Introduction

Controlling Your Destiny

Why Should You Buy This Book?

You know that you need a business plan, right? You know that the investor wants a plan. What do you do next? What goes into this sucker?

• First step: Step back and take a deep breath.
• Second step: Think about both quotes. You need to take this piece of art and explain to an investor why it is good business.
• Third step: Do not skip the rest of this introduction. Read all of it.

Here we go with that old what, where, when, why, and how stuff. What is the product, who is going to buy it, and why will they care anyway? You are asking yourself the questions and then evaluating your own: Tricky business, since you may have assumed all investors will love this script and give you money.

From the dawn of film—actually, from the dawn of time—there have been individuals who have wanted to do it their own way. People who are not content to live by the rules of others continually strike out on their own. Here we are in 2016 with the number of independent filmmakers still growing. Whether you use this book as a step-by-step guide for writing a plan or as a test of your own ability to be in business, it will help you meld creative thought with business fundamentals. It has been written in language that is accessible to those who are not skillful with business jargon. Understanding business is not that hard.

Whether you want to take the time to learn about business, or even want to be bothered with the noncreative aspects of filmmaking, is another question; one that you will have to answer for yourself. What if, after reading this book, you decide you would be better off selling your script to a studio or directing for one? Have you wasted your money? No. You will have saved money by reading this book first. It is better to find out now, rather than several months or thousands of dollars down the road, that running a business is not for you.

Goals of This Book

My goal in writing this book is to give the independent filmmaker an introduction to the world of business and to provide a format to help you present yourself and your projects in the best possible light. People want to know who you are and what you will do. Dreams are good; the nature of an entrepreneur is to be a dreamer. Your plan will bring the dream and the reality together.

There are many filmmakers with projects who are struggling to obtain equity (private) dollars. Being able to see your project from the investor’s viewpoint and being able to present it to the financial community in a recognizable form will give you a useful edge on the competition.

Throughout the book, I emphasize that this is your plan. When I write a business plan, it is the client’s plan, and that person or group must understand it.

A Constantly Changing Medium

My friend Jerry Quigg suggested calling this book Sex, Films, and Investing. Good title. It is clear, informative, and to the point. All the elements for a book or a business plan are there. Your finest hour will come when an investor says, “What a sexy idea! It will make me money. How much do you want?” This book is sexy, too, in its own business-like way. It will bridge the gap for you between the passion of filmmaking and the day-to-day realities of creating a successful company.

As you read this, the motion picture business is changing right before your eyes. For seven editions, the big news in the “industry” chapter was which company was buying Universal Pictures. Comcast has been the lucky owner of NBCUniversal since 2011; however, the rest of the industry seems to be buying, selling, and making new alliances at a pace faster than ever before. Much of this is due to the continued growth and presence of the independent sector as well as the rapid application of new media and technologies to the film business. The “paradigm” (an in-vogue word meaning “pattern”) shift that has been predicted for over 30 years is taking place, and its overall business effects are debated constantly. What hasn’t changed is the audience. No matter how many tools for viewing a film divide the finite audience, theatrical motion pictures keep chugging down the track. Movies are needed to fuel that engine, and you can be the one to provide it.

People go into independent filmmaking for many reasons. They are driven primarily by the subject matter, theme, or style of the pictures they want to make. I have talked to thousands of people who have told me what types of films they want to make. No two people have had the same vision, but they all share the same goal—to own their project and control it. Whether a filmmaker decides to make one film or many, it is up to him or her to understand how the business world functions. If you are focusing on types of films/video/Internet projects for which you do not plan a theatrical release, the financing model in this book is not useful.

With new opportunities appearing for the independent filmmaker, more people want their own companies. Books and articles have been written about the ins and outs of writing or finding the perfect script, how to do the budget, finding the best location, and what camera to use. None of that information is in this book. The question before us is not how to make a film but how to get the money.

You might argue, “But I’m making a film. This is different from other businesses.” The details of any business will differ from industry to industry and from segment to segment, but the principles are the same. Movies involve many people, whether small or large, all of who expect to get paid. Even if you are a collective, people assume money will be distributed at some point. Raising money involves intermediaries such as agents, finders, and lawyers, who expect to receive a fee for what they do. And do not forget the investor, who hopes to see a return on his or her investment. All films need certain standard ingredients to get going and stay alive. To get the show on the road, you need to put together a business plan.

It is true that independent films have been made and have found success without a business plan. Many more films without one, however, have not been funded and have never seen the light of day. No plan can guarantee the thrill of victory, but not having a plan could bring you closer to the agony of defeat. When you read about all those productions setting up shop with a large influx of capital, which of these scenarios do you believe?

• Scenario 1: Louise, you’ve had such extraordinary success at Megalomaniac Studios that we would like to give you $100 million. Have fun and send us our share.
• Scenario 2: Louise, you’ve had such extraordinary success at Megalomaniac Studios that we would like to explore the possibility of having you head your own company with $5 million in seed capital. Why don’t you get together with Victor Visionary and create a business plan? If we agree with your analysis and the numbers look good, we’re in business.

Trust me (a famous Hollywood term): Scenario 2 is far more likely. Wealthy people do not throw around big bucks on a whim. An investor may say, “Louise, you have a great idea.” However, before that impulse leads to cash in your bank account, many questions will be asked. Eventually, someone will ask you for—you guessed it—a business plan.

The purpose of this book is to show you how to make all that thinking and analyzing into a coherent story. It is more than just an outline, however. The standard business plan outline has not changed for over 100 years. Open any book on business planning, and you will see the same types of headings: Executive Summary, Company, Product (Film), Industry, Markets, Distributions, and Finance.

I have tweaked the standard plan to relate to film. This book will help you take the next step to expound and polish your business plan within those guidelines. It specifies not only what you need to include but also why and how. I will give you samples—both good and bad—for writing the individual sections of your business plan.

Movies as a Business

The biggest misconception about the movie business is that the movie is more important than the business. Many of us tend to think about filmmaking not as a business at all but as an art form; in that case, it would be called show art instead of show business. Often the most difficult concept for filmmakers is looking at the movie as a commercial enterprise. The word commercial can be viewed in two very different ways. When it comes to artistic endeavors, many people give the word a negative connotation. The strict definition is “prepared for sale,” but in many people’s minds, the words “without regard to quality” are added to the end of that definition. Looking at the term in the broader sense, however, the filmmaker trades a seat at the film for someone else’s dollar ($4, $9, or $15, as the case may be). Whether this trade occurs at a multiplex mall theater or at a video store, the buyer expects to get value for the trade, and the value is definitely in the eye of the beholder.

The Blair Witch Project, which earned $300 million worldwide and for which the business plan (yes, the filmmakers had one) called for raising $350,000, was always considered a commercial project. Audiences evidently liked it a lot; other filmmakers were more critical. But the filmmakers made the film they intended to make consistent with their vision and were successful in their effort. They were innovative not only in using a mockumentary format but also in their use of the then new (1993) Internet. The point is that they made a film that brought profit to themselves and their investors—the real meaning of the word commercial. The definition of independent film depends on the speaker’s agenda. Filmmakers often want to ascribe exclusionary creative definitions to the term. When you go into the market to raise money from private investors, whether domestic or foreign, it doesn’t matter if your film is a no-budget production or a $200-million blockbuster. You are still finding your own financing. Sometimes filmmakers on panels declare that someone else’s film is not independent by being “a genre” or “in a specific genre” (i.e., horror, comedy, and family). This drives me crazy. In the end, esoteric discussions don’t really matter. We all have our own agendas. If you want to find financing for your film, however, I suggest embracing the broader definition of the term used in this book: When the filmmaker (including large independent companies) controls the production and the financing comes from a source other than a U.S. major studio, the film is independent.

An independent film is one made by those individuals or companies apart from the major studios that assume the majority of the financial risk for a production and control its exploitation in the majority of the world.

It seems to be a simple concept. If you produce a gizmo designed to lose money, you go out of business. Why would it be any different with a film? Many films lose money (ask the studios), but many films are successful, also. Film investors have a right to expect to earn back their money at least. Unfortunately, many auteur filmmakers find the concepts of creativity and being responsible for money are mutually exclusive. If you suffer from this malady, take two aspirin and rethink your position. Even relatives have their limits; they don’t want to lose money either. You are using other people’s money. Be respectful of it.

People Get the Money

A question frequently asked of me by students and clients is: “How much money have your business plans raised?” My answer is: “None. People raise money. Business plans are only a tool.” Some of the best business plans I ever wrote are stored in drawers; they haven’t raised a cent. In addition, although you may have the most well-written and well-presented business plan ever done, it will not raise money on its own. You simply have to look until you find the money.

To be ready to get your project off the ground with investors, you have to be focused on your goal. If you are arguing with your partners, are not ready to make decisions, or are unwilling to look for money, the quality of your business plan is immaterial. The biggest consulting firms down to the smallest ones have plans stored on shelves gathering dust, because the client was not ready to be serious about taking on partners or making changes.

Once you track down your “prey” and deliver this terrific plan, you have to explain what it is all about—how it represents you. A plan is only a guideline with strategies and forecasts. You have to demonstrate to others that you can carry out the steps described within. Unless you understand every step of the plan—rather than just handing over a document written by someone else—you will not be able to do this.

Finally, are you adept at handling business in a professional and impressive manner? When all is said and done, your demeanor and presentation are important. After all the numbers have been added up, investors are still betting on people. If they are unsure or wary about you, no checks will be written. (Chapters 13 and 14 will help you with this effort.)

All consultants have clients whom they would like to keep hidden from investors. Sometimes it would be ideal if the entrepreneur and the investor never met. Some clients like to argue with investors and generally have a take-it-or-leave-it attitude. I once had a client—a successful studio screenwriter—who actually said to an investor, “I’m doing you a favor by giving you this opportunity. Take it or leave it.” The investor left it.

How Does the Economic Climate Affect Financing?

When I wrote the seventh edition of the book, we were just starting to come out of a recession. Business is getting better. At this point in 2016, the indie segment looks good. While people always go to the movies (and will continue even with all the new media available), they usually go more often in difficult times. If you are putting together a business plan in 2018, the economic picture could be different. Since this book tends to be published as we are going through a national election, making definitive statements about the general economic picture is impossible. You easily can do the research with the sources I mention throughout the book and find significant information as to what is happening. In addition, on my website I publish a monthly newsletter that tracks the business side of independent film.

Can Anybody Do This?

Developing a business plan involves the proverbial “10 percent inspiration and 90 percent perspiration.” In other words, anybody can do it. Unfortunately, I have found that most people lose interest when faced with the amount of research and work that is required. If you want to make your own films, however, this is part of the price of admission.

To find financing for your films, you do not have to be part of the business world, have an M.B.A., or be a math genius. My students have often said, “I can’t do math.” Yes, you can. This book will help you bridge the gap between right-brain creative thinking and left-brain math stuff. All you need is the desire to be in control—a powerful motivation.

Hollywood Is Only an Attitude

“Hollywood” is not a specific place. This book does not restrict the term filmmaker to those toiling in Burbank, Century City, or other areas of the southern California movie scene. Moviemaking is a worldwide event. The person in Cincinnati, Ohio, with a camcorder who aspires to make a documentary or a feature film is as much a filmmaker as her counterpart in Brisbane, Australia. Watch the film festival rosters and you will quickly see that there is a lot of moviemaking going on outside of Los Angeles in places like Omaha, Boston, West Palm Beach, Mexico City, Taipei, and Galway. My client Rick Pamplin, who owns The Pamplin Film Company, lived and worked in Los Angeles for a number of years until reaching a different level of success in Florida. His story and those of other filmmakers are recounted in Chapter 14.

An Entrepreneur Is an Entrepreneur …

For most entrepreneurs, the idea of boiling down a vision into a neatly contained business proposal is as foreign as the notion of taking a job. Nevertheless, the recipe for success in today’s competitive business environment demands that we act as managers as well as artists. The most common blunder is to assume that a business plan is a creative piece of fiction used to trick a rich person into giving them money. Even worse is the assumption that creating a business plan is an interesting hobby for someone who has nothing else to do. Independent filmmakers often see themselves only as artistes—creatures whose contact with the murky world of business is tangential to their filmmaking and unimportant. Nothing could be farther from the truth.

When a person has an original idea and develops it into a film, an entrepreneur is born—a person who has personal drive, creates an intimate vision, and is willing to take risks. Entrepreneurs want to make the decisions and be in charge of the show; they want to do what they want to do when they want to do it! I have never met an entrepreneur who was not convinced that he was right, who did not believe that the world couldn’t live without his film, and who did not want to control his own destiny. Independent filmmakers are the best kinds of entrepreneurs, because they want to push the edge of the envelope and seek new horizons. They are major risk takers.

Film investors are the biggest risk takers of all, however. They bet their dollars on an idea and help it become a reality—a contribution not to be taken lightly. Too often filmmakers believe that investors should donate their money and then quietly go away. Of course, this attitude is not unique to filmmakers. Most entrepreneurs feel that their ideas have more value than the capital needed to make them a reality. Think again, or you won’t see any cash.

Art Versus Profit

Lately, this topic has been in heated discussions on social networking and entertainment industry sites. Such activity is often the result of any film festival or market. At the 2010 Los Angeles Film Festival, James Stern, CEO of Endgame, stated three rules when making a film:

1. Make smarter movies.
2. Respect the money!
3. Before rolling cameras … think “market.”

Which one is more important—one’s artistic expression or money? My view has always been that both are. If you are using your own money, you can do anything you want. On the other hand, if you are using someone else’s money, it doesn’t mean that you automatically have to forgo your artist intentions; you just have to make clear to your financial source what the chances are that they will ever see a return on their money or profit. Then it can be their decision, which is more important.

The Role of the Plan

The business plan is the entrepreneur’s single most valuable document and his or her best safeguard for success. The majority of businesses that fail usually have paid little attention to proper planning. In Jake Eberts’s book, My Indecision Is Final: The Rise and Fall of Goldcrest Films, he mentioned several times that the company, which he founded, had no business plan. Although its first film, Chariots of Fire, won the Academy Award for Best Picture, the company (different from the one in operation today) did not succeed in the long run. Would Goldcrest have fared differently had the company had a business plan? No one can say for sure, but the group of very talented and experienced people consisted of producer, two famous directors, and Jake the money “finder.” Their widely divergent professional and personal agendas were often at odds, affecting the way the business was run. Even one film is a business. Make sure everyone is on the same page.

Whether you are making one film or several, you have to identify who you are, where you are going, and how you are going to get there. The business plan allows you to plot this path. It gives you the opportunity to develop a clear picture of the growth and bottom-line prospects for your film company. It also enables you to make more effective decisions and helps everyone follow the leader. When you have a clear course laid out, you have guideposts to follow that will show you where you are vis-à-vis your goals. While you may find this secondary to raising money, it really is a priority for fulfilling that goal.

The ideal length and depth of a business plan vary. You have something to accomplish and a specific path you must travel to accomplish it. The steps that you take along that path are defined in your plan. Before beginning any business, you want to know the nature of your goals and objectives, the desired size of the company, the products and/or services it will sell, its customers and market niche, the amount of revenue likely to flow, and its sources. When you think of a business plan, your first thought may be how to impress the investor. Before you worry about the bank or the distribution company or the wealthy investor, however, you have to make a personal business plan. For all of those people—and for yourself—you have to come up with an agreeable course of action, and you have to stick to it. This book will help you do that.

Is This Book for Someone Making One Film?

In a word, “Yes.” After seven editions, people still call or email and ask me this question. Any movie proposal—whether for a single film or a company—that seeks to raise money from private investors needs a business plan. I have used a multifilm plan in Chapter 11 to show all the possible information that needs to be included. If you are doing a single film, the outline is exactly the same, except you have fewer numbers to project and tables to calculate. While production for one film is estimated to be one year, distribution can take another year or two. Once the film is distributed, you will see 100 percent of your revenues usually being returned in two years. One film is a business and the producer (or executive producer) is the manager. You have the same responsibility to investors as if you were making four or five films.

The Facts and Nothing But …

The structure of a business plan is standard, but the contents are not boilerplate. Each film has its own unique qualities. All plans must be substantive, promotional, and succinct. A one-film plan normally has a length generally of about 20–25 pages, which is comprehensive but not too long. The business plan needs to contain enough information in a readable format that excites the reader but sticks to facts. Perhaps even more important, however, is that the plan clearly represents you and your ideas. Copying someone else’s plan is like copying someone’s test paper in school. You may give the right answers to the wrong questions.

Several years ago, an acquaintance of mine wrote a business plan that was very professional and cleverly laid out. He found that he had to keep it under lock and key, because other producers kept making copies of it. What they failed to recognize was the specialized nature of his company. It was structured to fund development money, not to produce films. The payback to the investors is quite different with development money. The “borrowers” of the product were so enamored of the text and graphics that they were blind to the obvious: The business plan promoted a type of company that they did not plan to run. How they ever managed to explain the relatively lower return to investors we will never know.

Negotiation Stances

The first strategy that I suggest in negotiating with an investor is to leave the negotiation deal points out of the business plan altogether. By doing so, you keep yourself open for the best deal. Notice that the financial examples in the sample business plan in Chapter 11 do not show a breakdown for the split with investors. They simply show the pretax dollars available for sharing. How the interested parties decide on equitable shares will depend on the number of parties involved, the types of entities involved, and proposals not foreseen by this plan. I advise my clients to hold their cards close to the vest and to let the other person go first. The most important fact to remember is that you do not want any of that information in the business plan. I cannot repeat too often that the business plan is for marketing and showing the potential monetary rewards. The investor offering is the document that describes how those rewards will be shared. It also is something that an attorney experienced with film offerings must write.

The Investor Wants How Much?

It is always perplexing for creative people who have put their hearts and souls into a project to give away 50 percent or more to an investor. A common complaint is, “I’m doing all the work. Why should he get 50 percent?” Your decision has to be based on whether the amount of investment money is worth giving the investor that large a share of the profits. I cannot answer this question for you. Your priorities and goals are part of this decision. A standard business plan ploy that seldom gets funded is the 70/30 or 60/40 split in your favor. There may be someone out there willing to take it, but the chances are that you will give your business plan to a variety of people, so reserve the bargaining for the individual. If potential investors seem unsophisticated, you can try it. If you are lucky, they will only laugh. If you are unlucky, they will laugh while leaving the room.

Business Plan Outline

This book is best described as a movie within a movie. To find financing for your projects, you will have to describe how your production or company will function. Accordingly, this book describes how the business works as well as instructing you on how to put the business plan together.

The book is arranged so that the numbered chapters follow the steps of the business plan. As you will see in the sample business plan, I don’t include the subtitles of the sections, either.

1. Executive Summary: A Short Version of Everything
2. The Company: Who, What, When, Where, and Why
3. The Film: The Investor Needs to Know the Whole Story
4. The Industry: The Facts and Nothing But
5. The Markets: The Spin
6. Distribution: Theatrical and Managing the Changing Landscape
7. Distribution: Nontheatrical and the Wild West
8. Risk Factors: Truth in Advertising
9. The Financial Plan: How It Works
10. The Financials: Forecasting Without Fear
11. Sample Business Plan for a Fictional Company
12. Breaking the Rules: Documentary, Animation, and Large Format
13. Other People’s Money: Them That Has the Gold Makes Some of the Rules
14. Raising Money: Did Someone Say It Would Be Easy?

No matter how independent you are, when writing your business plan, do not fool with tradition. You should make it as easy as you can for potential investors to read your plan. They are used to seeing the information in a certain way, so humor them. It is in your best interest not to be an auteur with your business plan. As you devise your plan section by section, you will find yourself being repetitious; likewise, you will find the chapters of this book somewhat repetitious. Think of the plan as a series of building blocks.

Additional Information on Companion Website

Taylor and Francis has a companion website for Filmmakers and Financing. It contains files with additional information that can be downloaded to your computer. Go to those files when a chapter signals there is additional information. The contents of the companion site and how to access it are on page ix.