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Lets assume that Linda and Bill have $5,800 in the bank, at 2% interest. Over five years it will earn $603.67, making a five year total of $6,403.67

So every year for each of these five years the editing equipment must earn $1280.73 (6,403.67 / 5), or they're losing money. ($1280.73 / 650) = $1.97 per hour of editing to cover the actual cost of owning their editing gear. Allow for repair costs of $365 per year, for an hourly cost of $0.56 The CODB is still $4.22 per hour, and lets provide an editor's salary of $25 per hour and a profit for the business of 40%. The hourly editing cost, based on 650 hours of editing per year, looks like this:

Summary

So in this example, Linda and Bill's actual cost of producing an 8 hour wedding, with 20 hours of editing, with a salary of $25 per hour for the videographer and the editor, and a 40% profit for the business, is:

If the couple is charging $1,400 for a wedding they are paying all their expenses, paying themselves $25.00 per hour for all their shooting and editing time, and making a profit of 40% for the business. At the $1200 they're currently charging, Linda and Bob are losing $168.00 per wedding.

Given the premises upon which these examples have been calculated, there are only two ways to revise these cost figures downward. The couple can either lower their hourly salary or they can lower the profit margin for the company. The other costs are fixed and probably can't be changed significantly. A better strategy, of course, would be to raise their prices!

Finally, in order to make this analysis as straightforward as possible I have left out considerations of State and Federal tax liability and credits, which must be included on a case by case basis. Also, there may be costs unique to individual businesses which I have overlooked. Factor these into your individual analysis using the methods I have illustrated.

Posted 12/28/05