Unless of course you had significant writeoffs in terms of capital asset purchases or operating costs to help lower your taxable income. Which is a double edged sword: my best years of production had VERY significant writeoffs, lowering my taxable income greatly. However, now when I go looking for credit, my "ability to pay" is looked at worse than if I had claimed it ALL as income. You need to be careful to look at the BIG picture. Contact (and retain) a good accountant that understands businesses like video production that CAN have large capital asset and labour/external cost outlays. A GOOD accountant pays for themselves multi-fold.

Of course the more you write off may mean you can save more and need to borrow less. I guess that's the double edge. Actually the reason the gov't has write offs is that those expenses are investments in your business.

Yep, and my investments in my business have historically outperformed the equities market, or at least the Indices.

Further to my above dissertation: I'm changing markets and may be looking at buying a condo in a much more expensive market so my accountant has indicated we may need to start "showing" more income for a couple of years (which basically means just being less aggressive with writeoffs - still completely legal, it's just different ways of "accounting" for where your money goes).

That does make sense if you're moving to a more expensive market. They'll see tax returns and may assume your business expenses are too high to give you income to pay back the loan . . . which would likely be deducted from your taxes. Seems like flawed analysis on their part but it's what you must play to.

Thank you all for your feedback. I have used the freelance calculator to estimate our hourly rate for 'in house' work. (I searched for the calculator a few days before posting this thread)

I know we're not charging as much as 'industry' standard, but as a freelance team just trying to break into the market (while in a recession), we need some customer incentives. Price is one of those incentives till our quality word of mouth starts moving. At the beginning of each year, we plan to increase our rates by a certain percentage, which can be justified by additional experience as well as equipment upgrades.

I know it may be difficult to make those changes each year, but nothing with any business I've EVER dealt with was simple and easy. (unfortunately)

Luckily, my uncle (who lives within 30 min of me) is an experience CPA who has owned his business for nearly 30 years.

Sean: the other thing that MAY work, rather than starting with LOW prices is to offer a "startup incentive" where you charge a normal and reasonable amount for a number of hours and "donate as part of the incentive" a number of hours in order to bring projects in at the same rate as just charging less. This of course is a limited time offer and you reserve the right to pick and choose projects based on a number of criteria INCLUDING the ability to use the video you create for promotional purposes.

One way to make this clear is to list your standard rate and the percentage discount/final rate up front so they know they're getting a deal.

Again I can't speak directly to whether Sean's rate is too low. I can only assume that he's done the calculation and KNOWS he can stay in business at that rate while he gains experience and gear. One MUST be able to stay in business at that base rate other wise the "scramble" to increase income can spiral a business under within the first year.

Keep in mind that word of mouth is probably the most important part of marketing. Each happy client may either come back or recommend another. The result is that you may have a boat load of clients and still tank your business. Leaving you with a boat load of clients who will never come back if you resurrect your business.

Warning:
Giving a higher price to recommended clients may mean you wont land them and both they and the recommending client may be offended (and lost). Giving the recommended client the same low price will mean you'll lose money on each job. It means they will take up time even when you have the opportunity to get completely new clients at a higher rate.

Set a rate your business can survive with. Set a policy on rate increases (leaving that for a future discussion). If you ever discount make it CLEAR in both the discussion and on the paper work what that is (list both your rate and the discount "ON PAPER"). I've actually been asked by potential new clients if I can give them a discount (often that's followed by the empty promise of more work). My response is I may work out a bulk discount if they commit to a bulk job order in contractually or pay in advance. If you offer discounted "trials" that's generally the only thing you'll sell in this business.

Sean,

It doesn't appear as though you've stated exactly what kind of partnership the group is considering getting into. A loose association of individual free-lancers, as opposed to an arrangement of strict equal partnership, is preferred, imho. In the later circumstance, it is inevitable that one or more parties will consistently pull their weight more than the others, yet the laggards will be compensated equally. Inevitably, resentment rules the roost and kills the business.

And now for some more unasked for advice.

Do not go into debt buying equipment. Start small and allow your profits to pay for what you need as you grow. Not sure how that will work at your stated hourly rate, though, unless you are extremely busy.

And about hourly rates. It seems as though everything is moving toward a teaser rate that is loaded with all kinds of extras before the day is done (oh, you want a review copy of the footage?$). I prefer (call me old school) to charge an hourly rate that compensates adequately without having to resort to nickel and diming the customer. Probably missing a golden opportunity to fleece my clients, but I'm in this for the long haul (and have been for a long time).