10 |
The Financial Plan
Get your facts first; then you can distort them as you please.
FORECASTING WITHOUT FEAR
Predicting the future has been popular since the days of Nostradamus. No one can afford to run a business without looking ahead. Only when you have a clear picture of your film's potential results or company's future can you proceed with a feeling of confidence. In the past 500 years, little has changed except the technology. For filmmakers, predicting the revenue of films yet to be made is a necessity. This chapter reviews how to find data, what to do with it after you find it, and how to create your own financial forecasts.
Students often object to looking up boxoffice grosses for a class assignment. Their idea of a business plan is a description of their films and, possibly, general market and distribution information. Although important, these items pale in importance to projected income. Remember the investors? They are going to read the Executive Summary first and then go quickly to the revenues and expenses. Money is the glue that holds these building blocks together.
A filmmaker recently asked me if all my business plans showed films making a profit. The short answer is “Yes.” Before investors hand over hard cash, they want to believe that your project will be profitable. In rethinking the Mark Twain quote at the beginning of this chapter, I became concerned about the phrase “as you please.” Partially, this is true. However, keep in mind that whatever the forecast, it has to look reasonable to the “he who has the gold.”
Forecasting is an art, albeit not a precise one. Sophisticated business writers like to say that the one sure thing about a prediction is that it will be wrong; they are probably right. The value of a forecast is as a guide for making decisions; the better informed the forecaster, the closer to actual events the forecast will be. By researching history, obtaining the best data possible, looking for relationships among the data you find, and making assumptions about the future based on those relationships, you hopefully have a rational basis for your forecasts.
When writing your proposal, you have to decide which group of numbers tells your story best. The most recent data may be a year or two behind because of the flow of revenues. You therefore have the opportunity to forecast to the current period, putting whatever spin on these statistics you can justify with current events. Remember our discussions about investors in the previous chapter? They value two things most of all: facts and common sense. Your goal is to show that the independent film market is robust and that profits can be made.
Anyone Can Do It
There is no mystery to forecasting revenues and expenses. You do not have to be an accountant or hold an M.B.A. You do not need previous knowledge of trend and regression analysis or internal rate of return. This jargon is used by financial whiz kids to speak to one another; life can go on without it. The information that you uncover can be used to create the numbers that make a company look feasible. You will take the elements that seem to influence the outcome of a film—genre, stars, director, distribution, ancillary returns—and analyze how much you think each will influence the resulting revenue. I used to say that the only math skills you will need are adding, subtracting, multiplying, and dividing. Mix these skills with a little gut feeling, and you have a forecast. If you can balance your checkbook, you can create a forecast.
FINDING THE DATA
What Are Comparative Films?
Forecasting requires that you use films that reasonably can be compared by theme, budget, and release date. Due to inflation, audience tastes, numbers of screens, and other film business trends, the industry standard has been five to seven years including the current one. I have always used five years.
What makes a comparative (comp) film is a combination of factors. The fact that you are making an independently financed film does not mean that you can only use independent films. For low budgets, most of the films within a reasonable budget range are likely to be the only ones available. If you were making a film like Knowing, for example, with a budget of $37 million, it is likely that a majority of your comparative films will have been made by studios.
What is a reasonable budget range? With a $2-million budget, I would like all comp films to be at $6 million or below on the high side. Any film with a lower budget that shows a gross profit is fine. However, to find enough films you may have to move the upper limit of budgets that you are using. Be aware though that production quality and cast become important the higher you go. As talented as you may be, you can't use films with $15-million budgets in this financial comparison.
With the advent of digital film, the concept of having a budget that includes a transfer to 35mm is important. I have found it is often difficult for filmmakers to comprehend. At this point, of course, there aren't enough films to compare. As discussed earlier in the book, despite the number of digital screens, all the profitable low-budget films that I have found were released theatrically in both digital and 35mm. When your $30,000 is upped to 35mm, what will it really look like? Is it really going to look like $5 million on the screen? Will it have the same cast that a $5-million film will have? When comparing your film to other movies, remember that the audience doesn't care how you made the film; they care about what the film looks like and who is in it.
On a statistical basis, I feel that at least four to five films are required over the three for which worldwide data is available. In 2009, for example, those years are 2005 to 2007. Now that you have decided your time span and budgets, you can then start looking for films that fit.
Matching Your Film
Do they all have to be just like your film? Films can be similar in genre and subthemes; however, it is unlikely that at any budget you will find 15 films “just like yours.” After all, your film is going to be unique. Therefore, start with your overall genre. You may have a crime drama. The film also could have action, romance, gay themes, coming-of-age, or a host of other themes.
The goal is to use films that relate to at least one of these. To fill out your list, budget also is a consideration. Since you are likely to be asked by an investor why you used certain films, have a reason for each film that you use. All you can do is your best to have a rationality for each film. There isn't a rule as to what will seem reasonable to a given investor.
The data that you gather about previously released films will serve two purposes: (1) show the profits of films recently released, and (2) supply a basis for estimating the revenues and total costs for your films. The first part of your numerical story consists of showing what has happened with films that have already been produced and released. You use these examples to build a case for the ultimate success of your film. Select recent films that have a relation to your planned production in terms of genre, budget, or other common factors.
Genre is a common way to group films; however, use whatever characteristic you feel links these films together. But whatever your rationale for grouping films, use budget clusters that make sense.
The films you include in your business plan depend on what is available. It is your choice whether to include films that have lost money. There is no database that includes all the films ever made, so you can't have a “fair” sampling no matter what you do. However, if you use only five films and three of them are films with extraordinary results—for example, The Blair Witch Project, My Big Fat Greek Wedding, Napoleon Dynamite—any projection you make will be unrealistic and recognized as such by most investors. Of course, if your budget is in the range of these films, you can't use Lord of the Rings.
For example, recently I did a business plan for a sci-fi action faith-based film. It is hard to find sci-fi in a low-budget film due to the special effects requirements. I went to www.imdb.com and used the “power search” feature to look for films with sci-fi in them. A list of 1,901 films came up. There were two films that I felt I could use for forecasting in this particular business plan. Of course, there were more that I could use in the Markets section, where you can use a film of the same genre regardless of budget. For the comps, there still were action, inspirational/faith-based, and other films in a reasonable (notice how often that word pops up) budget range that fit this particular synopsis.
Whatever tact you take, heed this warning: DO NOT INVENT NUMBERS. If lying does not bother you, getting caught in a lie will. Then the game will be over.
Where Do You Find Information?
Your first trip is to trade papers and free online data collectors such as www.boxofficemojo, www.imdb.com, www.thenumbers.com, and others. Film markets, seminars, and other industry meetings also help give you information on what films you will want to use. Let's look at some specific data that you can uncover in your research. Much has changed since the last edition of this book was published in 2006. I will be describing what sources you will use today. Those may change again by the time you buy this edition; however, the overall methodology will not.
Both Variety and the Hollywood Reporter have the full list of boxoffice grosses online every week for the current period and cumulative year-to-date. The grosses are reported to Variety by Rentrak and to the Hollywood Reporter by Exhibitor Relations Co., Inc. Previously, the full Daily Variety list was only available by subscription; those data is now free. The same list is available online at the Hollywood Reporter but only with a subscription. The boxoffice grosses in these tables equal the total domestic gross sales for the film. Since they include Canada and Puerto Rico, I refer to the grosses as domestic or North American rather than United States. The majority of the films on the list used to be studio productions. Over the past ten years, however, a vast majority of films on the list fit this book's definition of "independent." Both sources have virtually the same boxoffice numbers. Once you have picked the films you want,www.boxofficemojo.com is another credible source.
Finding budgets can be another question. Hopefully, most of the films you want to use will have budgets at the sites indicated above. Interviews with filmmakers in the public press are another good source. Check the week or two before release. For recent film releases, check television and radio shows for the appearance of a filmmaker. Young filmmakers appear often on the daytime and evening talk shows. Watch CNN, E! Entertainment Channel, Oprah, Charlie Rose, and all the news programs, especially on the all-news channels. In recent years, the Independent Film Channel and the Sundance Channel have gone on air in selected markets; naturally, they are dedicated to information about independent films.
The film festivals are another place where you can gather extensive financial information. Many producers and directors of independent films attend, and they will usually answer questions about not only the cost of their films, but also the source of their financing. People often feel more comfortable about revealing proprietary data when face-to-face. Also watch the Oscar telecast and the Cannes Film Festival Awards (broadcast on Bravo). You never know what you might learn.
Revenues from cable, free television, DVD, and other ancillary sources; foreign; and the prints and ads (P& A) costs are harder to find. Some DVD data may be published, although currently the only credible free site is Box Office Mojo. Be careful that you are looking at dollars, however, and not a rental index as listed on www.imdbpro.com. Note that Box Office Mojo was acquired by IMDb.com, Inc. in July 2008.
In previous editions, I had a separate section for average foreign revenues. The section included a table of typical revenues from individual foreign territories for a $1.5-million film. With presales in flux and foreign territories giving more and more screens over to their locally made films, I don't feel it is appropriate to put together such a table at this time. Distributors either are giving very low numbers or saying that there aren't any foreign sales at all for low-budget independent films. As always, the foreign value of any film depends on the story, cash, etc. In addition, the trade papers have been reluctant to estimate such sales in 2009. Normally, during Cannes or AFM, the Hollywood Reporter has had a table called “The Going Rate,” which shows average sales of films by territory. Likewise, once or twice a year Variety has had a table called “Global TV Price Spread,” which shows average prices paid for feature films as well as televison movies, dramas, reality shows, sitcoms, and a combination category of documentaries and children's programming. The last of those charts appeared in 2007. Note their names, as I am sure they will reappear when the world economy gets on a better footing. When I feel there are real numbers, I will include my chart on the book's companion web site.
If you do use the tables from the trades, the range of likely prices is based on the distributors’ experience in selling low-budget films. When forecasting, you always want to be conservative, so you would use the average return of dollars. For example, if in Japan, you see that the high is $70,000 and the low is $20,000. This does not mean that all distributors will pay you $70,000; generally, the most they will pay is 10 percent of the budget. Use the average figure, which is $45,000.
Eventually, to find all the data you will need for your three years of worldwide numbers, you will need to buy the information. I recommend Baseline StudioSystems (www.blssi.com) as the current best source. Once you go to the web site, click on “Baseline Research” to learn about purchasing films.
You have to go with the best information you can get. DO NOT MAKE UP THE NUMBERS. If telling the truth isn't reason enough, you may have investors check some of your sources, which will be listed at the bottom of your tables. Or, as I have seen many times, some friend of theirs will claim he saw “something somewhere that was another number.” Worse yet, your potential investor may have a relative or friend in the film business who can check the data. All sources will not necessarily have the same information; however, you want to be able to point to your sources as the most credible you could find.
ANALYZING THOSE PESKY NUMBERS
Did I say without fear? You must analyze the data before putting it into your proposal. Be strong. You can do it. When collecting and analyzing, keep in mind the words of Mark Twain: “There are three kinds of lies: lies, damned lies, and statistics.”
The discussion of financing and your presentation of comparative films, projections, and cash flows is the single most important section of your business plan. Most investors will read your Executive Summary first and then go straight to the tables. The filmmaker 's job is to be honest and use common sense.
I have said it before, but filmmakers have convinced me that I cannot say it too often. This analysis is your job, not the investor 's. Do not expect the investor to accidentally happen upon useful information while browsing through the 15 or 20 pages you have photocopied from newspapers and magazines. It is your duty to find useful information and present it in an easily understandable way.
Tables 11.3 through 11.6 included with the sample business plan (see Chapter 11 ) are examples of methods for presenting comparative films. The films listed in these tables are fictional but are based on the results of real films. These sample tables include the following items:
1. Domestic theatrical rentals: Domestic rentals are the portion of the North American theatrical box office that reverts back to the distributor (or producer). (The tables in the trades include Canadian boxoffice figures in this total.) There has been confusion in recent years, as we also refer to DVD rentals. The term domestic theatrical rentals is the industry standard and should be used.
As mentioned above, when working with numbers, you should avoid factoring in exceptional movies that would make all your averages too high. If you want to include My Big Fat Greek Wedding, list it and indicate in a footnote that it is in your chart for reference only. Just as on any given day any team can win, it is theoretically possible for any film to be a breakout hit.
2. Domestic ancillary revenue: The ancillary revenue includes all nontheatrical sources, such as cable, DVD, video, free television, syndicated television, and pay-per-view. Distributors have been trying various formulations of revenue sharing as opposed to paying per unit. However, it is too early to know the effect on independent film. Pay-per-view (movies on demand) is growing, although not as quickly as analysts have expected. Specific numbers do not exist for individual films, so some analysts use a general estimate. Those estimates are derived mostly from studio films, so they are more appropriate for budgets over $15 million than for other films.
Although release times (windows) into home video have become shorter for studio films, the windows for indies have remained the same. Cable and the premium channels are getting movies sooner than they used to, also. Be aware that although a few of the indie films financed by cable networks have had a U.S. theatrical release, most do not. In the past, PBS has also financed documentaries that have had a theatrical release prior to being shown on television.
3. Foreign theatrical revenue: The distributor is responsible for collecting money from the foreign box office, which includes all countries except the United States and Canada as well as Puerto Rico. Generally, the industry assumes that the North American box office drives all the other windows. If a picture does not perform well in U.S. theaters, therefore, all other theatrical and ancillary venues may be worth less money. On the other hand, some films that do only moderately well in the United States do much better overseas. To make the picture even murkier, there are films that do very well at the domestic box office and in domestic ancillary revenues but have virtually no foreign revenues that are recorded. Depending on the gross profit of those films, they can still be used.
The type of film and the stars often have a lot to do with these results. Certain U.S. television stars continually appear in movies of the week, for instance, because they have large followings in foreign markets. This fact does not mean that distributors will accept them in your feature films.
4. Foreign ancillary revenue: Foreign ancillary presents a great opportunity. Television companies often buy exclusive product. In addition, markets have opened up in Eastern Europe and Asia. The studios have established their own distribution arms in India and China. The potential revenues for English-language films, even small ones, in other countries remain much stronger than for foreign- language films in the United States.
5. Total revenue: This is rentals plus domestic ancillary plus foreign equal total revenue. The foreign dollars are assumed to have the exhibitor portion removed and, therefore, can be added to the domestic dollars to find total revenue. Always be sure that you are comparing apples to apples.
6. Negative cost, prints and ads, and total costs: We have already discussed finding the production, or negative costs, of the film. These are not the total costs, however. Prints and ads are an important expense. It is necessary to include these costs to get a total profit picture. As films stay in distribution, the P& A costs grow. Therefore, if you are forecasting the initial release cost, indicate it. The most credible source for this type of information is still Baseline.
7. Gross profit (loss): Gross profit (loss) equals the revenue minus the direct expenses before the company operating expenses. In this case, direct expenses are the negative and P& A costs. They relate directly to your film, as compared to the company overhead costs, which exist whether a film is in production or not. Notice the parentheses around the word loss. When preparing financial statements, use parentheses rather than minus signs to indicate negative numbers. Both words can be written on the profit line. However, if there isn't a projected profit, you may want to rethink the whole idea.
Forecasting While Keeping One Foot on Earth
Now we come to your films. Here are two guidelines for projecting your revenues. First, be conservative. The rule of thumb is to forecast your income on the low end and your expenses on the high end. Probably all filmmakers who have ever done a budget have padded it to be sure that they did not run out of money. You want to take the opposite path for revenues. If you are making a $1-million Indian-themed film, you would be fooling yourself to assume that the film will gross $141 million, as Oscar-winner Slumdog Millionaire did. It is nice to aspire to be an Oscar winner, but you can't plan on it.
Second, be honest. As long as the data of your historical films are as accurate as possible and the films you choose are comparable to those you plan to make, you should be all right. The comment made to me most often by distributors and investors is, “Tell them not to include Napoleon Dynamite and Facing the Giants as an average film.” Feel free to discuss them in your analysis as an example of an exceptional result to hold out the brass ring as a hook for the investor.
Assumptions
Before seizing your calculator, you should write down your assumptions. Unless you have concrete reasons for the forecasted revenues in your tables, people may assume that you invented them. There has to be a thought process leading to these numbers. If you have just written 15 or 20 pages for the preceding sections, you have already gone through the thought process. In most cases, the crucial elements have already been mentioned, and the list is a recap for your benefit and for the investor 's. Do not expect readers to remember the specifics from the body of the business plan; this is not a game of hide and seek with the investor.
Explain your assumptions at the end of your Financing section, directly before the tables, to be sure that the reader knows how you came to your conclusions. If you do not do this, it may look like you have no rationale. Review the assumptions in the sample business plan both in the book and the files you have downloaded from the companion web site before continuing.
Revenue and Expenses (Income Statement)
The Projected Income Statements (Tables 11.7 through 11.9 in Chapter 11), also known as the Statement of Revenues and Expenses, is the profit statement for each film. Likewise, the Summary Projected Income Statement (Table 11.1) indicates the bottom line for the company.
As I say in a preamble to the sample business plan, whether you are doing a business plan for one film or a company, the methodology is the same. In a one-film plan, you won't have summary tables. In the downloaded files, you will find a complete Financing section for one film using Len's Big Thrill from Chapter 11.
The sample shows a straightforward production company in which all the income is from films. If you are planning to produce other products or have additional divisions, such as direct-to-DVD or distribution, you will need other methodologies and types of tables for those items. You will have to provide separate assumptions and cash flows for those products because they function differently from film. Then make a combined statement that includes all the products.
Looking at our numbers, you can take the average or the median (the point above and below which half the films fall) of all the films, or you can give more weight to the more recent films. (Do not panic. The “how-to” is contained in the downloaded files.) It depends on whether you feel that the genre is gaining more audience approval or has been drawing the same amount of boxoffice dollars for the past few years. You have to look at the available data and use good judgment.
Note that these tables show worldwide results. As you will not have these for the two most recent years, you want to include a table for each film (Tables 11.4 and 11.6) that shows the box office and budgets only for those years.
The net profit (loss) line is the sum of the company's revenues and expenses. Commonly, the phrase “before taxes” is added to indicate that this is a preliminary income forecast. Do not let these phrases throw you. An accountant can easily prepare these statements for you.
Cash Flow Statement
A cash flow statement shows the timing of incoming revenue and outgoing cash. The dollars will not come in all in one week or one month. Table 11.10 shows the cash flows for the individual films, and the summary is Table 11.2. Notice that in the columns for the table, I have used generic terms Year 1, Year 2, Year 3, and so on. If you are looking for the production money, your year starts when that money is in the bank. To specify the first year—for example, 2010—could create a problem. What if you are still wandering around two years later looking for money? Finding money is hard; no need to announce it to your current prospect.
In addition, each year is further divided into quarters. This seems to make the most sense for showing cash flow. I would shy away from individual months. There is no way to actually track each month. Unless you have the distributor 's monthly accounts for various films in front of you, there is no way to track such data accurately. You have to give your investor a readable document, even if you aren't crazy about the idea.
In the sample cash flow statements all of the production money is outgoing in Year 1. I have assumed one year from the beginning of production to the end of postproduction. (The exception in my cash flows is animated films for which experienced filmmakers want two years for production.) If you are an experienced filmmaker, you may be able to shorten this timeframe. Release of the film is scheduled for six months after the end of postproduction.
An independent filmmaker won't know the actual timing in advance, unless she is doing her own distribution. Even if you already have a distribution agreement in place, you won't know. (I am making an assumption that vertically integrated companies like Lionsgate and DreamWorks aren't buying this book to find out how to calculate cash flows.) In order to make the table readable, I skip two quarters before distribution starts and make it clear that the plan is not promising a specific interval. Note there is the following comment at the bottom of the table: “For reference only. How and when monies are actually distributed depends on contract with distributor.”
The first rentals are shown during the quarter in which distribution begins. Throughout the year, we track domestic grosses week to week to find trends in the number of theaters and the amount of grosses. Going through that exercise will reveal a pattern that you can use. Average release “windows” give you an idea of the money flow from other sources. Most films don't stay in the theaters longer than six months; however, due to some long stays in the theater, I have a small amount of revenue still coming in a third quarter. The median stay for both independent and studio films is about four and a half weeks.
We can track when films go into DVD but not necessarily how long they are there. In addition, there may be a different method on how the dollars flow back to your distributor, the head of your revenue food chain. Therefore, I have chosen to include them, as the distributor normally does the accounting for money that is owed to the filmmakers and their investors—once a year.
For foreign revenues, all sources are grouped into one number. Not all films are released the same way. Some countries actually legislate the time period; in other cases, the distributor negotiates it. Some films go directly to DVD or satellite, which is a more popular distribution method in Europe and Asia. Trying to figure this out country by country would be excessive. The timing has been very fluid lately, so it is a good idea to research the topic to keep current. The films go into foreign release in the third quarter of Year 2, approximately seven months after the domestic release date.
The total line is the sum of the incoming cash minus the outgoing cash. Do not panic over minus totals. The amount of eventual profit is the deciding factor. In companies the minus total may last longer than in a one-film plan. As in Table 11.2, depending on how often you plan to start preproduction on the next film, the costs for the next film coming in as well as the P& A money spent by the distributor may keep a negative number in the cumulative total for several years. In a multipicture company, the cash flow statement allows you to see whether you will have enough money coming in to keep production going.
Overhead (Administrative) Expenses
The cumulative total is simply the sum of the totals from quarter to quarter, showing the position in profit and loss. These numbers represent the profits and losses from the films only. To keep the table simple for our purposes, assumed overhead numbers have been included in Table 11.21. In the overhead table (Table 11.11), however, I have not included specific numbers. It is meant to show you what line items you may have to use. These differ from city to city and country to country. While the films are clearly fake, I don't want to take the chance that someone will copy my overhead sample. You must research what those costs are in your community. In addition, add anything that is specific for you, and leave out line items that don't relate to your film.
An ongoing company has its past history to report, along with a statement of its present position. Your accountant will do the serious reports for you, such as Sources and Uses of Funds, Balance Sheet, and so on. These go into your Financing section along with the other tables. As new companies have less to report, don't worry. Just report what there is. There may or may not be a bank account worth mentioning. Present information that must be included in the business plan, even for a very small company.
If you are setting up a company, you will have ongoing expenses, far less than those of the studios, of course. These general administrative costs include salaries that are not attributable to a specific film budget as well as all of the company's tools of the trade—office equipment, telephone charges, entertainment costs, and so on. Your company may have fewer people or no salaried employees at all. Before Year 1, there are generally startup expenses. You may rent an office, option a script, buy a computer, or scout locations in the Dardanelles. Any expenses that are necessary to get your company going are shown in this table. Even if you wait for investment funds before doing any startup, list these costs separately. Some of them—like the computer—are one-time costs.
Like everything else, administrative costs are projected over the time period of the business plan. Look ahead to the number of films that you plan to make three or four years down the road. You may need additional office staff, more office space, or increased development money. Everyone knows that these numbers are guesstimates; however, as a general rule, you should include all the expenses you can think of. On the other hand, do not give yourself a salary of $1 million. I see this item in a lot of companies that never get funded. Because you are partners with the investor, your salary should be moderate.
What If I Have Only One Film?
No matter how often I mention it in the book, some people still are confused about the sample business plan in Chapter 11, which uses three films, because they only have one film. As a filmmaker (producer, director), you are the manager of a small company. The difference is that any expenses need to be in the budget of the film. Don't overburden this poor film with your car and house payments. Include only those things that belong in a film budget. You will be splitting those massive (let's be positive) profits with your investors.
The layout is the same for one film as for multiple films, but fortunately you have less number crunching. Your first table will be comparative films for the past three years (or four if you need them) for which you have worldwide numbers. Your second table will be the two years for which you only have U.S. box office and budgets. Then you have an income statement (without the overhead) and a cash flow statement, which will be similar to any of the individual films in the sample business plan.
DOCUMENTARIES
Due to the limited number of films and the lack of some information, I break my own rules in forecasting docs. There is more responsibility placed on you, the filmmaker, to be sensible and logical throughout the process. I know that many of you would rather never think about numbers. However, your investors do. How you do a forecast has to look rational to them.
In the past, I had only one table of comparative films. Since the last edition was written, however, there are more feature docs to use in a business plan. Consequently, the first two tables are similar with one major difference. Due to the relative lack of docs with worldwide data, I may go back as far as 2002. Therefore, instead of breaking the films into three years for running numbers, I use one long table. There is a sample documentary forecast in the companion files to show you the details.
Which documentaries to use and which not to use is a choice you will have to make. Clearly, political films don't fit with a sports or music documentary. They reach a broader audience, particularly with all the turmoil that has been going on around the world. I can't give you a hard-and-fast rule for which documentaries to use; it has to be your choice. Depending on the total story you are telling, you could be telling the true story about a well-known performer who was active in political and socially relevant subjects. Therefore, you may be able to use most of the successful feature docs that you want to.
As when making a table of the traditional feature films, list the extraordinary films when they are appropriate (e.g., Fahrenheit 9/11, March of the Penguins), but do not include them in your forecasting process. Even though it is tempting to use their high revenues, remember that your investor probably will know better. You want him to have confidence in you.
Note that fiction films cannot be mixed into a forecast for a documentary. They have a wider audience appeal and usually wider distribution. All of the revenue windows for a fiction feature are going to show higher grosses. Using them would mean that you are fooling not only your investor with an unlikely net profit number but yourself as well.
On the other hand, a successful documentary in the same budget range as your feature film can be used. For example, Enron: The Smartest Guys in the Room can fit in a low-budget film plan that deals with corporate greed and corruption, a theme that has become more prevalent in the financial turmoil of recent years. Since we always are looking at a conservative revenue projection for our “Moderate” column, using a film that has done well with a lower net profit result is not a problem.
Next, go through the forecasting process in Focal's companion web site for this book. Apply that process to your films with worldwide numbers. Taking into account those results and what you know about the boxoffice results for the other documentaries, make a reasoned estimate of the box office for your film. Then forecast the rest of the dollars.
THE NEXT STEP
Review Chapter 1, “The Executive Summary,” and then study the sample business plan in Chapter 11. Work through the sample in the downloaded files from the companion web site. Feel free to use this format as a guide in writing your own plan.
Have fun, and good luck!