Nowadays it's pretty cost efficient to produce a film of any length. Short films, episodic, and feature films of all kinds are being produced today without any sort of ground under them. If you're aspiring to be creative, such a director, writer or DP, it's important to lay the ground work early and properly to ensure your entire focus is creative when the time comes. You don't want to wear too many hats when you're taking on a creative role in a production, especially going from creative to business, it's exhausting and your work will most likely suffer. Do it right, do it smart and do it first.
So, when is it a good idea to form a business around the film you're producing? First, before answering that, let's take a look at the common mistakes made by filmmakers. I see these fancy opening graphics of "production" companies that don't exist. Makeshift press releases listing the production company, the actors, director, budget, etc. We've all seen it and it's just amateur when "A SUPER AWESOME PRODUCTION Presents" and then you Google that company to find out it doesn't exist in the digital world or see it just has a Facebook page with 2 people that like it. One of the biggest mistakes is producing a film without a proper business idea and the ground work laid for that particular film. This is unacceptable if you want to be taken seriously. The fact remains, if you wish to direct a film or write, shoot, etc. you must become a producer first and foremost.
Being a Producer First
The moment you decide you want to make a film you are a producer. A good producer will not only know which story to select, but will know and understand your own limitations. If you aspire to be a writer and have a wonderful idea you believe will have commercial appeal, know your limitations: can you write this? Do you have the ability to convert your idea successfully to page which can be translated to screen? Do you fully understand or grasp the concrete structure that is your story? Do you write dialogue well, do you have the ability to know the difference between good and bad dialogue? That is just scratching the surface. If you answer "NO" to ANY of these questions, then be a producer first and hire a writer to do it for you. Now, if you aspire to be a writer then sidesaddle that writer during the process, find out technique, structure, beats, moods, act breaks, etc. Learn as much as you can. What if you want to be a director? Lots of people do and lots of people are. Find a director if you haven't directed before or know anything about direction or acting or on set behavior. Be a producer first.
Be a Good Producer
If you want to be taken seriously and advance yourself into the status you desire then start from day 1 doing things the correct way. Whether or not you're raising funds to produce your film you should have the ground work laid as a business. Depending on the budget and who's money you're using will really determine the level of which to establish your business. If you're using your own funds you should at least file a DBA (Doing Business As), it set's you a part from yourself as a business. However, if you're using someone else's money aka investments you should file your articles of organization with your state for an LLC (Limited Liability Company). It will cost a few hundred dollars, but they'll issue you Federal EIN (tax ID) and you'll be officially registered as a business. It'll show any potential investors or anyone you want to partner up with you and your film that you're serious. Besides, you always want to be prepared in case your little film becomes the next "Facing the Giants".
Side Note: If you file for a tax ID you will need to file it in your return for that years taxes. Even if you don't have any money coming in you still need to file. I believe my accountant called it a 'no activity'.
So now that you have your freshly filed LLC, you're ready to venture out and find someone to write your story? No. Before you go out and preach you have the best idea it will also serve you (and others) to see if you actually do. How to go about doing this is a little tricky and a little creative, so let your creative juices flow. If you don't yet have your script, at least start by writing out your idea in treatment form from beginning to end leaving out no great detail. Once you have that you can roughly gauge your commercial appeal by the "beats" of your story. I explain this process a little more in the previous blog here: http://myfilmstuffs.blogspot.com/2012/02/on-expanding-business-plan.html
It's a good idea to keep your audience in mind while writing your story, otherwise you won't get much of an audience. To find your audience you should at least put forth a little effort and do some research as to who you expect will want to see your story. Some helpful sites are:
http://www.ercboxoffice.com
http://boxofficemojo.com/
http://natoonline.org/
http://www.the-numbers.com/
http://www.mpaa.org/
http://www.nielsen.com/us/en.html
http://www.variety.com/Home/
http://www.hollywoodreporter.com/
Be a Smart Producer
Whether you're using your own financing or you have private investors you will want to follow protocol and be as systematic about the production as you can. A good trait to have as a producer is organization, whether it be with time or just in general, organization goes a long way. If you're looking for private funding there is little room for error, now with the expansion of crowd sourcing for private investment it's becoming more and more popular and more and more complex. Let's go over some of the details.
Disclaimer: I am in no way an attorney of any sorts, the following information is based upon my experiences and you should always request the counsel and advise of a licensed attorney or certified accountant.
As far as I'm concerned there are two ways to structure your offering (asking of money) and that is as a loan or equity investment. If it's a loan (which I wouldn't do) you have to worry about it being secured or unsecured and what recourse is attached to the loan (can they sue you or not), doing you include any equity or steak in the profits and to what guarantee are you offering. As equity, you offer a percentage of up to 50% and are sold as 'shares' or 'units'. Basically you're offering securities, it's a fancy and scary word. With this there is a lot to be considered, such as are your investors going to have a say in the production (active investor) or not (passive), and what kind of offering are you giving (eg. 50/50 net split with 15% compounding interest). If you are going to offer equity investment you should consult an attorney to draft the proper documents necessary (private placement memorandum, operating agreement, subscription agreement, etc) and also you want to file with the SEC (Security and Exchange Commission). I believe it's Form D as an exemption under Rule 506 and that is if you're offering to accredited investors only. What is an accredited investor? http://www.sec.gov/answers/accred.htm
- a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase, excluding the value of the primary residence of such person;
- a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year
You will also be obligated to disclose all information about your project that the investor might need to make an intelligent decision with regard to the offer. It should be listed in the private placement agreement; the structure of your company, how much you're looking for, the offer, the repayment structure, any influential contracts or agreements, the budget top sheet, the film itself, and any other legal documents pertaining to the business itself...oh and your business plan. It's complex, so please consult with a professional before doing anything.
Your budget. Chances are that anyone you give the plan to will skim the executive summary and head right to the financials. They want to know how much you're looking for, what they get out if it, and most importantly WHEN. So it's beneficial to you if you have a budget in mind and a nice outlook at how you're going to spend that money. I only did 2 budgets, one was for a Nicholas of Myra and the other was for $250,000 documentary. The reason I have only done 2 is because you need someone that does budgets and watches over it like a hawk, a production manager and/or a line producer and they know costs and where to find it and work deals. If you're not either of these, then call one to have it done. It should include a top sheet (summary) and a thorough page by page analysis of the cost of each line item.
Be a Smarter Producer
Once it's out there that you're looking for financing, you may experience some weirdo's coming out of the wood work that really don't have the capability to help you raise money, but they're only interested in taking your money. These people will claim they can find you financing and they will require a 10% finders fee. If they do anything other than give you contact information to people they believe are interested in investing, and you pay them the 10% and you find out they are NOT registered or a licensed securities broker ...you can be in a lot of trouble and out a lot of money. Another trick they'll use is that they'll require that you give them money in order for you to get investors. It's crazy and stupid but it happens. Don't fall for it. If anyone says they have money to invest, ask to show you proof, it's not bad business to ask so don't be afraid to. You need to protect yourself, you need to know that your investors are accredited (annual income meets a certain amount, etc.) there is a check list out there that you have them or their representation fill out to have on file that says they are accredited.
When I was helping Jerry with Nicholas of Myra, we collaborated on a lot of these aspects to ensure we had the proper footing in which he can proceed to make the film. It sure wasn't easy but it was essential if we were to expect anyone to give us any money to make the film.
Business Plan
For information on what to include and how to structure your plans, please refer to my previous blogs
Here: http://myfilmstuffs.blogspot.com/2012/01/structuring-business-plan-for-films.html
and here: http://myfilmstuffs.blogspot.com/2012/02/on-expanding-business-plan.html
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