Typically, there are two ways to come up with a budget. Sometimes, you have all of the creative in place and can price the line items accordingly. More often, though, you have a fiscal box dictated to you and must design the creative to fit into it. The variables make the job that much harder. Your client wants to highlight his widget in a beautiful setting. If you do it in your office it'll cost X. But if your client wants the Eiffel Tower in the background, it'll cost X-plus.
The best way to come up with a realistic budget is to have a series of discussions with your client ahead of time and pose the hard questions. What's the target demographic? What's the setting? How many bells and whistles do you want added in post?
Frequently, the reality of the project will reveal itself over the course of such an an open and honest conversation. Often, clients will have a grandiose notion of what they want, motivated by what they've seen on television and in the movies. They have big-budget tastes without the big budgets.
Your job is to inform your client, tactfully and honestly, that her project can be produced in a variety of ways within a variety of budgets. Don't be afraid to tell her that her idea is expensive. Going to Paris with a minimal crew for two shoot days will cost in excess of $10,000, whereas producing the same spot locally will cost less than half that amount.
Sure, you'd love to go to Paris. And you'd love the extra money from markups. But can your client really afford it? Will her expectations be unrealistically heightened? Will she ever call you again after spending a small fortune for "real"—yet ultimately negligible—results? Can you say… "green screen?"
Insist that clients be clear about their expectations. Require specificity. Don't get caught in the trap of vague creative; you cannot fix it in post! Make the client decide on the details of the project before you even consider offering a number. Once that number is in and the client has signed off, you will be obligated to deliver.
Now, this approach will take more of your time in development before you even sign an agreement. You will have to have more meetings, and make more effort at no pay to research and narrow the costs. But in the end, the budget will be real and fair and will support the creative the client expects and has approved. You will not be caught in a situation where you promised the moon but had only enough fuel to get to Cleveland.
The danger in this approach is the potential of losing the client. You may be too expensive. You may be perceived as inflexible on price. But you will have protected yourself from disaster. Remember that there are more clients than there are producers. Future clients will see the sanity of your responsible pricing method. They will have more realistic expectations, and there will be much less risk of nightmarish scenarios during production, not to mention complete meltdowns during the edit.
Develop a reputation for honesty and clarity. Don't try to be all things to all clients. Work according to your own ethic and process. Create prices according to your own worth and the real market value of your client's creative expectations.
Obviously you can be flexible and creative in solving budgetary issues, but don't present a budget that is unrealistic for the creative that has been proposed. You will end up with an unhappy client, a sullied reputation, and a really bad taste in your mouth.
The key here is your ability to be flexible and creative. For example, locations are relative. How well do you know your community? Are there buildings, street corners, and pastures that can be made to look like other, more exotic, locations? Can you make your office look like a doctor's waiting room? Can you make your backyard look like the 18th green at the country club? Can your brother look like a celebrity with the right haircut?
If you can come up with viable solutions to creative problems, you can save your client money. If you do that, you will have saved the project while giving the client what she wanted. After all, you're making a movie. It's not reality.
Do your homework, ask tough questions, be creative and flexible, and above all, be honest and unafraid with your clients. They are looking to you for advice, direction, and answers. They want you to tell them what is possible and what is not.