2

The Company

Who, What, When, Where, and Why

To open a business is easy; to keep it open is difficult.

—CHINESE PROVERB

Starting Is Easy

To start a business, all you have to do is choose a name and have a phone; ergo, you are in business. To be successful, though, a business involves much more. A company, according to the American College Dictionary, is “a number of people united for a joint action … a band, party, or troop of people.” The lone screenwriter is an island of self-absorption; the filmmaker is king—long live the king! When she becomes the producer of even one film, though, she is running a business.

Running a business embodies a totally different set of skills. It is a special kind of collaboration in which dictatorship does not work. For a business to run successfully, everyone must agree on its purpose, direction, and method of operation. This goal requires a lot of planning and communication.

I always like to recount my first seminar in which I started the day with a discourse on “Common Blunders in Business Planning.” At the break, my assistant overheard someone say, “What is all this esoteric nonsense? We came here to find out where the investors are.” To make my meaning clear, I started each full-day seminar by putting a list of companies on the board. I asked the seminar participants to tell me what these companies had in common. After attempts by several attendees, one observant person finally recognized that they all had declared Chapter 11 bankruptcy with reorganization of the business) or Chapter 7 (bankruptcy with liquidation of the business) or shut the doors in some other way.

The first reaction from filmmakers is that these companies were all too big and that somehow their size contributed to their downfall. In reality, the reason companies—whether big or small—failed was the same in either case: lack of planning. Anyone can have bad luck, especially people in the film business. Part of planning, however, is looking at the likely future results of current decisions. In doing this, you can build in ways of dealing with bad luck, or mitigate its effect. Granted, some crises are beyond your control. A bank failure or the bankruptcy of a distributor or the failure of an investor to deliver the money are such outside events. Hopefully, careful planning can help you deal these external occurrences.

The business plan diagrams a path for you to follow. Along the way, there may be forks in the road and new paths to take; flexibility in adjusting to such changing conditions is the key. On the other hand, taking every highway and byway that you see might take you in circles. In that case, you will never get a project completed and in the theaters. A balance is needed, therefore, between flexibility and rigidity. Planning provides this balance.

Know Yourself First

When asked what they want to do, many filmmakers (or entrepreneurs of any stripe) reply either “I want to make money” or “I want to make films.” There is nothing intrinsically wrong with either answer, but there are more questions to be considered. For example, what is the nature of the films you will make? What are you willing to do for money? And, ultimately, who are you?

Before characterizing your company for yourself or anyone else, make sure that you really know yourself. For example, one filmmaker told me that she intended to live and work in Georgia; she would make her films there and seek all money there. For her, this goal was nonnegotiable. Her position may seem rigid to some people, but you have to know where you draw a line in the sand.

Goals 101

Having and keeping a clear vision is important; it is as easy or as hard as you want to make it. Ensuring that you understand what you are truly about is the first step. A full course in Goals 101 is too long to include here, but we can quickly review the basic principles with a minimum of academic jargon.

Setting goals merely means clearly stating your main purpose. Objectives are often shorter-term accomplishments aimed at helping you meet your main goal. For example, writing this book was one of my long-term goals; teaching university classes was a short-term objective to help me reach my goal. I felt that the best way to establish credibility for a book was by teaching in extension at University of California at Los Angeles (UCLA). From the beginning, I knew that the pay would be low compared to consulting and other work; however, over the short term, the book was more important. The book goal made it worthwhile to forego some of my potential consulting revenue in favor of the time I put into teaching the class. (In the end, I enjoyed teaching so much that I continued at UCLA―first on campus and then online―for a total of 23 years and through seven editions of the book.)

The business and personal aspects of your life may mesh quite well, but any conflicts between the two need to be reconciled at the beginning. Otherwise, those conflicts may interfere with your success in one or both areas. Covert agendas are sometimes good to use with competitors, but fooling yourself is downright dangerous.

Formulating Your Goals

Formulating your goals may seem complicated, but it involves just two simple but essential steps:

  1. Take a meeting with yourself at the start. (In Los Angeles and New York, everyone “does lunch.”) Think about your plans, look at them, dream about them, and then set out to test them against reality.
  2. Write your plans down. Entrepreneurs love to declare that they can keep everything in their heads and do not have to write anything down. Big mistake! If your ideas are so clear, it will take you only a few minutes to commit them to paper or on any electronic device of your choice. Anything you cannot explain clearly and concisely to yourself will not be clear to someone else. Writing down your goals allows you to see the target you are trying to hit. Then you can establish intermediate objectives or a realistic plan to accomplish these goals.

A word about money is in order. John D. Rockefeller said, “Mere money-making was never my goal”; other successful executives have made similar statements. Many television talk shows and programs like Shark Tank have brought together groups of entrepreneurs to find out what motivates them. They almost always identify making the product, negotiating the deal, or some other activity as their main motivation; the money followed when they did the things they liked. Do something that you enjoy, that you are passionate about, and that you are good at; then the money, according to many popular books, will follow.

Whether or not you become rich, I cannot stress too often that filmmaking is not an easy business. Be sure that it is the filmmaking that draws you—not just the tinsel, glitter, and a desire to stand on the stage at the Oscars.

Personal Goals Versus Business Goals

Finding fulfillment is an elusive goal. To start, you must list and prioritize your goals. Unless you know where you are heading, you will be severely hampered in making decisions as you walk down your path. People have both business and personal goals, so it is crucial to look at both categories.

First, take a look at your personal goals to make sure that you do not inadvertently overlook something you want. This question has been the hardest for students and clients to answer. Someone will say that it is to move to Los Angeles to pursue film or hire a good director. Your personal goals have nothing to do with work per se; they are your private desires, your plans about your lifestyle, your dreams that will bring a feeling of satisfaction outside of work. Can you identify your personal goals? What is important to you? Is it family? Going to church? Riding horses in Montana? Consider the pursuits and activities that you find meaningful. Decide which are important enough to have time for outside of pursuing your business.

If the idea of personal objectives still perplexes you, take some time to think about it. Being passionate about films is one thing; having nothing else in your life is something else. Once you can identify your personal goals, continue on.

List your personal goals on something, not in your head; writing in the margins of this book is permitted. Describe as many or as few goals as you want, as long as you have at least one. Here are some examples to help you get started:

  1. Improve my standard of living.
  2. Live and spend quality time with my family in Council Bluffs.
  3. Play in poker tournaments (my list).
  4. Work out with a fitness trainer on a regular basis (should be on my list!).
  5. Volunteer at a local food bank every two months.

Now identify your filmmaking (i.e., business) goals. Again, make a list using the following examples as a guide:

  1. Make inspirational films.
  2. Form a company that will make action/adventure films with budgets less than $10 million.
  3. Create a distribution division in four years.
  4. Make a feature documentary that will influence national health care.
  5. Sell your company to Universal in ten years.

Now list both the personal goals and the business goals side by side; then rank them in order, with “1” representing the most important to you. (Note: You can download a format from the book’s website.) Only you can set these priorities; there is no right or wrong way to do it. Once you have made the two lists, compare them. What conflicts do you see? How can you reconcile them? Accomplish this task, and you will be ready to write the story of your business. You also will be ready to draw any lines in the sand about work that conflicts with your combined list.

Getting It All Together

Putting together the story (or script) of your company is like making an extended pitch only longer. (Chapter 13 has more on pitching.) You want to convince an unknown someone of the following:

  1. You know exactly what you are going to do.
  2. You are creating a marketable product.
  3. You have the ability to carry it off.

Essentially, you are presenting the basic “plot” of your company. The difference is that a script provides conflicts and resolutions as plot points. By completing the previous writing exercise, you should have resolved any conflicts. Remember what your teacher taught you in high school English: who, what, when, where, why, and how. These questions are your guidelines for formatting the Company section of your business plan. Before you go any further, ponder these questions again:

  • Why are you making films?
  • Who are you?
  • What films or other projects will you make?
  • When will you get this show on the road?
  • Where are your markets?
  • How are you going to accomplish everything?

Note that the standard order is changed a bit. The why needs to come at the beginning to set the scene for the rest of the story.

Why?

Now that you have listed your personal and business goals, you can identify the underlying aim of your company, known in corporate circles as the “mission statement.” This statement describes your film’s or company’s (remember that even if you are only making one film, you are a company) reasons for existence to you, your partners and managers, your employees, and, most of all, your money sources. It allows those marching forward with you to be marching to the same drummer.

A major reason for failure is lack of agreement on where the management/production team is headed. A film is always a group project; there is far too much to accomplish for one person to do everything. It is important to ensure that company personnel do not go off in three or four different directions. Many companies that fail do so because of lack of focus; your company does not have to be one of them.

What is it you really want to do? Make franchise films? Make children’s films? Focus on car crashes and other special effects? Clearly define your objectives for both yourself and others. As long as people can identify with where you are heading, they will not get lost along the way.

When your goals are down on paper, stand aside and take an objective look. Does this sound doable to you? Would it sound reasonable if someone else presented it to you? If you were an investor, would you put your money in this project?

By the way, in writing up this description, you are not required to incorporate all your goals for the world to see. Your personal goals are yours alone—unless they affect the production significantly. Suppose, for example, that you are active in animal rights organizations. For that reason, you are adamant that no animals ever appear in your films. Everyone working with you has the right to know about this dictum. Investors don’t need to know, since your films don’t involve animals.

I am often approached by producers who have strong feelings about the source of investment money (how it was earned) or about certain countries to which they refuse to distribute their films. Such decisions are yours alone, unless you have partners in the project. As for countries, however, you may not have a choice. Normally, these countries end up being major markets. Either it will affect your forecast negatively, which will put off potential investment money, or distributors will simply refuse to take the project. They do not like to give up lucrative markets and potential profits. You have a right to your principles; if they affect future revenues, however, you must tell your investors what they are.

This brings us to a brief discussion about honesty. What if you intend to make, say, environmental films but fear that you will lose potential investors by being explicit? Should you keep your true plans to yourself? Should you claim to be making some other type of film, such as action/adventure? This question has come up in seminars and classes repeatedly. In my first UCLA class, the following conversation took place:

STUDENT: If I tell them that I’m going to make environmental films, they won’t give me the money.

L.L.: What are you going to tell them?

STUDENT: I won’t tell them what kinds of films I plan to make.

L.L.: You have to tell them something. No one is going to buy a pig in a poke.

STUDENT: I’ll tell them that I’m going to make action films. Those always sell well.

L.L.: Then you would be lying to your own investors.

STUDENT: So? The idea is to get the money, isn’t it?

L.L.: If lying doesn’t bother you, how about fraud? The best-case scenario is that they will take their money back. At the very worst, you can be liable for criminal penalties.

STUDENT (with shrug of his shoulders): So?

You may think that I invented this conversation to make a point. I wish that I had. Unfortunately, it is a true story. Is it surprising that, at the same time, the university offered an ethics course and no one signed up for it? My job is not to lecture anyone, although it is tempting. Your moral values are your own. Suffice it to say that fraud is not a good offense to commit, and investors do not respond well to it.

Who?

By this time, you ought to know who you are, both personally and professionally. Now you can use the mission statement to define your company. Start the Company section of your business plan with a short statement that introduces the company. Give its history, ownership structure, and details of origin. Include the following in the statement:

  1. Type of company: limited liability company (LLC) currently is the usual format (and name of state where filed)
  2. Names of principal management/production people

A beginning statement might be something like this:

AAA Productions is a California limited-liability company formed for the development and production of Hispanic-themed films as well as the employment of Hispanic actors in primary roles. Over the next four years, the Company plans to produce three independently financed feature films with budgets between $2 million and $7 million. During recent years, the movie market has become more open to stories about ethnic groups. Films with Hispanic themes have led the way and proved that there is a market.

Not only has the writer said what films the company intends to make, but he has also identified a specific goal that is both professional and personal. The company’s “principal purpose” describes its mission statement. It is closely tied to the personal beliefs and desires of members of the company.

What?

Mysteries do not work, except in scripts. The readers of your business plan want a straightforward summary of your intentions. Saying that you will make films without a discussion of content is not enough. What specifically do you plan to do? In the Company section of the business plan include a short recap of your film(s). You will explain the individual projects in more detail later in the Film(s) section. You should summarize all the areas that your plan covers, such as the following:

  1. Films
  2. Budgets
  3. Types of functions (development, production, and distribution) in which you will be involved

Rationality must intercede here. What you want to do and what you are most likely to get done may be two different things. In one of the piles of business plans from outside sources at my office, for example, a group stated that it planned to make 10 to 12 feature films a year with average budgets between $8 and $15 million. This undertaking is laudable even for a large, integrated production company like Lionsgate or The Weinstein Company, but it may be questionable for a brand new company due to the quantity of resources—both money and people—involved. For this brand-new company, it was a foolish goal. No one in the company had ever made a film before. Even if someone had, consider the effort. The films would require more than $100 million in production costs alone in the first year, not to say anything about finding the staff, cast, and crew to make them. If you were an investor, is this a project you would view as “reasonable” for your hard-earned money?

Of course, people beat the odds every day. If entrepreneurs believed in the word impossible, there would be no progress in the world. Nevertheless, you should weigh the scope of your venture against the experience of the people involved in it. For a new company, aiming to produce one low-to-moderately budgeted film in the first year makes the odds of receiving funding a little better. I always tell first-time filmmakers to make and distribute one film first; then do a business plan for a slate of films. Since I make more money if they do a company with lots of films to forecast rather than one, there must be a good reason for that advice!

Experience producing or directing television programs, commercials, documentaries, music videos, and industrials is better than no experience at all; however, feature films are different in terms of time and budget. Being circumspect about the size of the feature budget in relation to your experience not only will impress investors but also will keep you from overextending your abilities.

With a one-film plan, you need only to look ahead five years (one for production, time for distribution, and two to three for revenue of most of the revenue stream). If you are starting a multifilm company, however, you must consider where your company will be five years hence. Analyze everything you plan to be doing over that time. If you plan to go into book publishing in year four (I’m not recommending it), that goal needs to be part of your plan. Even plans to sell the company in five years must be mentioned. All of this is part of your projected bottom line. Although you may not know all the specifics, the size, scope, and type of your planned projects need to be stated.

Even if your company has been in business for a long time or if the principals have considerable experience, never assume that readers have an intimate knowledge of your business. Present the same details in your plan that we have discussed already. If you do happen to give the plan to someone familiar with the industry, they will be happy to know that you also understand it.

Remember that it is important in this document to keep the malarkey factor to a minimum. That does not mean that you cannot put in a little positive public relations, but leave your press clippings for the Appendix.

When?

In describing your project or company, you may have already stated how and when you began functioning as a company. You may have a great deal more to say, however. The majority of companies run by independent filmmakers are start-ups. If your company has only just begun, there may be a limited amount of information to provide. Be clear about the current situation, whatever it is. You may still be someone else’s employee, for example.

Starting Steps

You have already taken the first step of starting a business—translating the entrepreneur’s vision into a concrete plan of action. The next step is the practical process of actually setting up shop. Go ahead and file forms that may be necessary for your type of company, have an address (even if it is your home or a post office box), and print business cards. To digress for a moment, I urge everyone to have a business card. I have found that writers or people with below-the-line jobs tend not to have one. Always have your name, a contact phone, and an email address available to give to anyone you meet. It is crucial once you have the desire to make your own films to have a business card.

You must create all those minutiae that say to prospective investors, “This person knows what he is doing.” Note the following checklist:

  • Define the job descriptions of the production team.
  • Determine the location and cost of offices.
  • Have your stationery and business cards printed.
  • Set up phones and a fax machine or scanner for easy communication.
  • Arrange for professional guidance from an attorney and an accountant.
  • Introduce yourself to your banker and set up a checking account.

A more important step is choosing your legal form of business. There is no one form that is best for everyone:

  1. A sole proprietorship is owned by one person. It is easy to initiate and faces little regulation. The individual owner has all the control but all the responsibility as well. It is the normal state of doing business for consultants and others who mostly work alone.
  2. A partnership is a business with two or more co-owners. The LLC is a common form of partnership for independent filmmakers. It is an operating agreement for one person or between you and your production/management partners that you register with your state. This LLC, however, should not be confused with an Investor Offering, which also may be called an LLC (see Chapter 9).

If you already have a company, you probably will want to register a new LLC, which will be in partnership with the funders. For example, Business Strategies is my company. What if Karen and I decide to make films together? We will set up a new entity (Movie Money Pictures, LLC) for that purpose. MMP, LLC will then be the main (general) partner with the investors in the Investor Offering. That way, all the profits due to the filmmakers will flow to the joint company, rather than Business Strategies or Karen’s original company. It is always important to keep the money and legal titles separate from other companies that either of you have.

Over the years, a common situation I have seen is Jim proposes a film or slate of films to Myrna with whom he wants to partner. Since she has an ongoing company, she suggests that they just make them as part of her company. The problem is that Myrna’s name is on the legal registration with the state or other entity as the legal owner of the company. Unless that is changed to add Joe’s name, she now has control of the films. As I suggested above, even if she did that, he might now be responsible for previous debts of the company. Always—I’ll repeat this, always—have your own attorney check any legal agreement before signing it.

Suppose that you have had legal problems with money in the past. Don’t be coy. Obviously, you need other people’s money for some reason. Most investors will insist on full disclosure. They need to know the depth of the problems to overcome. If you have leftover equity owners from a previous incarnation or have imprudently spent money on cars, confess now. In the business plan, the sin of omission is as serious as the sin of commission.

You may find yourself in another situation. What if a company of the same name or a company that you bought for this purpose was in some other line of business before you bought it? The name is established, but the business has not yet functioned as an entertainment entity. On the other hand, you may have bought an operating film company that has been unsuccessful. Both circumstances add assets and credibility to your company. Do not attempt to give the impression that you had anything to do with building the assets that remain the original company; on the other hand, be sure to explain any problems that may have occurred under previous owners.

Do not be afraid to state the facts. Investors want to know what they are getting into. Besides, being candid has its own rewards. People with money tend to know other people with money. Even if one prospect is not interested, his friend may be. If there is anything negative to know, an investor probably will find out eventually anyway, and you will lose not only an investor but also the chance for him to recommend you to someone else. When I wrote the first edition, people were not on the Internet. It was a small world then, and the Internet has made it even smaller. Once you start getting a negative rap, the word spreads quickly.

Where?

Potential investors want to know where you are going to sell your films. Although “worldwide” is a good thought, you should be more specific. If you are making your first independent film, it is not likely to have a $25-million budget. (If it does, please reconsider. Your company is not Alcon Entertainment yet.)

There are many different things to choose from when starting a film company. I strongly suggest sticking to films in the beginning. However, some people want to make films for the broadcast media, direct-to-home video, or create their own distribution division for theatrical. This may hinder raising money when you do not have a significant track record. Remember that the Company section is an introductory statement, not a thesis. A short summary, such as the following one, is all you need.

The company’s objectives are to:

  • Develop and produce a film that will resonate with both domestic and foreign audience.
  • Maintain strong management control over production to obtain the best quality.
  • Pursue independent production financing in order to make the best possible deals with distributors, thereby maximizing returns to the investors.

How?

Up to this point, you have essentially outlined everything your company proposes to accomplish. In the rest of the business plan, you will describe each step in detail. Chapter 3, “The Film,” is a continuation of the what. It is an in-depth study of each of your projects. Chapters 4 through 10 and 13 describe the how. This is the central plot of your business plan. How do you fit into the industry? How will you identify your place in the market? How do distribution and financing work, and how will you pursue each one?

Management and Organization

Conclude the Company section of your business plan with a brief description of your production team and its key members. This means writing just a paragraph or two for each. Save the six- or seven-page résumé for the Appendix. How many people you put in this section depends on the strength of the production team.

Generally, you only want to include people above-the-line—producer, executive producer, director, writer, coproducer, assistant producer, and editor. Unless they are producing the film, I put the bios of actors as attachments in the Film section. Track records also are important. Although they are normally considered to be below-the-line, I include noted cinematographers or well-known musicians acting as the music producer in the production/management team.

Track records in other businesses are also important. I just finished a business plan for which one partner has extensive financing experience. I couldn’t convince him to let me put his bio in a one-film plan. Even though the filmmaker has experience, this person’s business experience definitely would make an investor feel comfortable.

The following is an example:

Production Team

Self Consumed, Director and Screenwriter

Self Consumed will be writing and directing our first two films. Last year, he directed the romantic comedy short film, Louise Loves. It was well received at several film festivals and won the critics’ award at the Mainline Film Festival. His fifth feature screenplay is in development at Crazed Consultant Films. Consumed has directed commercials for 15 years. In addition, he has done promotions for the Big Time cable system.

Simply Marvelous, Producer

Simply Marvelous worked in acquisitions and production at MNY Pictures. Among the films that she was responsible for are Cat Cries at Sunset, Phantom of La Loggia, and Dreaded Consultants IV. Previous to working in the film industry, she served as Executive Vice President of Marketing at APQ Automotive.

Frieda Financial, Executive Producer

Frieda Financial brings to XXX varied business and entertainment experience, including five years’ experience in motion picture finance with the Add ’Em Up accounting firm. Previously, Financial worked in corporate planning for the health care industry.

Make these descriptions with more detail than I have here, and include all the essential information; however, do not write a PhD thesis. Put long list of projects elsewhere. For example, Mr. Consumed’s commercials and the companies for whom he worked can be listed on a résumé in the Appendix. For the sake of your readers’ sanity, however, do not create a ten-page listing of all of a director’s commercials, even in the Appendix.

Catch-22 Experience

What do you do when no one in the company has any experience? Tread very carefully. My advice is to attach someone who does. Why would any investor believe that you could make a film with no previous experience and no help? The amount of skill expected is related to the budget as well as the genre of the planned film. Suppose you have decided to make a $10-million film for your first venture. You have written a script and have partnered with people with financial or retail backgrounds, but no direct knowledge of or experience with film. Would you take $10 million out of your own pocket for this?

If you don’t know people to add to the production group, network through film groups in your area or at film festivals and markets to connect with someone. You also can write to people whose previous work makes you think that they would love your film. Try to be rational here. Don’t spend ten years waiting for Jodie Foster or David O. Russell to respond.

Be careful how you do this, though. You want to avoid making the production of your films look like no one is the leader of the group. One wannabe producer came to me with a plan for a first movie, with himself as executive producer. He planned to start with a $20-million film and felt that running the computer system at a production company was appropriate film experience. His explanation read as follows:

So and So has 25 years’ experience working with computer systems, 10 of them at X & X Production Company. So and So is the producer and has an experienced crew ready to work with him. These technicians have a combined experience of 105 years in the film business. If So and So has any questions, they will be able to help him.

This is a dangerous trap. The expectation that your inexperience will be covered by other people working in various crew positions may backfire. The old saying, “A camel is a horse designed by a committee,” is applicable here. The producer is the manager of the business and must make the final decisions; therefore, the person in this position must have knowledge on which to draw. If you don’t have it, hire a producer who does. Investors expect to see people in charge who have more than a vague idea of what they are doing. When describing their experience, some people elaborate on the truth to a fault. Think carefully before you do this. Filmmakers often put their most creative efforts into writing the management summaries.

Compare the following real biography to the “elaborated” version that follows:

  • Real biography: Leonard Levison worked as an assistant to the associate producer on The Bell Rings. Before that, Levison was a production assistant on four films at Great Movies Studios. He began his film career as a grip at the studio.
  • “Elaborated” business plan version: Leonard Levison produced the film The Bell Rings. Prior to this project, he produced Heavier Than Thou, The Poker Chip Always Falls, and two other films at Great Movies Studios. He began his film career as the executive producer on various films.

Harmless public relations “puffery,” you say? This overstatement is similar to the inflated income some people put down on a home loan application. You might assume that this is just the way things are done, but this action can come back to haunt you. A Los Angeles entertainment attorney told me about a court case in which the fictional management biographies of the filmmakers were the investor’s sole reason for suing when a film lost money. He said that he “bet on people” and only read the management portion of the Company section of the business plan.

Try to be objective about the film or films that you are creating. If you are making a very low-budget film, experience with short films may be enough. On the other hand, it is less likely that an investor will give money to totally inexperienced filmmakers with a five-film slate. No situation, as I have said, is impossible. The safer you can make the downside (chance of losing money) for the investors, however, the likelier it is that they will write you a check. No matter how emotionally involved an individual investor might be in the project, there is usually an objective, green-eyeshade type sitting nearby, trying to make your plan fit her idea of a “reasonable” investment.

A Word about Partnerships

In forming a company to make either a single film or many, you may want to take on one or more partners. The usual makeup is two or three people who co-own a company and work full time in it. Each one is personally liable for the others. It is quite common for good friends to become partners. Because of the relationships involved, however, many people doing business with friends often do not take the same care that they would take with total strangers.

Handshakes are only an invitation to work together. No matter what the affinity with one another, agreements between people must be signed contracts. Over the years, I have had countless partners come to discuss the business plan without first making their own agreement. In some cases, this has resulted in the project not starting—or worse, being stopped once they have paid—because the people involved had not made their own formal agreement. Once they are faced with making a formal agreement for the purposes of the plan, someone doesn’t like the original handshake agreement. Or people don’t agree on the details of the original agreement for which there are no notes. Even if there are emails, nothing has been signed, and a change of mind over who will get what is not unusual. I have even been told that I made the potential forecast sound so good that the writer decided to demand an equal percent of the profits rather than a simple agreement to be paid for the film.

A good partnership requires the presence of two contradictory elements. First, you and your partners must be very much alike so that your goals and objectives mesh. On the other hand, you must be very unlike and complementary in terms of expertise. Often, one partner is more cautious and the other more adventurous. Whether to form a partnership can be a difficult decision. As in many other situations, list the advantages and disadvantages of a partnership and see how it looks to you.

The following are examples of such lists. First, the advantages of entering into a partnership:

  1. I will have a measure of safety because it takes two to make any decision.
  2. I will avoid the unremitting and lonely responsibility of doing everything by myself.
  3. I will have a partner with skills that are different than my own.
  4. I will have someone to share crises with.

Here are some reasons not to enter into a partnership:

  1. My share of the profits will be a lot less.
  2. I will not have total control.
  3. I will have to share recognition at the Academy Awards.
  4. My partner’s poor judgment could hurt me and the film.

Assessing Your Strengths and Weaknesses

Casting an unbiased eye over your plans is always hard for entrepreneurs. A strong desire for everything to work often clouds your vision. Evaluating the strengths and weaknesses of your film(s) in the beginning, however, will save time, turmoil, and money later. You might be able to describe the strengths of your company as follows:

  • Associates of the company possess unique skills or experience.
  • We have special relationships with distributors or other professionals or companies in related fields.
  • Unique aspects of this business that will help us are …

On the reverse side of the ledger are your company’s weaknesses. Be honest with yourself when identifying your company’s failings. This exercise saves many companies from later failure. By converting the strength statements to negative statements, you can spot problems. Write them down on a piece of paper to review:

  1. No one in this company possesses unique skills or experience.
  2. Our films have no distinctive characteristics that set them apart from others in the marketplace.
  3. We have no special relationships with distributors or other professionals in the entertainment industry.

Being good in one area of business does not guarantee success in another. For example, suppose that an entrepreneur from one area of entertainment, such as commercials, decides to go into theatricals, an area in which he has no experience. Although he knows how to manage a profitable business, feature filmmaking has its own unique set of concerns. The business requires larger sums of money per project than do commercials and involves greater risks in terms of market.

In addition, running a company as opposed to being a studio producer or an independent working on one film at a time requires different skills. Successful executives often rush into new businesses without preparing properly. Used to calling all the shots, they may have trouble delegating authority or may hire lower-level development personnel rather than experienced producers in order to maintain control. The producer can counter these weaknesses by studying the new industry first and hiring seasoned film people. Running through this exercise will help you in two ways: First, you will locate the holes in the dike so that you can plug them before any leaks occur. Second, you can use it to assess how much confidence you or anyone else can have in your organization. In addition, pointing out the obvious to readers never hurts. You should not make readers work to see the good points. As to weaknesses, most investors are sophisticated executives and will see the problems themselves. If you do not mention how you will overcome the obstacles your company faces, the investor may question your ability to understand them. Being frank may help your cause rather than hurt it.

Less Is More

The Company section of your business plan not only summarizes the essential facts about your company but also is an introduction to the rest of the business plan. It should be short and to the point. Prospective investors want to know the basics, which will be described in exhaustive detail throughout the rest of your proposal. Many readers of this book’s previous editions have told me that the phrase that was most important in writing their own plans was “less is more.”

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset
3.149.243.18