client is ecstatic but now two weeks later needs the video compressed for their website. My colleague asks if I can make the tweak (no problem) and forwards me the email request from the client.

In the email that was sent, I see the initial discussion between my colleague and the client on the total price for the project. I see that my colleague has put a 50 percent markup on top of my price, which seems steep to me.

So my question is, does this seem exorbitant to you?

The reason I ask, is because honestly it bothers me. There's been a pattern from my colleague for a while now of asking me to come down with rates, saying clients probably won't go for "X" amount or whatever. I'm fine with markups, but I'd always figured it was around 10-15 percent amount, not 50 percent. This has left me with a lot of doubt about my business dealings with this colleague.

He recently bought a high-end car, traveled to Asia and Europe, etc. I've been getting a lot of pushback regarding my rates and have been struggling a bit more financially as a result. I'd be curious what other seasoned businessmen around here think. Am I overthinking the markup too much? Am I right to be frustrated to begin with?

 

[FrancisK]

So what you're saying is that he is acting as the middle man, taking your quotes and marking them up to the client? Does he have any role or offer anything other than being the salesman?

 

[TheLoneReader]

So what you're saying is that he is acting as the middle man, taking your quotes and marking them up to the client? Does he have any role or offer anything other than being the salesman?

He's not a salesman, he is essentially the production company and I am contracted to edit material. In this case, the project was finished years ago but the client asked to retool it. He put me in touch with the client and I made the updates from there after dealing with the client. He maybe had an email/text exchange and that was the extent.

 

[Sandalwood Peak]

The question has nothing to do with the markup but your relationship. 50 percent is “normal” in the modern world.

Your buddy is making money at your expense. You’re actually going in reverse where you’re charging less the more experience you get.

It happens, no one is going to disrespect you more than “friends”.

Just diversify your business relationships. You might find a different production company who are eager to work with you and you can have a nice joyful honeymoon period again until that relationship too sours.

This relationship is already dead. Once you start pushing back on anything you will find out how he truly feels.

 

[Thomas More]

It all comes down to the question of who brings what to the table. If he owns a production company with customers and a complete production capability, and you have video editing skills, then he can probably replace you more easily than you can replace him. Therefore, he can charge a marked up rate that includes money for overhead and profit for his operation, while paying you a wage. In this case, he is bringing a great deal of value to the table, because he is able to create work for you that you couldn't arrange on your own, and your work is combined as part of a larger set of company capabilities.

On the other hand, perhaps your skills really are the essence of the product, and you are in a position to get the same work direct from the customer. In that case, he is bringing very little value to the table, and at most he could expect a small markup.

This customer has been purchasing video productions services from this production company. Perhaps the customer is not interested or able to delve into the minutia of video production, to try to hire video editors themselves. It may be obvious to you from within the industry that a simple video edit is all they need, but they may not want to try to get into that side of things. They just want to tell the video production company what they need, and the video production company handles the rest of the details. In a case like this, a 50% markup is completely reasonable.

On the other hand, maybe you have gained enough skills and experience that it is time you you to go out on your own as a video editing contractor. It's a natural pattern that people start out in an industry, gains skills, and become able at some point to start their own business. Note that if you do this, you will be the one hiring people and marking up their work by 50% or more. You'll find you need to do this to make the numbers work for your business.

 

[magoo]

I've been self-employed for over a decade now and a lot of my work involves contracting with different businesses for work. I work in the video production world and mainly work on the post-production end of the pipeline. Basically, I get hired by companies to edit and put together what they have filmed, whether it's a corporate video, a commercial or similar type of content.

I've had a good working relationship with a colleague for the better part of the decade (even sharing an office space at one point) and through our collaboration we have received some awards and accolades along the way. He trusts me to handle direct contact with clients and has often commented on my reliability and work quality.

A month ago he asked me to bid on a project and told me the probable range that this client could afford. This project was basically a tweak of an old video that we had done years ago for the client. There would be no filming or anything else involved.

I bid a price that he was good with and also that the client was happy to agree to. Long story short, I get the revamped project done on time and the client is ecstatic but now two weeks later needs the video compressed for their website. My colleague asks if I can make the tweak (no problem) and forwards me the email request from the client.

In the email that was sent, I see the initial discussion between my colleague and the client on the total price for the project. I see that my colleague has put a 50 percent markup on top of my price, which seems steep to me.

So my question is, does this seem exorbitant to you?

The reason I ask, is because honestly it bothers me. There's been a pattern from my colleague for a while now of asking me to come down with rates, saying clients probably won't go for "X" amount or whatever. I'm fine with markups, but I'd always figured it was around 10-15 percent amount, not 50 percent. This has left me with a lot of doubt about my business dealings with this colleague.

He recently bought a high-end car, traveled to Asia and Europe, etc. I've been getting a lot of pushback regarding my rates and have been struggling a bit more financially as a result. I'd be curious what other seasoned businessmen around here think. Am I overthinking the markup too much? Am I right to be frustrated to begin with?

What he charges is irrelevant to you. As long as you are receiving the price you consider fair for your work. As long as he is the one giving his company name. If you are giving your name than it´s different. Because you might lose other clients for such a high price. And it´s your responsibility also.

You are a subcontractor right? If he assumes all responsibility and the client doesn´t even know you exist than it´s none of your business. At best you should charge more.

You don´t know if he has to spend money to acquire a client. If he paid dinners, travels or other stuff. If he travels to Europe or have an high end car it doesn´t mean it has anyting to do with you. Unless he works exclusively with you. This is unprofessional from you. When I hire someone I can immediately tell if it´s professional people or not. By the questions they make. Personal questions are a no go.

If you want to charge more you should aim to acquire clients.
It´s a difference if he receives a comission or he is the final face before the client and all burden lies with him.

This is boss level markup:

https://www.wsj.com/business/retail...have-a-hidden-cost-reputational-risk-8175c9c9

"Christian Dior struck gold when it found a supplier willing to assemble a €2,600 handbag, equivalent to around $2,816, for just €53 a piece—or did it? Cleaning up the reputational damage may not come cheap."

 

[SkiPro]

I've been thinking on this topic for a while and it's to do with mindset.

You charge what the market will support and there is a perception to what your product is worth, which has to be congruent with all your other marketing.

Be aware that your own ideas about what is a fair price is not necessarily the same as your clients. If you grew up, 30 years ago, your ideas on what something is worth or what a fair price is, bears no relation to anything, especially in light of current inflation.

I've put up our prices a lot in recent years and we are busier. Mainly due to the clients perception that price = quality.

I think your problem OP is that your mate is your only client for that piece of work, so you charge what you think is fair, he charges what the market supports.

With regards to fairness, I'll charge what I can get away with, it puts food on the table for my family.

I'm a bit stuck at the moment with my pricing because they sit at nice, round, charm pricing numbers, 199, 299, 349, 499 etc. To push them further lowers their attractiveness somewhat.

 

[Sandalwood Peak]

If he travels to Europe or have an high end car it doesn´t mean it has anyting to do with you. Unless he works exclusively with you. This is unprofessional from you.

I've been self-employed for over a decade now and a lot of my work involves contracting with different businesses for work.

I've had a good working relationship with a colleague for the better part of the decade (even sharing an office space at one point) and through our collaboration we have received some awards and accolades along the way. He trusts me to handle direct contact with clients and has often commented on my reliability and work quality.

A month ago he asked me to bid on a project and told me the probable range that this client could afford. This project was basically a tweak of an old video that we had done years ago for the client. There would be no filming or anything else involved.

I bid a price that he was good with and also that the client was happy to agree to. Long story short, I get the revamped project done on time and the client is ecstatic but now two weeks later needs the video compressed for their website. My colleague asks if I can make the tweak (no problem) and forwards me the email request from the client.

In the email that was sent, I see the initial discussion between my colleague and the client on the total price for the project. I see that my colleague has put a 50 percent markup on top of my price, which seems steep to me.

The reason I ask, is because honestly it bothers me. There's been a pattern from my colleague for a while now of asking me to come down with rates, saying clients probably won't go for "X" amount or whatever.

Does that sound normal to you?

Doesn’t sound normal to me.

Sounds like the guy acts like a middle man for the money on collaborative projects with a duplicitous purpose when they both have a reputation in the industry.

The only unprofessional thing here is OP is super naive to let someone handle invoicing and collections on his behalf without even knowing how much they get.

He’s lucky he has a skill that is not easily replaceable, people get burned everyday doing stupid stuff like this.

 

[magoo]

Does that sound normal to you?

Doesn’t sound normal to me.

Sounds like the guy acts like a middle man for the money on collaborative projects with a duplicitous purpose when they both have a reputation in the industry.

The only unprofessional thing here is OP is super naive to let someone handle invoicing and collections on his behalf without even knowing how much they get.

He’s lucky he has a skill that is not easily replaceable, people get burned everyday doing stupid stuff like this.

Yes. But OP works under the other guy umbrella. The fact he is contacting directly clients. Doesn´t mean he is using his company name. The other guy trusts him enough or thinks he is too dumb to steal the client. And cut him from the deal. OP works as a subcontractor. And he is very valuable. Having someone who won´t steal clients is a feature few people have.

Also OP knows the other guy is charging 50%. But he doesn´t know if the money goes all to his friend. Or if his friend has more mouths to feed with comissions. What if the other guy had to pay other people to get the client? If there´s more middleman involved.

I remember once a colleague refused a client because with taxes and the comission it was not worth it.

There was this rule in business the more people there are in a room. The more comissions are being paid.

What OP needs to do is develop commercial skills. Or hire someone who does. And fast. Instead of commenting if the other guy has good cars or whatever. That´s weak. And it´s an employee mentality.

There was a book from getty I think. How to be rich. He has a paragraph about the types of people. Some people like to be under an umbrella.

Investment funds work like this also. If you want to create a fund. You need to be under an umbrella of an investment fund management company. They don´t do anything. And collect fees. But creating an investment fund management company is equal to creating a bank. A fund is easy. But not the management company.

But OP. He only needs to hire commercials. Or read books on sales. How hard can it be?

But to answer OP question. There´s no limit to a markup. The limit is what you are willing to accept. What matters is if you assume risk. Because little mouses pressing buttons are a dozen. Risk taking is a different ball game. Are you willing to take the risk?

 

[SkiPro]

Yes. But OP works under the other guy umbrella. The fact he is contacting directly clients. Doesn´t mean he is using his company name. The other guy trusts him enough or thinks he is too dumb to steal the client. And cut him from the deal. OP works as a subcontractor. And he is very valuable. Having someone who won´t steal clients is a feature few people have.

Also OP knows the other guy is charging 50%. But he doesn´t know if the money goes all to his friend. Or if his friend has more mouths to feed with comissions. What if the other guy had to pay other people to get the client? If there´s more middleman involved.

I remember once a colleague refused a client because with taxes and the comission it was not worth it.

There was this rule in business the more people there are in a room. The more comissions are being paid.

What OP needs to do is develop commercial skills. Or hire someone who does. And fast. Instead of commenting if the other guy has good cars or whatever. That´s weak. And it´s an employee mentality.

There was a book from getty I think. How to be rich. He has a paragraph about the types of people. Some people like to be under an umbrella.

Investment funds work like this also. If you want to create a fund. You need to be under an umbrella of an investment fund management company. They don´t do anything. And collect fees. But creating an investment fund management company is equal to creating a bank. A fund is easy. But not the management company.

But OP. He only needs to hire commercials. Or read books on sales. How hard can it be?

But to answer OP question. There´s no limit to a markup. The limit is what you are willing to accept. What matters is if you assume risk. Because little mouses pressing buttons are a dozen. Risk taking is a different ball game. Are you willing to take the risk?

Very few people have the ability to market and sell. That's why 95% of people are employees.

 

[TheLoneReader]

I appreciate the many comments here, it's great feedback and I'm open to all of the viewpoints. Like I said, I am fine with markup and the industry standard in my region has been around 15 percent. I had even asked around to other industry workers about what their standard was in our region and the reply was 15 percent, otherwise any more was pushing it (this is due to the economic reality of our region). The reason I posted here is because I was curious what the insight would be from fellow CIK members and I knew that the replies here would help me have some checks and balances in my own thinking, I value the community here and so I do appreciate the responses.

My colleague has always expressed that he does a 15 percent markup which I was completely fine with and considered when doing my own pricing with him. However, what bothered me was the 50 percent markup after asking me to come down on my end. This has been a consistent request from him for a while now and it is always put in the context of what clients are willing to pay. I've always enjoyed working with this colleague and have put him as priority when it comes to work opportunities. Something in my gut felt off about this after seeing the email, and I think it boils down to what seems like dishonesty on his end.

I do have other colleagues that I work with and I think shifting away from this one in particular for a while may help (I am also considering a new line of work). He depends on me for a lot of work and also for acquiring new clients (we recently landed a gig with a large client due to my past experience in that particular industry and showcasing work I had done). But again, even landing the large client has left me in doubt, because he expressed that they can't pay as much as he had hoped and for this one in particular, there was a steeper drop in pricing.

Part of my enjoyment working with him was seeing the possibility of his business expand and grow and also growing and expanding with it on my side to new opportunities -- when the sea rises, all of the boats rise too, right? We make a good collaborative team and it's been genuinely fun. Unfortunately the curve is not trending upward as of late, but seems to be following the opposite trend. Additionally, some other contractors have stopped working with him as frequently and I am starting to doubt his character after seeing the email.

Thanks again for all of the responses, I hope some of these additional details help clarify some things.

 

[fortyfive]

This issue you posted is always present in business relationships and is one of the reasons why communism still looks so appealing to many.
Honesty and fairness are the domains of God, not our fellow humans.

Now, instead of rummaging over what happened, accept it, and don't hold a grudge in your heart because it will damage you, not the person who wronged you.

Use this experience as a good lesson to be more aware in the next dealings, and perhaps start thinking about creating your own company.

Then all joys and sorrows will be only yours.

 

[TheLoneReader]

This issue you posted is always present in business relationships and is one of the reasons why communism still looks so appealing to many.
Honesty and fairness are the domains of God, not our fellow humans.

Now, instead of rummaging over what happened, accept it, and don't hold a grudge in your heart because it will damage you, not the person who wronged you.

Use this experience as a good lesson to be more aware in the next dealings, and perhaps start thinking about creating your own company.

Then all joys and sorrows will be only yours.

I appreciate this reminder. It just stings to have a good trusting work relationship be poisoned by potential dishonesty. I had to chuckle at your statement about communism, because I said to myself "This is how a communist is born" (not that I would become one).

 

[magoo]

I appreciate the many comments here, it's great feedback and I'm open to all of the viewpoints. Like I said, I am fine with markup and the industry standard in my region has been around 15 percent. I had even asked around to other industry workers about what their standard was in our region and the reply was 15 percent, otherwise any more was pushing it (this is due to the economic reality of our region). The reason I posted here is because I was curious what the insight would be from fellow CIK members and I knew that the replies here would help me have some checks and balances in my own thinking, I value the community here and so I do appreciate the responses.

My colleague has always expressed that he does a 15 percent markup which I was completely fine with and considered when doing my own pricing with him. However, what bothered me was the 50 percent markup after asking me to come down on my end. This has been a consistent request from him for a while now and it is always put in the context of what clients are willing to pay. I've always enjoyed working with this colleague and have put him as priority when it comes to work opportunities. Something in my gut felt off about this after seeing the email, and I think it boils down to what seems like dishonesty on his end.

I do have other colleagues that I work with and I think shifting away from this one in particular for a while may help (I am also considering a new line of work). He depends on me for a lot of work and also for acquiring new clients (we recently landed a gig with a large client due to my past experience in that particular industry and showcasing work I had done). But again, even landing the large client has left me in doubt, because he expressed that they can't pay as much as he had hoped and for this one in particular, there was a steeper drop in pricing.

Part of my enjoyment working with him was seeing the possibility of his business expand and grow and also growing and expanding with it on my side to new opportunities -- when the sea rises, all of the boats rise too, right? We make a good collaborative team and it's been genuinely fun. Unfortunately the curve is not trending upward as of late, but seems to be following the opposite trend. Additionally, some other contractors have stopped working with him as frequently and I am starting to doubt his character after seeing the email.

Thanks again for all of the responses, I hope some of these additional details help clarify some things.

Why don´t you simply give him the price you think it´s fair? Or put in a written agreement the conditions you want.

It´s also strange no client tried to steal you from him. Or work directly with you bypassing him?

Next project. Just tell him the price you had given him fell short. Since you realized as the project proceeded there was much more work to be done.

It´s sad but business is like that.

The guy is playing you and taking advantage. The high end car and the summer trips to Europe is to fool the gullible. Sorry to say this. But it´s always like this.

The guys who showcase a perfect life are always scamming others or wanting to take advantage. This is a golden rule of business. Perfect people are scammers. People who don´t want anything from others are imperfect. I called it putting a carrot in front of your eyes. So many people fall for this. I only had one criteria: My bank account. Except pro bono stuff.

Either way. The markup is irrelevant. As long as you are paid a fair market price. And assume no risk.

Saw a movie like this recently. Two brothers owned a store. One was having perfect life. The other guy life sucked. And he didn´t understood how he had so much money.

 

[SkiPro]

I appreciate the many comments here, it's great feedback and I'm open to all of the viewpoints. Like I said, I am fine with markup and the industry standard in my region has been around 15 percent. I had even asked around to other industry workers about what their standard was in our region and the reply was 15 percent, otherwise any more was pushing it (this is due to the economic reality of our region). The reason I posted here is because I was curious what the insight would be from fellow CIK members and I knew that the replies here would help me have some checks and balances in my own thinking, I value the community here and so I do appreciate the responses.

My colleague has always expressed that he does a 15 percent markup which I was completely fine with and considered when doing my own pricing with him. However, what bothered me was the 50 percent markup after asking me to come down on my end. This has been a consistent request from him for a while now and it is always put in the context of what clients are willing to pay. I've always enjoyed working with this colleague and have put him as priority when it comes to work opportunities. Something in my gut felt off about this after seeing the email, and I think it boils down to what seems like dishonesty on his end.

I do have other colleagues that I work with and I think shifting away from this one in particular for a while may help (I am also considering a new line of work). He depends on me for a lot of work and also for acquiring new clients (we recently landed a gig with a large client due to my past experience in that particular industry and showcasing work I had done). But again, even landing the large client has left me in doubt, because he expressed that they can't pay as much as he had hoped and for this one in particular, there was a steeper drop in pricing.

Part of my enjoyment working with him was seeing the possibility of his business expand and grow and also growing and expanding with it on my side to new opportunities -- when the sea rises, all of the boats rise too, right? We make a good collaborative team and it's been genuinely fun. Unfortunately the curve is not trending upward as of late, but seems to be following the opposite trend. Additionally, some other contractors have stopped working with him as frequently and I am starting to doubt his character after seeing the email.

Thanks again for all of the responses, I hope some of these additional details help clarify some things.

This is a positive for you. You don't want to work with him anymore. His actions have handed you the motivation to go and do your own thing.

The messages are all around us, you just need to read them.

Good luck OP

 

[magoo]

Businesses are based on self interest and common gains. Not friendship or loyalty. And this may not be pretty but its reality.

Actually what that guy did is pretty light.

The mark up is irrelevant. People say 15% and accept 100%. What others say is trash. Its the law of demand which sets prices.

What counts is if the pay you receive is fair. All the rest is bullshit. And if you have the hability and skills to strike on your own. And deal with clients. Which at this point you havent. But can easily gain them.

 

[Get2choppaaa]

Sounds like you need to cut out the middle man and engage directly

 

[TheLoneReader]

Guys, these replies are great, thank you. I don't have any "real-life" acquaintances I can talk nitty-gritty details like this with in person, so this is the next best thing. I think going forward I will be a bit more "hard-line" on the pricing and be willing to drop the projects with this colleague. It will be tough, but this is part of the growth process.

 

[Get2choppaaa]

Guys, these replies are great, thank you. I don't have any "real-life" acquaintances I can talk nitty-gritty details like this with in person, so this is the next best thing. I think going forward I will be a bit more "hard-line" on the pricing and be willing to drop the projects with this colleague. It will be tough, but this is part of the growth process.

You only get what you demand in life....and if you allow yourself to be exploited you will be.

 

[magoo]

You need to find a client who is besides a client a pipeliner of other clients. And this client pays extremely reduced fees. If any.

Theres a website called logo tournament. They make a logo for 100€ i think.

Just make a small presentation on power point or pdf of your work.

If that guy is paying less than you deserve why dont you subcontract the project he gives you? You get what you pay. Subcontract the project. Dont send clients away.

Dealing with clients involves a lot of anxiety.

Also try to have client who pays a monthly fixed fee and has the right of x hours at a reduced price. This is good to cover fixed bills in the beginning.