Business plans

[Ucla_sb]

Ok, im sure some of you guys can help with this and some will be wondering why im posting this on the writing boards. Ive been focusing my writing efforts lately on low budget genre stuff, which i love writing, and have come up with some fun concepts and hopefully winning stories( i love 'em, worried about the rest of the world). I'm in a wierd place where i have access to money in a fashion, and i have a script that could most cerainly be shot with little money. OK, the main thrust of the question is how does one create a budget projection? is there a formula or website or something that can help breakdown these elements? am i just avoiding the hard work of looking into how much itll cost to build/obtain props, locations, etc? because going to the money people with a "business plan" i think is a fairly powerful tool and allows me to physically show how much it would cost toget the film "in the can". Thoughts?

[krano]

*I'm not a professional.

Budgeting software can help, but there is no easy out of this responsibility. Granted, the time it will take to flesh out the budget will depend on how much you need, which in this case is not much.

I would start by just jotting down everything you think you need and find the associated costs. Then, compare that figure to what you will actually receive from your financiers and trim out the least necessary items.

My advice: buy movie magic budgeting. It's the industry standard and will make a better impression than a mere spreadsheet.

Since you said this is a small budget, I'm assuming it will be non-union. If it were to be union, then I also suggest you get professional help to calculate fringes, "sixth" days, etc.

[Goodwriterguy]

Ok, im sure some of you guys can help with this and some will be wondering why im posting this on the writing boards. Ive been focusing my writing efforts lately on low budget genre stuff, which i love writing, and have come up with some fun concepts and hopefully winning stories( i love 'em, worried about the rest of the world). I'm in a wierd place where i have access to money in a fashion, and i have a script that could most cerainly be shot with little money. OK, the main thrust of the question is how does one create a budget projection? is there a formula or website or something that can help breakdown these elements? am i just avoiding the hard work of looking into how much itll cost to build/obtain props, locations, etc? because going to the money people with a "business plan" i think is a fairly powerful tool and allows me to physically show how much it would cost toget the film "in the can". Thoughts?
I think you have two choices, or perhaps three, to get a budget done.

1. Buy the budgeting software
2. Pay some dude to do it for you.
3. Do it yourself.

You may want to have the budgeting software anyway if you're going to be producing other pics in the future. It will guide you through all the various ins and outs and help you get every element of cost into the budget. But you'll need to do some thinking too, going through each scene and imagining what you'll need to actually shoot it.

There are people in Hollywood who will knock out a budget for you based on your script and what input you give them as to locations and scheduling and whether it'll be a union or non-union shoot. I think you can find these kinds of folks in the ads that appear in the backs of the screenwriting mags, or probably even the Yellow Pages.

If you developed your budget yourself one approach would be to create a spreadsheet so that each scene has a line and a subset of many lines below it to accommodate entries for every element of cost you can think of, camera/lens rental, lighting, sound recording, a generator for location work or sound stage rental, depending, film stock, commisary, crew ...

First you'd want to lay out a shooting schedule and optimize it,

Day One in Big Bear: shoot scenes 3, 5, 6, 8 and 9;

Day Two in Apple Valley: shoot scenes 1, 4, 7, 10, and 12.

Day three through six on a sound stage: shoot scenes 2, 10, 11, 13, and 14.

(these numbers are far from realistic of course, you'd do well to shoot two scenes a day).

Then figure out what you need on each of these days in terms of gear, crew, equipment, film stock, props, wardrobe, commisary, and the like and appportion those to each scene on your spreadsheet.

This would be a sort of work-both-ends-to-the-middle approach. I mean, like you'll have to rent a camera/lenses for the entire shoot so find out how much that would cost for six days and then apportion one-sixth of that cost to each day (assuming a 6-day shoot) and perhaps even break that down and apportion each day's camera/lens rental cost to each scene, depending on how you structure your speadsheet for summing.

And don't forget the costs of insurance, some legal fees, permits, accounting and payroll, car rentals, and other overhead kinds of things, film processing (and dailies), and so on.

And in the end, an amount for contingencies!

A lot of pernsnickety work to be sure but you should be able to get there from here if you just keep plugging away at it.

I don't know what the software costs but I think I just convinced myself I'd want it!

Good luck in any case! :Thumbs:

[Hillgate]

The software is a few hundred dollars BUT you can achieve exactly the same by using an Excel spreadsheet. A lot of accountants still use boring old Excel over and above glitzier programs.

More important than coming out with a budget that looks reasonable is that you have done your homework from the bottom up as opposed to top down in relation to each item on your budget. It's easy to 'wing it', but dangerous if the winged budget ploughs forward and turns out to be inaccurate. Getting additional funds once you've started shooting is not easy, and I know a few productions that simply ran out of funds before they could finish, or else had to wait a year to scrimp and save to get it done. Everything suffers if things are drawn out.

So it really doesn't matter if you handwrite the thing, as long as each of the numbers is representative of what the item costs. And a contingency of 10% is always eaten into.

All this talk of numbers has got me reaching for a glass of wine. Excuse me. :)

[Mac H.]

If you want a massive budget spreadsheet to cover almost everything, use the free one on the AFC website:

http://www.afc.gov.au/downloads/a-zfeature_v3_aug08.xls

The description of it is here:

http://www.afc.gov.au/filminginaustralia/azbudget/feature/fiapage_70.aspx

Remember, though, that a detailed budget certainly isn't expected in a business plan. "I've never done it before, but I made a bloody complicated spreadsheet, and I think it will cost $X" isn't convincing.

A simpler approach would be to pick similar sized projects done in a similar area and use those as benchmarks. Then you can also list how much money those similar projects really made back for the investors. (Or at least estimate)

The downside is that this may not give an answer that you like !

Good luck,

Mac

[Hillgate]

If you want a massive budget spreadsheet to cover almost everything, use the free one on the AFC website:

http://www.afc.gov.au/downloads/a-zfeature_v3_aug08.xls

The description of it is here:

http://www.afc.gov.au/filminginaustralia/azbudget/feature/fiapage_70.aspx

Remember, though, that a detailed budget certainly isn't expected in a business plan. "I've never done it before, but I made a bloody complicated spreadsheet, and I think it will cost $X" isn't convincing.

A simpler approach would be to pick similar sized projects done in a similar area and use those as benchmarks. Then you can also list how much money those similar projects really made back for the investors. (Or at least estimate)

The downside is that this may not give an answer that you like !

Good luck,

Mac
Not many films actually recoup for their investors. I wish I knew the %, but it's extremely low. People like to invest for many reasons, some financial, some philanthropic, some ego-driven, but the thing to stress to any and all of them is that it's all high risk: investors will appreciate YOU saying that and not having to work it out for themselves.

The basic costs of marketing a film - especially a low-budget film - might easily exceed the cost of making it, and without marketing it, or without employing a solid sales agent for domestic and international, you're up the Swannie without so much as a toothpick. Without a distribution channel, you're back to square one, just like watching the last page come off the printer thinking you've written the best thing since the bikini and then realising that unless a lot of other people agree with you, nothing's going to happen.

If it's just you and your perspiration and the cost of paper then no-one's on your back. Add nervous investors and you have a different scenario. Imagine you're sitting in a pressure-cooker and a nuclear bomb just went off in the kitchen... ;)

[Mac H.]

Not many films actually recoup for their investors.Yep - thus the last line in the bit you quoted!

So why the heck do people invest in donate money for indie films?

Mac

[Goodwriterguy]

Yep - thus the last line in the bit you quoted!

So why the heck do people invest in indie films?
Many variations on this theme, but in many cases, some people just have too much money so they'll help out their nephew who wants to make a pic and whom they've always liked and thought well of anyway. Hey, what's another $50K one way or another?

But few do it 'cause they think they're going to make money.

Some do it because they resonate with the project's idea, the message they think the pic conveys. Others do it 'cause they get off seeing their name up on the screen, and still others do it because they think there's a long term payoff in the filmmaker, if they support them now, they'll "make it" and when they do ...

But many indies are financed by small groups of people who get promoted into doing it by a zealous producer who's could sell refrigerators to the Eskimos, in winter.

And some indie productions get at least partly financed by government subsidy, e.g., Canada's National Film Board, or by philanthropical institutions or other funders.

It's fun to go to a film festival and sit around in the bar come evening and listen to the tales about how people got the money to produce their movie.

[krano]

People like to invest for many reasons, some financial, some philanthropic, some ego-driven, but the thing to stress to any and all of them is that it's all high risk: investors will appreciate YOU saying that and not having to work it out for themselves.


An approach to investors I've often thought about would place emphassis on losses - allow them to write their investment off in their income tax returns (I'm not tax expert - yet). Investors are allowed to write off losses from your film for three years. Meanwhile, you push the idea of the possibility of recurring revenue (dvd, netflix, etc) to them later.

The theme: lower tax bill now, income later.

Of course, it would require film finance experts to put such an arrangement in place, but it could be viable.



On another note: have you (OP) made plans of issuing a memorandom to your potential investors? It highlights the risks of your project and is required by law. It's similar to a firm's prospectus before an IPO.

[Hillgate]

The theme: lower tax bill now, income later.

Of course, it would require film finance experts to put such an arrangement in place, but it could be viable.



On another note: have you (OP) made plans of issuing a memorandom to your potential investors? It highlights the risks of your project and is required by law. It's similar to a firm's prospectus before an IPO.

There are many such schemes in place already, whether it's cashflowing the tax credit, straight equity investment into a qualifying company with specific additional extra breaks/tax write offs, usually capped and which are often geared towards lower budgets, etc etc...

Issuing a memorandum is required when you make anything that could be deemed to be a 'public offer'. If you have just friends and family, and a small number of them, no memorandum is required. Most official memoranda have bundles of legal disclosures and effectively 90% of them contain information that is (1) as dry as a bone and (2) expensive to produce as you may or may not need qualified accountancy, corporate or legal input to produce the thing in the first place and it has to jump through many hoops, including compliance (in the UK at least) with FSA regulations and statutory provisions relating to public offerings.

It can work, but often a public offer is not the way to go for film. The fewer investors you have for an indie, the better. Multiple investors greatly increases your overhead and hence budget, or else detracts from the little you have.

[krano]

Multiple investors greatly increases your overhead . . .

I'm still learning the business. How do more investors increase overhead? In this case, is overhead referring to more paperwork and record keeping?

[Hillgate]

I'm still learning the business. How do more investors increase overhead? In this case, is overhead referring to more paperwork and record keeping?

Not just basic paperwork. There may be disagreements about how to do things which stretch timelines and increase costs for example final cut approval may have to be by a majority of investors or all of them or three of them or whatever. It's much easier to have 1-5 investors. Get past the 10 mark and administration is more tricky, although not maddeningly so, until of course you need to get in contact with all of them to ask them for more money (try this with 100 people). With 1 or 2 people, you can ring them up. You can have 1 or 2 on set or let their son's friend's girlfriend's sister play a walk on role. If 100 investors all want extras, all want to come to the premiere(s) (assuming you actually finish filming) and all need TLC then it's a full-time job just keeping them happy and it's that little bit more expensive. That's why big companies have departments dedicated to 'shareholder relations.'

In addition, a low number of investors, or just one, means that it is likely that that investor will be a more sophisticated (financially, that is) individual and may actually be able to bring something more to the party than just money.

And you don't need more than a signed one-sheet plus cash for a single investor. It is a whole different ball-game when it comes to a public offer. You will have to add an additional £50,000 minimum to the budget in order to follow this through all the legal hoops, and that's on a low budget. That's the bite. You will also probably need a completion guarantee (ie insurance that the film will be made for mass investors) which will add another 10% on to the budget. You will need a proper production accountant. You may need to employ someone just to deal with the investors and the paperwork. It all adds up.

[8thSamurai]

Oh, oh, pick me, pick me!

:) I write for another forum - www.filmmakerIQ.com, and we have a whole section of gak about raising money, putting together a budget, proposals, blah blah blah.

A rough line item budget might help, too - google for some examples. There are things that you might not have thought about that'll raise the estimated budget considerably, such as food, transportation, lodging for the crew, expendables for each department...

How many 'featured' characters are there? How much face time do they get? How many extras? (While you probably won't have to pay extras, they still need snackies and water, plus someone to wrangle them)

How many locations? How much securing do they need?

Special effects, and what kind?

If you have a bit of money already, you can look for 'match funds' as well.

Oh man, there's SO much to talk about for somethin' like this.

And don't forget a good business/entertainment lawyer, for things like escrow, agreements, errors and omissions insurance, blah blah blah ...

Depends upon how big you want to go. Do you want to find some aspiring college kids and shoot this on weekends? (I don't really recommend this route, but it depends upon what resources you have available, and what you're willing to do.)

I worked on one movie that had this special agreement. Can't remember what it was called, but every cast and crew member worked for $100 a day, 'cept for the PAs. We stayed on the director's farm - full of nice little guest cottages. I know the film screened at the Hudson Valley Film Festival, but I'm not sure what happened after that.

One thing to think about. A big chunk of your whole budget should be dedicated to marketing, film fests, buyer fests, promotions, etc.

[Hillgate]

Oh, oh, pick me, pick me!


I worked on one movie that had this special agreement. Can't remember what it was called, but every cast and crew member worked for $100 a day, 'cept for the PAs.

Favoured nations. :)

[nmstevens]

Ok, im sure some of you guys can help with this and some will be wondering why im posting this on the writing boards. Ive been focusing my writing efforts lately on low budget genre stuff, which i love writing, and have come up with some fun concepts and hopefully winning stories( i love 'em, worried about the rest of the world). I'm in a wierd place where i have access to money in a fashion, and i have a script that could most cerainly be shot with little money. OK, the main thrust of the question is how does one create a budget projection? is there a formula or website or something that can help breakdown these elements? am i just avoiding the hard work of looking into how much itll cost to build/obtain props, locations, etc? because going to the money people with a "business plan" i think is a fairly powerful tool and allows me to physically show how much it would cost toget the film "in the can". Thoughts?

You should certainly listen to what others have said, but I must add this general warning.

As with something like, say, wiring up your house, there are some things that amateurs can do -- like for instance swapping out a plug, and there are other things that you really don't want to do yourself, like rewiring the breaker box.

For certain things, you really want to have somebody do the work who knows what they're doing, because if you put your finger in the wrong place you can electrocute yourself or burn down your house.

And that's true when you're doing things in the world of business plans and offerings and prospectuses and limited partnerships and taxes.

If you just want to get together with a few friends and make a movie for a few thousand dollars -- you probably don't need to do very much.

If you're doing something substantially bigger -- something involving real money and real investors, you should bring in somebody who knows what they're doing.

It is not something that you want to learn about as you go because you may suddenly discover, after spending a hundred thousand dollars of somebody else's money, that you've stuck your finger in the wrong place or burned down your house, in a business way.

That is, you may have inadvertently made a deal or an agreement that is illegal, or failed to follow the tax laws appropriately, or done something or failed to do something that the result of which is that your movie will not be releasable either here or elsewhere.

So it's great to ask questions here, but what you need to do is to talk to somebody who actually really knows stuff for real.

Say, an entertainment lawyer who puts together business plans for movies, or somebody who actually does this sort of thing for a living and knows how it's really done.

When you're dealing with other people's money (unless the memo note reads "love Mom and Dad") you've got to be very careful and very serious about what you're doing.

NMS

[8thSamurai]

Thanks, Hillgate - I've only worked under that agreement once, and couldn't remember what it was to save my life.

Lawyers and accountants are a must once you start dealing with investors.