How much is too much?

[Jim Andrada]

I'm a video hobbyist, but have been in the business side of the computer biz for - a LOT of years. Let's just say a lot longer than Bill has been in the video business. A lot of my work has to do with being an OEM supplier to another company. In this arrangement we sell our product to them, they integrate it with some other stuff, and sell it to their customer under their name.

As Bill says, business is business. Cost is cost and price is price, and they have no relation to each other (although getting more for something than you pay for it is always recommended if you want to stay in business)

Frankly, as a vendor or subcontractor, the price at which someone resells your products or services is none of your business. As long as when they resell it they represent it as part of THEIR product or service.

It MAY be your business if they represent to their customers that they are a reseller of YOUR products or services.

In other words there are two main cases; whether the product or service is sold under and perceived by the ultimate buyer as the reseller's "branded product or service" or your "branded product or service"

I think there is a lot of confusion in people's minds between the two above cases, which drives the differing opinions.

"Let me make that perfectly clear", as a former President used to say.

1) If the customer came to the photographer because they had seen or heard of him, then they are buying the services of the photographer, not your services. Whether the photographer has the video done by you or his mother-in-law is of no importance whatsoever to the customer. From a business perspective, the customer doesn't know or care whether you exist or not - you're invisible. The transaction is between the photographer and the photographer's customer and you're the hired help and the business relationship between the photographer's customer and the photographer is flat out none of your concern. Your only concern is whether you get paid by the photographer or not.

2) If the customer came to the photographer because they knew that he was your representative or agent, then things would be different.

Assuming that case (1) is representative of the situation, then if you think you aren't getting paid enough for your services, ask for more money because you think your services are worth more money. If you just think you should get a bigger slice of the pie, keep in mind that the size of the pie is none of your business.

[Chris Hurd]

Originally Posted by Jim Andrada

Frankly, as a vendor or subcontractor, the price at which someone resells your products or services is none of your business. As long as when they resell it they represent it as part of THEIR product or service.

Absolutely right. Thanks for taking the time to make such a spot-on post, Jim.

[Peter Wiley]

Chris Burgess,

I think this guy wants an employee without having to pay the overhead associated with employees. If fact, if you've been working with him on on projects on a regular basis for more than 90 days, there's a good chance that you would be considered his employee (if only a part-time one) for tax and other purposes and unless he's been doing the appropriate tax withholding, he's potentially in a heap of trouble.

BTW, if he asked you to do work and you did on his promise that he'd pay you most certainly did have a contract with him, albeit an oral contract that might prove difficult to enforce, but it is technically enforceable.

[Tim Polster]

Chris B,

Charge your rates and walk away if they don't want to pay 'em.

Anybody who blatently asks you to lower your rates is trying to get something from you.

As contracted labor, you get to decide what your time and effort is worth.

If you feel like you need experience, then do the work and don't care about the money because you are gaining valuable lessons.

Either way, make a decision and go with it.

[Jim Andrada]

1) There's nothing magical about 90 days. I have a good client I've been working with for 15 years and the IRS certainly doesn't think I'm their employee. I know because I passed a major audit and this was never an issue. There are a lot of other considerations that come into play.

2) I don't think Chris ever said he didn't get paid, he's just unhappy with how much he gets paid for what he does. Or maybe he's only unhappy with how small a percentage of the total that he gets - not sure which.

3) Nearly every client I've worked for has asked me if I could work for less. Depending on the circumstances, the answer is either yes or no. I expect them to ask me this - in fact I'm sort of disappointed if they don't. After all, if they aren't trying to get the best deal possible with me, maybe they're not making good deals with the people they work for. In which case they may be out of business before I get paid.

And you can always negotiate to lower the scope of what you do if the price is too high for your prospective client. Less pay = less work. It's all negotiable.

[Peter Wiley]

Jim is right there are a lot of factors that come into play. How the IRS would treat this depends on the facts of the case. I should have been more clear.

The contractor v. employee issue is one that comes up frequently in the film and video production business and companies in the business face greater attention from the IRS about it. In 1994 the IRS changed the way it looks at certain classes of film and video employment relationships and created special rules for them. See the "IRS guidelines" section under Education and Information at http://www.itva.org/

This is such an important issue that some film/video employment companies provide the service of keeping production companies "honest" when hiring crew for projects. See: http://www.screenlightandgrip.com/html/crew.html

The facts Chris suggested are that the photographer finds the clients and then asks Chris to do the video. This means the photographer is telling Chris who his client is going to to be and where and when he must turn up to do the work -- all related to "control" of the work in time, place, and manner which is one of the principal factors the IRS looks at. It sounds to me like the photographer is setting his wage as well and the manner and form or payment. If the photographer does the creative meetings with his client as to look and feel of the finished product, as Chris implied that he may do, this would also suggest Chris is more like an employee. These are the reasons the situation sounds fishy to me, but admittedly it is a greyish area.

There is indeed nothing magical about 90 days, but it's the term that been quoted to me by attorneys of nonprofit clients that I've worked for who have questioned my employment status on various communication and web projects. Designing a website as a one-time project was fine. Updating the website on an ongoing basis gave the attys gas.

[Jim Andrada]

Peter

Thanks much for the link to the IRS document. I read the whole thing today.

My personal (ie non attorney) feeling after reading it is that if Chris owns his own camera and lights etc, buys tape etc out of whatever he gets for the job (ie doesn't ask for reimbursement for supplies), and otherwise acts like a separate business (ie, keeps appropriate records, invoices on his own letterhead, prepares a Profit and Loss report at tax time, pays the self employment tax, buys business insurance, takes out a local business license etc etc) and also is the one deciding on how to get the effects desired by the guy hiring him and the bride and groom, then he's on pretty solid ground to be recognized as an independent contractor.

Interestingly enough FedEx Ground seems to have been involved lately in a somewhat similar dust up over the use of "independent contractors" who own their own trucks, but paint them in FedEx dictated styles, wear FedEx uniforms, and carry nothing but FedEx packages and follow the FedEx routing instructions. Not sure how this is all progressing or whether there's been any conclusion, but it certainly highlights the issue.

Anyhow, thanks for the link. It was interesting reading.

[Jason Robinson]

I know one of these truckers actually. It is indeed a very odd arrangement.

[Gabe Strong]

I have had a similar situation happen to me. Halfway through last summer I was contacted by a 'wedding service' agency from out of state. They were wondering if I would be able to videotape occasional weddings for clients of their's that were being married in my town on 'destination weddings'. I said sure, and they would call me, give me specifics of the couple and where and when the wedding was to be shot and what they wanted. I'd quote them a price, and they would then present that to the client (with a good markup I'm sure) and then get back to me to let me know if the client 'could afford' it. If so, I'd shoot and edit it, send the DVD's to the 'wedding service' company....and they would forward the DVD on to the couple and I got a check for my agreed on price. I did four or five wedding in July, August, September this way....everything worked great except for once. I happened to be talking to one couple when I was shooting and as they were asking about my DVD's....I told them I sent every couple two DVD's and advised them to keep a 'master' locked away and only watch the other one. That way if one got scratched, they could make a new burn of the 'master copy' and lock it back up after making a copy. Well, I was contacted by them via email a couple weeks later. Seems the 'wedding service' company was keeping one of my DVD's and only sending 1 DVD to the clients....they figured that way THEY would have a copy if anything went wrong. No big deal, EXCEPT they had never told me they were doing this, as I would have sent 3 DVD's then as I want all my couples to have 2. Anyways, no big deal, we got it all sorted out.

Then, comes this summer. They call and asked me for a formal package sheet with prices and what is included before the wedding season. I email one off. They get back to me and mention that their ceremonies are usually only 30 minutes or so and everything else isn't very long either....in other words they want me to lower my prices. So I give them a special deal....only good for their clients as it is true that their weddings are easier and quicker to do (lowered my prices about 15% as it seemed fair compared to my usual wedding shoots). They call me back and once again want me to lower prices.....telling me it is only 'an hour and a half of work'. I explained to them that an hour and a half shooting, means I have to be there AT LEAST 45 minutes before that to set up, which means leaving my house to drive to their locations half an hour before that, which means, loading gear into my SUV half an hour before that, and also pack up and load up after the wedding, plus an hour and a half of ingest time into my computer (Yes, I'm still tape based)....and that is BEFORE ONE FRAME has been edited, which is where the majority of the time is. Not to mention, that if they book me for the day, I can't book any other full paying clients that day. Long story short, they tell me the clients 'can't afford' my prices and I need to lower them. I tell them that I 'can't afford' to lower my prices. They try to appeal to me again, and I finally told them if they really want the clients to be able to 'afford me' that I would suggest they lower their markup on my services. Of course they didn't want to do that! Anyways, they canceled my first scheduled shoot of one of their weddings this summer, and I have got nothing else from them since.

Moral: 'Be prepared to loose all the business you currently get from someone like this as they will likely be competing on price alone, and I am SURE they can usually find someone cheaper than you.

Anyways, I DON'T compete on price. As a magazine's business section has noted, "the only logical progression of competing on price is that you will eventually end up doing something for nothing". I choose to stick to my prices and if I loose the business, so be it. The business I loose, is not people I want to be working with anyways!! Maybe I am lucky here, I DO NOT base my video business on weddings. I try and be as diverse as possible, TV commercials, events, weddings, freelance news, web video, website creation, live web video broadcasts of events, documentaries, short corporate videos, pretty much ANYTHING relating to video and multimedia. Being diversified means you DO NOT have to depend on one segment of your video business to make you 'X amount', because if it's slow in weddings, you can make up for it making TV spots, or news coverage or something else. So be prepared to 'take it or leave it' when one of these people makes you an offer. As Bill says, they have the contacts and 'control the water upstream of you'. If you decide their price isn't fair (as I did) then be fully prepared to walk and loose all that business. It wasn't worth my time and effort for what they wanted to pay me. They can find someone else to do it, cause it's not going to be me, I've got enough other work that will pay me a fair rate to deal with.

As an interesting aside, I just got a email from a woman in Houston Texas, and another in Las Vegas asking me to shoot their destination weddings. It appears a popular Alaska wedding destination website put a link to my site up directing people to me if they needed video for their wedding. I didn't ask them to do this or anything, I'm not even sure which of the wedding vendors that I work with did this for me! Of course I am grateful and want to thank them, now I just need to find out which wedding planner it is! I will also cross link to them. They apparently think I offer a fair price for the product I put out and I am listed in their recommended vendors section. So you lose business some places, and gain it others.

[Chris Burgess]

First off, let me say that there has been a ton of helpful advice and knowledge thrown around in this thread. And to be perfectly honest, the initial response Bill Davis gave has been the one that stuck with me the most (thank you Bill).

First off, let me clear a few things up. Yes, I pay for all of my own supplies, maintain proper records as such and handle my business like a business.

Second, alot of my indignation originally came about because this person went out of their way to assure me they were me friends. To be taken advantage of by a "friend" was rather upsetting to me. Well, shame on me for sure. while I approached this from a "friends helping friends" point of view, it is now very obvious that the other party approached it soley from a business point of view. It was stated somewhere earlier that really what he wanted to charge was not my concern (which it is not) and that I should have just worried about myself.

Bearing this in mind I have built up a new price letter reflecting the prices that I feel are adequate and have sent it off to him, with no response yet. I do have the luxury in this position that this is not my primary work so losing some income from this will not hurt me in the long run.

I do hope my stumbling around in the dark and the responses that it has garnished will help others with similar problems. And now we wait to see what happens!