Controlling Your Destiny
Independent doesn’t have to be a synonym for badly made.
ROBERT REDFORD
Why Should You Buy This Book?
King Ferdinand of Spain appointed a group of consultants to advise him on Christopher Columbus’s enterprise for sailing to the Indies. This scholarly group of astronomers, mariners, and pilots pored over charts and graphs. They determined not only that the world was flat, but also that the ocean was too big to be conquered.
“Ergo,” they said, “if you try to sail to the Indies, you will fail.” But Columbus had done his homework and planned ahead. He replied, “I have researched my own charts and graphs, spoken to other sailors, and obtained years of technical experience that proves otherwise. I believe it can be done.” Columbus was the prototypical entrepreneur. He examined his proposed business venture, made forecasts regarding pros and cons and plunder versus expenses, and then he decided to move ahead.
Neither Columbus nor any of his friends or enemies knew that he would run into the Americas on his journey. Nevertheless, he seized his opportunity and took appropriate action. By keeping abreast of the situation on his ships, and the changes in the outside environment, he was able to make an informed decision. When he landed in the wrong place, Columbus looked at the opportunity, measured it against his goals, and decided that he had discovered a better place than he had originally intended.
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 2006. The world is in turmoil with terrorists and strange viruses, governments are changing, corporations are failing, and the number of independent filmmakers keeps growing.
Tactics for 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 four editions of this book, the big news in the “industry” chapter was which company was buying Universal Pictures. That company has remained part of the NBC family since the previous edition; 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 technologies to the film business. The “paradigm” (an in-vogue word meaning “pattern”) shift that has been predicted for 20 years is taking place, and its overall business effects are debated constantly. What hasn’t changed is the audience. No matter how many products divide the finite viewing audience, theatrical motion pictures keep chugging down the track. Product is 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. Once a filmmaker decides to make one film or many, it is up to him or her to understand how the business world functions. Of course, your goal may not be feature films at all. Instead, you may focus on other types of films—direct-to-DVDs, television, cable, or even cell phones. All of these are important, and all the principles stated in this book apply equally to them; however, their business models differ from that of film.
With new opportunities appearing for the independent filmmaker, more and 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 much it costs to make a film, 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 films. This is different from other businesses.” The details of business may differ from industry to industry and from segment to segment, but the principles are the same. Movies involve lots of people, all of whom expect to get paid. 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 investment. All companies 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 found success without a business plan. Many more films without one, however, have not been funded and never see 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 production companies 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 $100 million in seed capital. Why don’t you get together with Victor Visionary from Major Merge Investment Group and create a business plan? If we agree with your product analysis and the numbers look good, we’re in business.
Trust me (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 becomes a reality, much thinking and analysis will be done. Someone will ask 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: Summary, Company, Product, Market, Sales, Finances.
What do you do next? 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.
A movie is a form of art, but a very expensive one. 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 (or $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 value is definitely in the eye of the beholder.
The Blair Witch Project, which earned $300 million worldwide and whose 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 and were successful in their effort. They were innovative not only in the filmmaking but also in their use of the Internet. The point is that they made a film that brought back 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 (both domestic and foreign), it doesn’t matter if your film is a mini-budget or a $75-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, family)—this used to drive 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.
There are plenty of successful filmmakers who manage to find their own financing to do things their way—John Sayles, the Coen brothers, Jim Jarmusch, and Henry Jaglom, to name a few. They make films on whatever subjects please them. Their films may have a limited distribution, but the directors (who often are also the writers) have their own financing. They keep their budgets at levels comparable to the likely box office receipts.
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 have success, 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 attracting an audience mutually exclusive. If you suffer from this malady, try to reeducate yourself. 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.” Three of the best business plans I ever wrote are stored in drawers; they haven’t raised any money. In addition, although you may have the most well-written and -presented business plan ever done, to raise the money you have to (1) be ready to go ahead with the business, (2) understand the premise, and (3) look until you find the money.
To be ready to get your project off the ground, 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 company was not ready to be serious about taking on partners or making changes. Business plans do not find money by themselves.
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, the company is only a reflection of your demeanor and presentation. 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.
All consultants have clients that they would like to keep hidden. 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 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.
Can Anybody Do This?
Developing a business plan involves the proverbial “10 percent inspiration and 90 percent perspiration.” Anybody can do it. Unfortunately, I have found that most people lose interest when faced with the amount of research and work that are 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 an accounting genius. 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 nationwide and worldwide event. The person in Cincinnati with a camcorder who aspires to make a documentary or a feature film is as much a filmmaker as his or her counterpart in Los Angeles. 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, Orlando, and Austin. My client Rick Pamplin, who owns Pamplin Film Company, lived and worked in Los Angeles for a number of years until reaching a different level of success in Orlando.
An Entrepreneur Is an Entrepreneur Is . . .
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 that entrepreneurs make is to assume that a business plan is a creative piece of fiction used to trick a bank officer 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. The biggest mistake made by independent filmmakers is to see themselves not as businesspeople but as artistes—creatures whose contact with the murky world of business is tangential to their filmmaking and unimportant. Nothing could be further from the truth.
When a person has an original idea and develops it into a product, 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 her 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.
Rick’s Story
Independent filmmaker Rick Pamplin has had his own film company for more than 12 years. After selling scripts and projects to studios and major independents in Hollywood, and after teaching screenwriting, low-budget producing, and directing for nine years, Pamplin moved to Orlando. “It wasn’t easy and most of my friends and family thought I was crazy. At the time I had a wife and small child and no income. But in my heart I knew I was an independent filmmaker and believed in my talent and myself.” Unfortunately such struggles can play havoc on a family, and eventually the Pamplins divorced.
“My first project was with a partner. Although we had a script, raised development money and attached talent, we could never get the film off the ground. We raised money for a comedy concert film, Michael Winslow Live, by asking everyone we knew and everyone they knew for money.” The film was sold to STARZ Australian television and received American and European DVD deals. Their second project, Hoover starring Academy Awardwinning actor Ernest Borgnine, had a small theatrical opening. A third project, Magic 4 Morons, was an award-winning instructional video. It debuted on the Home Shopping Network, got a distribution deal, and reached several foreign markets. In addition, Pamplin eventually bought out his business partner.
Since Pamplin’s real passion was feature films, Pamplin and Business Strategies developed separate business plans for three features and set out to find production funding. Each of the projects attracted talent, development money, and endless meetings. A New York company, a Tampa, Florida homebuilder, and a doctor all came to various stages of contracting for the financing, but the deals never closed. “We had raised the money for our first three projects in a relatively short period. Raising money for independent films is a marathon, not a 100-yard dash, so you’d better be prepared for it. Luckily our business plans were solid, investors liked our packages, we signed an Academy Awardwinning actor to a three picture deal, which gave us credibility, and we were able to raise development funds to sustain us during the lean years.”
After several years of dead ends, frustrations, broken promises, and hundreds of meetings, through his participation in an Orlando charity event Pamplin met Harry Green, who had a long history in raising investor funds and had worked with a small movie company in Los Angeles. In June 2006, Pamplin and Green signed deals for financing the three films. The story originally ended here for this edition. Unfortunately, a month later Harry Green passed away unexpectedly. Rick lost both a business opportunity and, more important, a friend.
Things turned around quickly, but just as quickly they continued to turn. Someone who worked for Harry said he had an uncle who might be interested in investing, a fundraiser from Palm Beach called, and Rick is currently meeting with a South African source. “And so it goes,” says the determined Pamplin. “The most important thing is to never, ever, give up or lose passion for your project.” And so the book goes to press with this unfinished saga and on a decidedly optimistic note.
Why Bother With a Business 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’ book My Indecision Is Final: The Rise and Fall of Goldcrest Films, he mentions 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 it is obvious from reading Eberts’ book that this group of very talented people had widely divergent professional and personal agendas. They also had very different business styles.
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 it 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 Only One Film?
In a word, “Yes.” After four editions, people still call or e-mail 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. If you are doing a single film, the outline is exactly the same, except you have fewer numbers to project and there is no separate overhead. The results of one film will take you out three years, from the beginning of development to 80 percent of your revenues being returned. It is essential to remember that before going into business, you must find out for yourself whether business is your thing. 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. Reading this book will help you determine if a business is what you really want.
The Facts and Nothing but . . .
The structure of a business plan is standard, but the contents are not boilerplate. Each film company or project has its own unique qualities. All plans must be substantive, promotional, and succinct, with a length generally between 20 and 50 pages—that is, comprehensive but not too long. The business plan needs to contain enough information in a readable format that it excites, or at least impresses, potential investors. 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.
A few years ago, a friend 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 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 low return to investors we will never know.
About This Book
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 the business life is not for you.
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 company will function. Accordingly, this book describes the system of marketing and financing individual films within the greater framework of the film company.
The book is arranged so that the numbered chapters follow the steps of the business plan. They appear in the order that the sections of your plan should follow:
- Executive Summary
- The Company
- The Films
- The Industry
- The Markets
- Markets Part II: The Nontraditional Film
- Distribution
- Risk Factors
- Financing
- The Financial Plan
Note that the subheadings in these chapters do not have to appear in the business plan. This outline has been the stuff of business plans from time immemorial. Finally, a sample business plan for a fictional company appears in Chapter 11.
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.
My goal in writing this book is to give you, 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. There are many filmmakers with projects who are struggling to obtain equity (partnership) 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. 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.
The book contains a CD with additional information. Don’t go to it until you have gone through the book. One of the many things that I have always wanted to do is explain the art of forecasting. Since the sample business plan in Chapter 11 is for a multiple film company, the exercises on the CD take one of the films from that company and explain how I arrived at the forecast and cash flow. Other information included are sample synopses of well-known films, sample distribution contracts, a list of sources for data information, and film festivals that meet the Academy of Motion Picture Arts and Sciences eligibility rules for short films.