Episode 222 — How to Bid VFX Projects

 

Episode 222 — How to Bid VFX Projects

Hello, everyone! This is Allan McKay. Welcome to Episode 222! I want to talk about how to bid out VFX projects. This is going to be a lot of fun! This has been a long time coming because a lot of people have been asking me about this. I want to lean into this topic and show you how to approach pricing and the process of building a bid for a 6-figure project. Make the most of this and please share this Podcast with others!

Let’s dive in!

FIRST THINGS FIRST:

[00:46] Have you ever sent in your reel and wondered why you didn’t get the callback or what the reason was you didn’t get the job? Over the past 20 years of working for studios like ILM, Blur Studio, Ubisoft, I’ve built hundreds of teams and hired hundreds of artists — and reviewed thousands of reels! That’s why I decided to write The Ultimate Demo Reel Guide from the perspective of someone who actually does the hiring. You can get this book for free right now at www.allanmckay.com/myreel!

[43:57] One of the biggest problems we face as artists is figuring out how much we’re worth. I’ve put together a website. Check it out: www.VFXRates.com! This is a chance for you to put in your level of experience, your discipline, your location — and it will give you an accurate idea what you and everyone else in your discipline should be charging. Check it out: www.VFXRates.com!

HOW TO BID VFX PROJECTS

[02:58] A lot of us as artists are happy working day to day. We show up at our work, make art and go home at the end of the day. Occasionally, we do wonder what the process is like for landing jobs. Typically later in our career, we work on building relationships and our brand which leads to us landing work. Oftentimes, one opportunity leads to many and I’ll get into that later on. Some of us, go out and seek work consciously, as we try to build our own studio. Other times, we land a contract that leads to another and suddenly we have a studio and a team.

[03:54] Back in 2007 when I was starting my studio Catastrophic FX, my producer gave me a pen encased in a glass cube, for my birthday. I asked him, “What the hell is this?” He said he gave it to me with the intention that we break it open when it’s time to sign our first million dollar contract. I don’t know if it was luck or timing, but right around that time we did land that project. Up until that point, I didn’t think about the financial stuff for our studio. I was just making sure we had fun projects coming in and that we were staying out of the red. However, we landed a project with THQ, the game publisher, and that was a massive game cinematic.

[04:54] Anytime I submit a bid on a project — anytime it’s a big number — it’s based more on a gut feeling. There is at least 15 minutes before I hit “SEND” that I jump into the spreadsheet and start [lowering] the numbers. Then, when I’m about to submit a new bid, I go back to thinking, “What if this is the death of the company?” And I do this again and again. It’s one of those things where I go back and forth a lot. Sending out a higher number can scare your client. Sending it out too low can mean the death of your company. I’ve seen so many studios having to pay for projects themselves because they underbid. There was a time when a bid was an estimate where you could give the locked-in numbers at the end of a project, but those days are gone. Running a studio is a delicate dance. I’ve met so many artists who complain that VFX studios are out to get you. Whenever I try to defend them, it falls on deaf ears. VFX studios are actually in the worst case scenarios. If they don’t get paid, they’re missing out on hundreds of thousands of dollars. And if they don’t deliver on time, they can get sued by the client (not to mention by their staff). There are so many instances when things could go wrong!

[08:03] As I’ve mentioned, bidding isn’t an exact science, especially with 3D. Most of the time, clients are coming to you asking for something that’s never been done before. Even if it has been done before, there are so many curveballs. If you aren’ supervising the actual shoot, you get dumped some problems in post. A lot of the time the producer is submitting the bid. Keep in mind that producers don’t do 3D. They’re there to work with the client. The way they come up with numbers will be based on previous projects or they will go to each department and run the numbers by the supervisors or department heads. It’s up to you to speak up if you’ve never done an effect before. You have to budget for the unknown. But the producer doesn’t know these things so they’re relying on you to tell them.

FRONT LOAD THE QUESTIONS

[10:18] Just for this analogy, I’m going to say that we have a 30-second Super Bowl commercial in which we have to animate characters that are jumping around and eating cereal. Not always are you going to get an animatic ahead of time. Sometimes, the treatment is just a page long. Other times, you will receive a script and story boards, design Bible and everything else. Some agencies have designers who will come up with these ideas. But sometimes, it’s on you to find out all that information from information. [11:24] I’m notorious when I talk to clients. I interview them more they interview me. I always say to front load the conversation.

  • I bring up money right away. 
  • I point out anything that could go wrong.
  • I ask questions to make them think about things they haven’t thought about before.

I want to walk them through any issues that they haven’t thought about. I want to streamline this as much as possible. The more we cover in the initial conversation, the more accurate the bid is going to be. The more we can address the problems early on. It’s also a chance for you to get the vibe from the client: Are they thinking about this stuff? Are they resistant with you? You can figure out what the project is going to be like. If the client is a nightmare to deal with, you can get that idea ahead of time. For me, budget and schedule are the two critical things.

[13:15] One of the things to think about is that it’s all in the numbers. Using that Super Bowl commercial as an example, let’s think about what it’s going to take. It’s a 30-second commercial. How many shots are there going to be? Let’s say there are 20 seconds of animation with two characters and we’re aiming to do 10 seconds of animation per day. That’s a good pace and that sums up in about 4 days. Knowing what the animator would cost to hire, bit by bit, we start to figure out what our profit margin would be like. I’ve actually recorded a YouTube video about this. I feel like anything in 3D takes a lot more work, there is a lot of problems that can happen. I’ve done a project for McDonald’s where they did a close up shot of pouring the special sauce. When you poured the sauce on you could see the grease being pushed away and the client asked us to remove that. Which is impossible! There is stuff like that that’s absolutely insane. We had these complicated elements already: All these athletes made out of the ingredients. But pushing the grease away wasn’t something we were planning to do. So these are the types of problems that can happen.

PLAN FOR THE UNEXPECTED

[15:56] If I were to plan for 4 days of animation, I’m probably going to add on 2 days for revisions and 2 days for anything that goes wrong. If anything goes smoothly, those 2 days will be the profit. There is a lot of moving parts! Sometimes, artists will say, “Oh, yeah! That’s really easy, it will take me 10 minutes!” Hours later, they’re still working on it because they didn’t understand how to estimate something. You have to go with your gut and tack on additional time based on that. The more artists manage themselves and track their time, the more you can rely on them. So it’s good for you to have that habit of tracking your time and managing yourself.

[17:32] Let’s say you’ve scheduled 8 days in total. So that’s one week for 2 animators. What if it’s a 3 week commercial? On week 3, that’s when the client is reviewing everything. There is likely going to be animation revisions. There is a chance that things could come back. Which means you will still have to pay someone to be around. There are times when you need to have someone on call. You may need to pay someone to be on soft hold to keep them available on your team. That’s why it’s beneficial to have several jobs going on at the same time because people can roll off another project and jump onto this one. Or, if you have generalists with strength in animation, they can move onto other things. They can change hats. So it’s important to figure out how many people you will need on a project. If it’s a senior artist, a day of being unemployed could cost you a $1,000. They will be lining up other jobs. So if you let them go, but then you need them again, it’s a giant wild card.

FIGURE OUT THE RATES AND THE OVERHEAD

[20:33] Other things to think about is: Are you paying your artists hourly, daily, weekly or on a salary? In California, after 9 hours, you have to pay them an hour and a half. In the U.K., it tends to be a day rate. You may have 2-3 people working double time on weekends, and then you get that invoice and it’s tens of thousands of dollars. The bigger the projects, the more moving parts there are. So you have to be clear what hours are being worked. You have to pre-approve the extra hours, for example. That’s really critical. A buddy of mine is a producer at New Line and they were working on Lord of the Rings. An artist send in his invoice after two years, and it was $200K. Let’s say you hired an animator for $400 per day for 9 days or work. If you’re paying them $400 a day, what should you be charging the studio? There are different ways to price this out. The cost would also have to include your overhead: electricity, internet, snacks, etc. A lot of studios have a rate card. You would be able to call and ask for that card and you could see what they charge. That was very educational for me. These days, because it’s so competitive, no one gives that out anymore. Producers want to get more creative: If you need assets, the producer may say, “What if we send you our game assets?”; but those won’t hold up in a commercial. The more they get creative, the more you have to fight them on that.

[24:57] The way I work it out is: What would it cost to run my facility monthly or daily?

  • Internet = $1,000 per month
  • Rent = $10,000 per month
  • Electricity = $15,000 per month

Once you know what that is, you can start break down the artists:

You charge $1,000 per artist per day — but you pay the artist $500. The other $500 is the profit (to be used for costs like the computers, the license, the overhead of the studio). The other stuff — receptionists, HR people — need to be compensated but they aren’t included in the bid. Once I figure out my overhead, I will divide that in between all my artists. How much does it cost for all the artists and the supporting resources inclusively to function in my facility PLUS the 30% profit. That seems to be the number that’s the same for most industries. In VFX, thing fluctuate a lot. With some projects, you meet that number. With others — you’re bleeding money. Sometimes, you are going to have a profitable project that pays for everything else. Some of the studios do the best balancing profitable projects with other projects that are less so. As creatives ourselves, we have to be able to do both.

[28:57] That’s how I bid my projects out. I figure out what I would charge for an artists and what I would generally charge per day, per artist in different discipline. (Rigging, for example, would be less expensive than rigging, lighting and comp.) Modelers get paid a bit less. Then I would figure out the cost of the artist, I would figure out the overhead and the 30% profit. If I was charging $1,000 per day, I might charge rigging as 3D. Some of that would go to pay expensive artists. If I figured out that I needed 2 animators, I then figure out how many artists I need in modeling, lighting, rigging and comp. If it’s 20 people, that’s $20K. The $10K will go to pay the artists, the other $10K will pay the coordinator and other overhead. Hopefully, that makes sense.

[30:52] In general, what I always think about is: What are the deliverables? What are the dates I’m committing to? What are the file formats? This is where I see so many people go wrong. [3110] The more you talk about money, the more you front load the conversation, there more you prevent having unknowables down the line. Knowing all these things is so critical. Sometimes, someone wants you to hand deliver files but they’re in a different city. So you have to fly someone out. I’ve had clients come back in the final week and ask for something we haven’t discussed (like delivery). This is the type of stuff that happens! You have to bring out what you’ve discussed. I had a client from hell whose producer changed half way through the project. You have to discuss these things at the end, depending on your relationship with that client.

[33:28] Let’s say you need to buy new hardware. If you need to buy a render farm, that costs $50K. You probably cannot charge that in the bid. You can’t expect for your client to pay for that. If you have such a big cost, you will spread that out over several projects. If it’s $50K, over the next 10 projects, you will tack on $5K to cover that cost for the big expense. You will benefit on those projects by having that new render power. It’s important to know your cost and add margins. Once you figure out that the cost is $27K on a project, you also need to include a profit. You work that out and you submit it. You have to communicate all the agreeables for that particular bid. A lot of the clients don’t understand what you do. You have to keep that in mind. When they ask for something ridiculous, they may not understand the work that goes into it. Educating your client is important. The more you educate them, the more they will trust you and the more they will understand why something may be more expensive or more difficult to do.

[36:33] This applies to both being a studio and an artist. If I come in to do a building destruction. I have to explain that the modeling has to be done a certain way, in order to be done. If you don’t communicate what you need ahead of time, you will sound like you’re making excuses for why you can’t deliver. I’ve felt that way before, when really I was educating them about what the project needed. It is really important to have that locked in.

A BIT ON LONG TERM PROJECTS

[37:35] If you are doing a $50K project, the ramp up period tends to be a lot more. If you’re doing a longer term project, then suddenly the costs will go down. The longer form project will give you more stability in the long run. You can course correct or redistribute during it. If you’re ramping up for 2 week job, you won’t make that much profit. Longer form projects will allow for more money and you can share resources among projects. If you can stay busy and do several jobs at the same time, you may need other overhead staff: an executive producer who’s constantly looking for jobs, HR staff, etc. It will become more profitable in the long time, however. A lot of things will start getting divided up and cost less in the long run. If your people become staff, they will become cheaper too. So it’s more profitable to have several projects running at the same time. On top of that, it becomes more stable and you become more confident about your value. Consistency is key.

[41:39] I want to lean into this more. I will include the video explaining this once it’s published. One thing I’d like to know is what questions do you have about this? Shoot me an email so I know what to lean into: [email protected]. Let me know what you’re interested in seeing. For me, I’ve been doing this type of talks for years! I have a lot of experience to share!

I hope you found this Episode valuable and got a lot from it. Feel free to shoot me an email with questions. I want to hear from you and I want to know what your burning questions are. Let me know what you want to know.

Next week, I’m doing an interview with Blackmagic Design.

Until then —

Rock on!

 

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