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Old November 2nd, 2013, 10:20 PM   #1
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when has a piece of gear "paid for itself?"

This might seem like a stupid question, but I've been curious about this for a while now. People say things like "I wouldn't buy a camera unless it can pay for itself in a year or year and a half."

But what do we mean when we say that? Do we mean if the cam cost $3000, the first time we make back $3000 using it we have "paid for it", or do we mean once we've made $3000 in CAMERA RENTAL FEES (if you itemize your rates with gear and labor separately, like I do).

The difference is, let's say your rate is $1000 a day with gear. You work 3 days with your new cam, you've made $3000. HAs your camera paid for itself?

Let's also say the camera portion of that rate is $300, the other $700 being your labor and other gear. In that case, would you say the cam has paid for itself when you've used it for 10 days?

The latter case makes more sense to me, but I'm curious as to what other think.
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Old November 2nd, 2013, 11:41 PM   #2
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Re: when has a piece of gear "paid for itself?"

If you're a hobbyist, the first makes sense. If you need to produce videos to keep food on the table, the latter.
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Old November 3rd, 2013, 01:52 AM   #3
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Re: when has a piece of gear "paid for itself?"

Like any other piece of business equipment - you take the depreciation, not the capital cost into account. Renting rarely makes sense if you use an item regularly. There's the hassle of pick up and return, and the difference between buying new and selling second hand probably will be less than the rental cost.
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Old November 3rd, 2013, 02:30 AM   #4
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Re: when has a piece of gear "paid for itself?"

I won't lie. . .I really don't understand what "depreciation" is. I am a simple man who understands the concept of my bank account being less x amount of dollars from having bought a piece of gear, and wanting to replenish that as soon as possible.

If I was unclear, I didn't mean actually renting the gear, I mean the portion you charge to the client as your fee for that piece of equipment even though you own it. The client is essentially renting your gear as well as hiring you, in other words.

Some people do it differently, but I have everything itemized so if someone wants me but no gear, that's x fee, if they want me and a camera, that's y fee, if they want me and a camera and lights, that's z fee, etc. Anything can be added or subtracted. Very fair and logical. So what I mean above is whatever that camera (or any other piece of gear) fee is, when I say "rental".
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Old November 3rd, 2013, 05:43 AM   #5
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Re: when has a piece of gear "paid for itself?"

When does it pay for itself?

That's an easy question and here is my answer: "When it satisfies that (I want it) craving."

Oh yes, you can say all you want about how it earns income and pays for itself but it is the craving for wanting it that really counts. If you want something and don't get it you'll be going through life with a gut ache and possibly not sleeping well because you deprived yourself. The complications may include ulcers, gastrointestinal problems, and other unexplained health problems like developing an allergy that you never had before. Hives? The cumulative effect may even be an earlier death.

"Bucket List": that's the things you want to do before you die. What about something called a "Pail List"? (A pail is something smaller than a bucket) This would be a list of things you really want but haven't got yet, essentially a list that is on a lower level, if you will, than the Bucket List. Lower? Or maybe not!

Stress impacts one's life via more illnesses and can even shorten it.

If the above doesn't work, then there is Plan B: rationalization.

"For the want of a horseshoe nail a city was lost." Ever heard that?

Okay, this is how it works. You have an opportunity for a day-long gig video shoot but for maybe 10 minutes of that there will be a need for a lavaliere mic. (okay, so that's redundant - just want to drive this point home). So, this day you can make, what?, $500, $,1000??? But there is no lavaliere mic. Heck, go out and buy one and it pays for its self in just 10 minutes.

The icing on the cake is: Now, you OWN it. Craving satisfied, fewer health problems, and a fringe benefit - you live longer!

If there is no job at the present, what the heck, there MAY be one in the future so its best to be prepared.

Life is too short to be counting all those nickels and dimes.

Don't procrastinate, put that Pail List together, do some research on the item(s), and go out and buy something!

Disclaimer: I'm a hobbyist (that pretty much says it all)
Hope this helps get someone past their "buying" road block decision.
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Old November 3rd, 2013, 06:39 AM   #6
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Re: when has a piece of gear "paid for itself?"

Had to laugh out loud at Johns reponse ... getting hives and early death.

That was a good read!
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Old November 3rd, 2013, 06:47 AM   #7
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Re: when has a piece of gear "paid for itself?"

Makes one wonder what is beyond the pail, John.
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Old November 3rd, 2013, 07:25 AM   #8
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Re: when has a piece of gear "paid for itself?"

One way to look at when a piece of gear is payed off is to compare how much you would have payed to go and rent it minus how much you can sell it for.

For instance, if you have three two-day jobs in a month. You call the rental shop and they say you can rent a certain camera for $325 per day. x6 that would be $1950. This is for one month's work. Basically $2,000

So if you go buy a $10,000 camera with the knowledge you can sell it for $4000 - $5,000 sometime in the future. Your camera will be payed off within three months using the typical month listed above. ($2,000 x 3 = $6,000) + $4,000 = $10,000

If you are producing your own work, you have to have a camera by renting or owning. Rental rates sort of set the standard for what things cost to do business. Your work rates should be in line with these rates per day to reflect the proper cost of ownership.

If you keep the camera for two years you are way ahead of the game (if the workload stays active).
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Old November 3rd, 2013, 07:55 AM   #9
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Re: when has a piece of gear "paid for itself?"

There are three reasons to buy a piece of gear:
1) it allows you to do work you couldn't before. This means new jobs are opened up, and if you start booking them, it will pay for the gear, but out of the gear portion of your income.
2) the gear improves your work. This would allow you to raise your rates, or in a tough market, maybe it's what is needed to keep up. Or will spending the money on those wireless microphones make editing quicker? OK, then it pays for itself that way.
3) makes your work easier or more enjoyable for you. This is entirely selfish, and is about quality of life. This gear doesn't pay for itself, but still gets paid for. These are often the toys and impulse buys.

Any gear gets paid for out of your income. No more than 1/3 of income should be going towards expenses. Of those expenses, only some is for gear. If you don't have any loans/credit cards that you used to buy, then it's the portion you save for future gear purchases.

For instance, our gear is paid for. We will have to replace anything that breaks, but mostly we'll hope to save about 10% from each job. Once we have enough for an emergency fund (Oh, no! I hit the Mark 2 with a hammer!), we'll consider a luxury item, like a fourth camera or a new lens.
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Old November 3rd, 2013, 04:13 PM   #10
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Re: when has a piece of gear "paid for itself?"

Quote:
Originally Posted by Josh Bass View Post
.I really don't understand what "depreciation" is.
How do you handle your tax returns? The simplified concept is, let's say you have $5000 in the bank, you're worth $5000. If you buy a $5000 camera you're still worth $5000 (assuming you can return the camera unopened for a full refund). Use the camera once then sell it for $4500, if you got $500 for the job, you're still worth $5000, and the camera has paid for itself. Use it twice and sell it for $4100, you're in profit. Rental shops are useful for setting rates for using your own equipment. If you just buy everything you want rather than everything you need you'll run out of storage space, and still get hives
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Old November 3rd, 2013, 04:42 PM   #11
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Re: when has a piece of gear "paid for itself?"

Tax returns? Keep receipts, hand it all to a CPA.

Gotcha on the depreciation. . .sort of.

I usually try to beat a rental house rate a little to be "competitive." My simple formula is usually 3-5% of purchase price is a good rental rate. Ah, but used or new purchase price (if you bought it used?) Philosophy!

Yes, I try not to buy that which I don't have a real financial need for a this point, unless it's an item that won't be obsolete for a looooooooooooong time (g.e. lights, audio gear). Still don't have an HD camera.
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Old November 4th, 2013, 01:07 AM   #12
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Re: when has a piece of gear "paid for itself?"

Depreciation is the percentage of an "equipment" purchase that you deduct as an "expense" against any income you may show as a "business" - your CPA should be able to provide you with a schedule he uses when he digs through your shoebox or preferred filing system - there ARE different methods, which is WHY you have a CPA... You might be surprised at how quickly things can be written down/off...

Effectively, this means how much you don't have to pay in taxes for running a video biz...


Another way to think of it is like a car - it loses a significant amount of value as it goes over the bump at the end of the dealers driveway, and another chunk each year depending on use and miles driven...


So lets say you BUY a NEW UHD camera for say $6000... it will lose SOME value, whether it sits on the shelf or if you use it, and you'll be able to recoup SOME of that $6000 if you SELL it, depending on many market factors... the difference is "depreciation" in value between what you paid, and what you can recoup or "recapture" (another tax term) in the sale. If you (your CPA) was writing off depreciation and you recoup more than the depreciated amount, you actually show a "profit" that would need to be accounted for. Again, why one might need a CPA!

Of course several others have hit on the non-accounting factors (nothing like 'treating" a bad case of "GAS", AKA Gear Acquisition Syndrome!). Hobby shooters have some leeway if they aren't trying to run a business!

If a job requires a "tool" to complete properly or more efficiently, that alone may justify the initial expenditure - particularly if the expenditure is smaller.

If it "ups your game" in terms of better images and end product (or keeps you up with competitors so you don't lose work), again, the purchase may be justifiable. I couldn't imagine shooting SD after trying HD. There is also something to be said for owning and learning the ins and outs of a specific camera...

Renting may be an option, but how many rentals before you've bought THEIR camera, vs. owning your OWN camera? They are taking the depreciation and you can bet that camera you rent "pays for itself".

One other "angle" if you want to make the budget more tolerable is to buy good gently used gear, or buy near model year ends - you can get near current tech toys, usually at already depreciated prices (which your CPA can STILL depreciate!). Buy used, use, sell, repeat... your cost of gear shouldn't be bad...

Just a few things to consider...
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Old November 4th, 2013, 01:47 AM   #13
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Re: when has a piece of gear "paid for itself?"

I know, I'm not trying to keep up with the Joneses.

However, even something like a used EX1 (not even the R), when you take into account batteries, bag and enough cards for 6+ hours of full quality media, is still a $4000+ chunk of cheddar (and I really do want to have a fully featured camera of that class, for those of my clients that require it, rather than something half the price missing this and that). Some folks consider it "old" already. I don't, not by any means. But who knows, that corner could turn very soon. Would I shoot often enough with it in a quick enough time frame to "pay it off"? Maybe, but right now I feel like my safe bet is buying the stuff that's good long term (again, audio, lights, monitor) and wait 'til I'm damn sure about something like a cam.
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Old November 4th, 2013, 03:34 AM   #14
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Re: when has a piece of gear "paid for itself?"

James - I had genned up a good reply for you but since sometimes things can be read different ways I elected to let it pass so as to help keep the thread on topic. However, …. we know the reply was really serious because it was supported by (some) scientific studies. Right?

Tim - and as for you, Sir,….
Not to let your question go unanswered...
Quote:
Originally Posted by Tim Lewis View Post
Makes one wonder what is beyond the pail, John.
Videographers are creative! So, first there is the Bucket and we know a bucket is a large container and generally has those big-ticket things you'd like to do before you kick it. A Pail is similar but a smaller container for those more affordable or easier to do things. What is beyond the Pail? A coffee cup. Seriously.

Coffee Cup? You bet. It holds that stuff that goes well with chocolate cake, doughnuts, and all kinds of pastries. Similar to the Pail that has those things you'd like to have someday soon, Coffee will go well with those things you can eat right now and perk you up while thinking about those things you want in the Pail. Coffee is a good "upper" so what about if it is "beyond the pail"?

Josh - The last paragraph that Dave wrote about 'One other "angle" ' is to buy gently used gear is what I've been doing. I had done video as a hobby since the days of Standard 8 so that has been awhile. I was looking at video cameras since the days of VHS tapes but these got reduced in size.

Kept looking and found what appeared to be a good used Canon that preceded the VIXA HF-S21. It was the model that had two flash cards but didn't "roll over" (forgot the model). The retail of the one he had (the predecessor) was of the order of somewhere around $1,500, and it was about 6 months old. The seller said he would take $600 for it (the economy wasn't good at this time). Why? he wanted the NEW HF-S21 because it automatically rolled over on the memory. He did surveillance videos of people who filed for disability and that was a much needed feature for him. Granted, this is probably an extreme example so what did I do? I passed because I also wanted the HF-S21 for the same reason. More on this later.

Moral of this story: If there is one thing that depreciates it is the video camera. The tripod, monopod, carbon fiber boom pole, microphones (lots of them), XLR cables, power cables, reflectors, lights, light stands, camera light, backdrops and stand, dolly, and a lot of other gear really hold their value by comparison [emphasis], over time.

Since my encounter with the HF-S21 that winter/early spring (this is often a good time to buy because people need money), I mentioned what I was looking at to my son-in-law and he wound up giving me his JVC HD7. Gratis, so can't beat that. (His previous camera was a Canon and it ate its tape while just out of warranty.) Since then, though, I've been buying "good gently used gear" like what Dave Blackhurst suggested in his "one other 'angle'". (see list above)

Caveat: Time is money. I've spent a lot of time searching (reminded frequently of this by wife) for the used gear so if one values their time highly then perhaps this isn't a good option. Personally, I do, but I also enjoy looking. If the wife thing gets too serious then just buying new would be better because a divorce can be very expensive.

One more thing: Computers, in my opinion, fall into the same "fast depreciation" category as video cameras.

Last edited by John Nantz; November 4th, 2013 at 03:58 AM. Reason: tweak sentence in pail
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Old November 4th, 2013, 04:45 AM   #15
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Re: when has a piece of gear "paid for itself?"

Indeed. I'm all for used gear. . .when I'm confident it's the right time to buy.

Computer thing is very true. The computer is something I use every day so I don't feel as icky in the belly area about spending money on one. I have a corporate client that I do editing for on semi-regular basis and the faster my computer is, the easier it is to work on my short films (the tedious processor/RAM-intensive aspects that is).
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