Hire Charges

[Paul_R]

Is there a formula to work out a suggested hire charge of equipment? An accepted rule of thumb?

Should it just be a percentage of the cost?

 

If I spend £1000 on building a DMX video server, what should I aim to hire it for?

 

Thanks,

Paul

 

** I am NOT looking for a lecture about insurance or running my own business thanks! **

[David A]

Rule of thumb is 5% of cost per week, subject of course to market forces, the second rule of thumb is as much as the customer can afford.

[Pete McCrea]

In the past I've used something in the region of 30-70 hires to recoup the cost for noise kit, with the lower end for video equipment (i.e. more per day). Somethings will go down to around 15 hires or lower still to 8 in some cases. It depends on the investment made and the period with which you want to see the money back, or profitability, as well as the length of time the product will work for, and the ongoing costs of maintaining it. Remember to consider the income after a trade discount has been applied.

 

For instance a 5000 Lumen Projector list RRP is around £5000. Trade price is lower than this, but then there is the cost of lenses and relamping to be considered, as well as flightcasing it. Locally I'd expect to pay around £345/day list and get a trade discount on that price. That gives a figure of around 14 hires to repay the cost. A sound company might buy a speaker at £2000 and charge it out at £40/day, giving 50 hires to recoup their expenditure, but that will last 5+ years comfortably.

 

Have a look round and see who's charging what in your area, and also nationally to give you an idea of the accepted rate, and don't forget to consider what 'Feels Right'.

[gyro_gearloose]

When you say you are building a video server do you mean "assembling a set of off-the-shelf hardware/software components to do what I need", or do you mean "designing and building the whole thing myself from scratch"? If you are going down the built-from-scratch DIY route then you may have to charge very little for hiring it out as you won't have the backing of using established brands.

 

For example would you pay the same to hire a moving light that someone had built in their shed as you would for a Mac? Of course not. The Mac has got years of development behind it and a proven track record for reliability. Thats not to say that the light built in the shed would break down at the first opportunity. It might not. But even if it had been built by a highly skilled engineer to a very high standard, given the choice just about everybody would hire the Mac. So the only way the shed-built light would be chosen over the Mac would be if it were considerably cheaper to hire.

[scjb]

...or it did something that the MAC couldn't?

[Jivemaster]

Hire list prices bear little relevance to the income items generate, 1/ because few people pay full price -they expect a discount! and 2/ long hires are priced around a 3 day week and a 3 week month. So a month's hire would income 9 days money!

 

Work out how much it will cost to do each hire, include a %age for profit and wages.

Look what others are charging,

How much will your clients actually pay.

[lightsource]

** I am NOT looking for a lecture about insurance or running my own business thanks! **

 

As a hire company that is my biggest expense, with the exception of the gear.

 

You need to look at the day to day running costs of your company. Include - Insurances, PAT testing, Vehicle servicing, Crew costs, wear and tear on equipment, consumables (including things like lamps), Utility bills, (including Telephone), Office PC's, and all of the various taxes we all have to pay.

 

Also the fact that your gear will have to be replaced some day, and to expand the company, you will also need to expand your gear list.

 

Once you know your running costs, this will give you an indication of the hire charges you need to achieve in order for your business to be profitable.

 

Then look at what other companies who are offering a similar service charge, and see how you compare.

[Bobbsy]

I've been advised on this by the "corporate suits" several times and what they tell me broadly agrees with David A's advice. I gather that in business college they're taught that equipment rental should be 1% of capital cost per day or 5% per week (i.e. it's standard that weekly charges are based on 5 times the daily cost.

 

It's worth noting that these charges are supposedly enough to cover your overheads, including maintenance, partial insurance, etc. Supposedly this should be enough to generate a contribution of 40% against pure capital costs and about 25% profit once overheads are considered.

 

Three points are worth considering:

 

First, you'll notice that I specify "partial insurance". The suits always assume that you are insuring against UNRECOVERABLE loss and damage and that the hirer will be charged for this/be responsible for his own insurance as per the Terms and Conditions you're supposed to issue and get signed. Getting money back for lost or damaged gear is not always as easy as the suits seem to think though!

 

Second, I've usually felt it necessary to tweak these guideline percentages based on what gear we're talking about. An SM58 is going to have a far longer service life than a fragile MKE2 lav...and despite the way suits assume all equipment is the same, it seems reasonable to me to adjust the guidelines to reflect this.

 

Third, the person who said "charge what you can get" is not far wrong since "what you can get" will reflect things like competition and what the market will bear.

 

Bob

[Ynot]

Guys.....

 

Whilst I would agree in principle with much that has been said, I KNOW what Paul is looking to do here - it's NOT a strictly commercial situation, BUT is more of a bit of a sideline - he's building the gear/putting it together as a package partly because he has interests in that direction, and partly because there are a couple of shows that can benefit from the increased quality kit. He's also (I suspect) looking to be in a position to offer that kit to other users of our venue (Paul is one of my volunteer tech's) in the future, so is wanting to be able to offset some of the personal financial outlay on that basis. With that in mind he's keen not to over-charge the (mainly am-dram types) customers, whilst at the same time ask a reasonable and fair figure for the fact that he's shelled out the coffers in the first place.

 

I think it may not have been quite clear enough in the OP, but he's NOT looking to set up a hire company as a business. He is also VERY aware of the insurance angles on hire kit, as he & I have had numerous discussions on just that subject. ;)

[Bobbsy]

Useful info, Ynot!

 

I guess the 1%/5% figures my still be the "guidelines" that the OP is after, so long as he regards them as being what a commercial entity would charge to make a sufficient profit. There's nothing stopping him reducing these percentages to whatever he thinks is fair, so long as he realises that he will rapidly getting to a break-even or loss situation if viewed purely commercially.

 

The only other comment I'd make is that I've "been there" in the past, renting some personal gear to local groups at a less than commercial rate in an attempt to be fair. Alas, I was shocked at how quickly the "wear and tear" mounted up when the gear was in somebody else's hands and not being treated with an owner's level of TLC. I rapidly came to the conclusion that cheap rentals weren't worth the damage to gear and hassle I had...it's amazing how fast a gear failure becomes your fault even if the user was heavy handed and getting the gear he broke at half the standard rate. People rapidly forget that special rates are a favour!

 

I hope Paul has better luck.

 

Bob

[zonino]

Its been mentioned on here before, but if you're doing a special rate its a good idea to show the standard rate and then discount it (then people are more aware of what they're getting, and are less likely to forget its a favour!)

[dbuckley]

And hire fees can vary wildly on market conditions.

 

Worst hire rate I've encountered - a pair of PCC160s costing 330+tax per week, so payback in under four weeks. And its not like PCC160s are fragile...

 

Best is a MSR1200 followspot, for $150+tax a week, which had a payback of something over 40 weeks excluding lamp replacement costs. Ok, so the followspot had seen some wear and tear, but from the hirer's perspective, still a fine price for an expensive bit of kit.

[Ynot]

Useful info, Ynot!

I do try...! ;)

The only other comment I'd make is that I've "been there" in the past, renting some personal gear to local groups at a less than commercial rate in an attempt to be fair. Alas, I was shocked at how quickly the "wear and tear" mounted up when the gear was in somebody else's hands and not being treated with an owner's level of TLC.

Actually, that's the other thing I should've mentioned - it's likely Paul will be the one operating as well as supplying (ie wet-hire in a way) or maybe at a stretch, dry hire to those he knows...

[Guest lightnix]

Is there a formula to work out a suggested hire charge of equipment?...

To echo what others have said...

 

As much as your market sector will bear, whatever that may be ;)

 

Don't just think of it as just being a bit of kit to for hire ;) Have a look at what the "competition" are doing and charging for their products and at the services they offer to go with them.

 

Evolve a range of prices to suit various budgets; from simple dry hire with a manual and basic telephone support, through supplied with trained operator all the way to full-on, pre-production design and programming for several weeks on a car launch in the Bahamas ;)

 

This has not been a lecture on how to run a business and I didn't even mention insurance ;)

 

All the best with it :)

 

 

PS- 5% ??? Blimey! Eeewheniwherealad it were 10%.

How times change :blink:

[lightsource]

Although Ynot has clarified things here (maybe the original poster should have done it in his first post :D

 

I agree with Lightnix here, customer budgets, are probably more useful to know than your own hire charges.

 

I've had the same PA and crew go out on similar jobs, with a £130 price difference between the two.

 

It's more a case of weather you need the job or not.

 

ie get £ 100 for a job you should quote £ 200, or stay in, watch the telly and earn nothing.