Budget is one of the most important aspects of a video production.  Yet, it is the most feared by clients and the production company.

The client tends to keep what they are willing to pay confidential.  They feel like the production company will spend whatever they are offered.

The production company generally will bid what they think will cover the expectations of the client.  It might include things the client may feel are not important.  And it might also not include things the client would be willing to pay for.  In the end, both the client and the production company may be disappointed in the results.

Usually, the best compromise is for the client to give an approximate amount they would like to pay.  Then, the production company presents a budget itemizing what they will get for that amount.  They should also suggest additional things that the client might want if there were more room in the budget and also list things that might be eliminated.

From this point, the budget should be negotiated.  If the client cannot afford some of the things in the budget, alternates may be suggested.  For tight budgets, creativity can go a long way.  Instead of a location shoot, for example, stock footage and green screen work may substitute.

This also gives the client the opportunity to request things not in the budget.  Perhaps some computer graphics would go a long way in enhancing the production.  But if the production company is trying too hard to keep the budget down, that might have been eliminated.

Communications is crucial in producing a budget.  The production company isn't out to gouge the client.  If they do, they will be out of business in short order.  At the same time, if the client is trying to get a lowball budget, they will get what they pay for and the production company may avoid working with them altogether.