You already have the skills. George Avgerakis explains how filmmakers can start a media production business, find clients and earn a living between films.
As you’re working day by day in the grind to become a name indie filmmaker, do you ever wonder, Hey, could I own a house most “A-List” directors would find comfortable? Why, I could own a Ferrari, or sail my own yacht or fly a plane. Or, maybe you choose to stay hungry and live from food you scarf from the craft service, scorning the rich life you can have just a few inches from your chosen path. If so, bravo. I hope you make it.
In the mean time, however, you might have a kid or two. You might get married, or need to help Mom and Pop. Life happens.
Just in case you decide to waver from the path and take a few months to try out the good life, I’ve written a little guide to setting up a little business on the side. I call it an e-Media Business, but really, it’s what you already do: Write scripts, direct, edit, distribute, and make your money people happy. You’ve already got the tools – the brains, the creativity, and a computer. That’s all it takes. And, yes, you’ll need one other little thing: the desire to contact people and tell them you’re better than a PA.
But heck, you already know that, so what’s keeping you back? Warning, however. You may just get to like this e-Media thing. I did. The house, the Ferrari, and the yacht. It’s a good life!
Build Initial Capital
No one can start in business without some money saved aside. The amount of money will depend on four factors:
(1) How much money you need to set up your business (to pay for equipment, a work space, and furniture).
(2) How much money, each month, you need to run your business (rent, electric, and salaries).
(3) How much money you can depend to obtain each month from customers.
(4) How much money you wish to take out of the business for your personal enrichment (profit).
Obviously, the more money you start with, the longer and better you can run your company before any money comes in from customers. This money is like fuel in a jet’s gas tank (a company burns money fast, like a jet!). Hence, the money determines your “burn rate.” This is a fixed amount of time, after which, you go broke.
Therefore, I urge you to build up as much initial capital as you can before you tell your boss to, “take his job and shove it,” and head out on your own. But, how much, you may ask, is enough money?
Investigate the Market
Before we can answer this question, we need to know the limit of your maximum earning potential in your given market. A market can be determined by the goods or services you sell (video, website design, and animation, etc.) and all of the customers in your area to whom you can sell those goods and services (film producers, corporations, retail chains, and schools, etc.).
Do not assume that just because there are other people making money with e-media in your area, the odds are excellent for your success. The market may already be “saturated.” That means that the current vendors already match (or outnumber) the extent of customer need.
You must diligently explore all of the customers and all of your potential competitors before you can understand your market. If your potential customers seem busier finding work than producing, and if the customers in your area laugh when you suggest that you want to enter the market serving them, these are sure signs that your market is saturated. If, however, a potential customer mentions that he would be glad to send you business he can’t handle, and customers tell you they would be glad to see your work, then you can be reasonably sure there is room for more players in your market.
Establish Prices
Once you are sure that your market can absorb another beginner like yourself, it is important to try to establish the going price for your work. This is a difficult task. Vendors and contractors are reluctant to reveal their figures. If you can’t get this information, try building a budget for the work you do, and then fill in the prices of each job by asking the subcontractors (cameramen, programmers, and editors, etc.) in your area.
Once you have a complete budget, take the total and double it. This doubling will help you account for the cost of operating the business and a small profit. Doubling may seem excessive, but my experience has shown that if a company does not charge double the cost of their work, that company will eventually burn out of money.
Figure Profit and Loss
Once you have estimated the prices charged in your market, you have to estimate how many jobs at that price you think you can sell in a given amount of time – for example, six months or a year. Next, figure out how much “gross” income those jobs will produce. For instance, if you can make an average of $10,000 per job and you believe you can sell and finish three jobs in three months, your Quarterly Gross will be $30,000.
From this gross, subtract your quarterly operating expenses and any profit you think you might want to extract to pay for your living expenses and, perhaps luxuries. Be realistic. No one can live on one peanut butter sandwich a day, nor should a budding producer go out and buy a new Ferrari. If you have a profit, try to add some of it to your initial capital to increase your company’s longevity or to invest in new opportunities.
Ideally, your estimated balance after six months should be at least “break even.” If there is a negative figure, you will have to pay this back out of your initial capital. Very few companies start out with profits after six months, but you cannot expect to eat into your intial capital every quarter and expect to survive for very long. How long can you survive?
Establish Burn-Rate
Once you have an estimate of your quarterly profit and/or loss, you can establish an estimated “burn rate.” This is a monthly figure of loss, which, when compared with your existing initial capital (or initial capital plus saved profits), will tell you how long you can keep your doors open at the current rate of business.
If you are not winning any customers, your burn rate will be very fast, perhaps terminal. If you get occasional work, your burn rate will be slowed, perhaps even stopped by a continued replenishment of profits.
Obviously, after you are in business for a while, you will be able to determine an accurate burn rate, but until you actually start working, you will have to estimate the burn rate. While you are planning your business, try to find work in your e-media specialty and save your money. The best way to prepare for starting a business is to work for a business that is already successful.
Estimate Equipment Needs
Many e-media producers, just starting out, think that they need a complete production studio, city-center office, and even a good looking receptionist to start the business. Such profligacy begins with the glamorous image of being a producer (which often substitutes for the actual achievement of that profession), and often ends with the sad realization that one’s facility has little to do with one’s success.
So, when should you buy equipment? Here’s the secret: Try to wait until you have actually sold a project before you buy any of the equipment you need to produce it. Equipment makers rely on “justin-time manufacturing” to time the creation of a product with the anticipated (sometimes the actual) sale. That is why you often have to wait a few weeks to buy a new video camera – the manufacturer is waiting for you to buy it first. Conversely, you might wish to buy a camera, or computer, after you sell the project. I call this “just-in-time purchasing.”
Since most e-media productions are paid for in thirds (first on contract, second at half-way, third on completion), you can use your first third to buy the gear. And, that is how you should limit the cost of your acquired equipment. Be wary of spending more for equipment than you can immediately justify with actually-received customer’s payments.
Research Potential Clients
Okay, you have all your financial and market research done, and all the signs say, “Go for it.” Even your rich uncle has kicked in a nice gift to get you started. Great. Are you ready to commit the cash? No.
First, you must now start actually researching the potential clients in your market. For each potential client, you must ask five questions:
(1) Are they wealthy enough to spend money on your work?
(2) How much do they need your work (or how unsatisfied are they with their current vendor)?
(3) How often do they contract work?
(4) How much do they spend on each project?
(5) And most important of all, who is the person who decides on a production and its producer?
Answering these questions will require real hard detective work. Ninety percent of selling is detective work! You can’t sell someone who has no need for your skills, and you can’t sell someone if you don’t know who to sell. Once you have answered the five questions above, you are ready to start calling each of these customers and presenting your skills. This is called, “pitching.” If you don’t pitch your work, you will never be a success. You could, of course, pay someone else to pitch for you, but your burn rate increases and a good salesman can always go out and find another producer to replace you.
Sell, Sell, Sell
Sadly, no creative person I have ever met enjoys selling, but the cruel truth of this bittersweet world is that you must sell yourself if you want to successfully pursue your craft. The more you sell, the more you make. Eventually, if you sell diligently, you will create a surplus of demand for yourself. Then you can hire other artists (the ones who don’t want to sell) and pay them less than half what you charge your customers.
After many years of successful customer service, you may not have to work at all – except to manage other workers who are making money for you. Then, if you budget your time wisely, you can spend it doing exactly what you want. Perhaps you produce your dream movie with your own cash. Perhaps, by then, you will be tired of being an artist and you will go out and buy that Ferrari and a sailboat. Or maybe, you will sit and write books to help your younger artistic brothers.
My experience has shown that one has to make a certain amount of sales calls every day to survive. In a busy market like New York, I need to make between ten and twenty calls a day. These produce a predictable amount of contacts, which if pursued further, produce a certain amount of bid requests (usually the ratio is 10:1). Each of these bid requests will yield a ratio of 3:1 bids-to-sales. Roughly speaking, 20 calls a day will yield about $300,000 gross a year. Results may different in your area depending on the factors mentioned above, but the fact remains; you have to make sales calls every day to be successful.
George Avgerakis is VP Creative Director and co-founder of Avekta Productions in New York City. His company produces video, animation, interactive programs and website content in English and all foreign languages. Mr. Avgerakis is author of three books on the business of e-media, the last of which is “Softimage XSI for a Future Animation Studio Boss” from Course Publishing. His hobbies are writing, sailing and restoring old Ferrari motorcars. prices on camera, audio rentals. Student and educational discounts. Unbeatable sales, service, and support. Lectrosonics Wireless. 1-800-883-1033.
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