business plans that get funded - how?

filmman

filmman

Veteran
I've never written a business plan that got funded.

I've been asked once again to write a business plan for a movie.

The budget is supposed to be between $1 and $3 million. The movie is to have at least one name actor. This I do have. I have a name actor already attached.

If the business plan is well-written, I'm assured funding.

I've bought a business plan software. It looks good, but it's too complicated. It asks for projections for five years. Whatever figures I enter, it looks ridiculous.

The program projects losses for five years. Nothing comes in for 3 years and only expenses pile up; it looks bad. How's anybody going to invest or accept this business plan?

The business plan is not geared toward filmmaking. That's my opinion.

Do you have a better idea about how to write a business plan that looks good to investors?
 
Hey, talk to an accountant. My business plan is made for 24 to 36 months. I didn't set it for 5 years. I think 5 years is the business standard, but really an indie movie should make 80% of it's money in 24 to 36 months. 9 to 12 months to make the movie, 9 to 12 months to market/festivals etc. Then your sell and you may get some HBO/Cinemax type stuff.

Sorry you're having such a hard time. But that's all I have for you.
 
A business plan is your plan that you intend to execute to get the money back and make a profit. If you're just randomly sticking numbers in a calculator, that's not a plan. If you don't have a plan, you don't have a plan, and putting numbers to paper that you don't understand doesn't amount to having a business plan.

I mean, it amounts to basically handing over some paper to your funder and saying "I have no business plan, but here's some numbers, will they work? If not, I'll go make up some more. What numbers would you like to see?" That might work for Enron, but it's not likely going to work for anyone else.

You can try contacting Louise Levison to see if she'll write up a plan for you, but... still... if it's not your plan, and if you don't understand it, then ... what's the point?
 
OK, two pieces of advice. Write the plan for shorter period -- 24 months. And use realistic estimates for what the movie will cost and where the revenues are coming from.

So the suggestion is write an original proposal for funding. I hope it won't be re-inventing the wheel, that's all :-)
 
filmman said:
So the suggestion is write an original proposal for funding. I hope it won't be re-inventing the wheel, that's all :-)
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You always will. Great thing is that once you get your base "business plan" you can modify it for future projects.

I mean all the plan is - is this:

I plan to Cast these People or Equiv
I plan to shoot these dates on this type of equip
I plan to finish the production by... post production by...

I plan to Submit to film Festivals utilizing x-amount of dollars
I plan to talk to the following distributors: A, B, C
I plan to work a deal based on this info- (in this info give other movies that have gone the path you have and were a success - give their numbers)

In 1 year I plan to accomplish xyz
In year 2 I plan to accomplish xyz
in year 3 I plan to accomplish xyz
 
Thanks J.

I wrote down the steps and I'm going to give it a twirl. Maybe I'll come up with a dilly :-)
 
now even i dont understand? an im the most missunderstood person here!!!!
you beet me buisness man, i am stumped?............

m.d.
 
Awsome Js!
I'm just putting a businessplan together
if you can include this in your 24 diary with more detail, that'd be amazing.

Charlie
 
filmman said:
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The budget is supposed to be between $1 and $3 million.
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The program projects losses for five years. Nothing comes in for 3 years and only expenses pile up; it looks bad. How's anybody going to invest or accept this business plan?

The business plan is not geared toward filmmaking. That's my opinion.
Click to expand...

Hmm, sounds like you should rewrite the plan and find another way to do business.

1. The team doesn't have a demonstrable track record

2. $1-3M budget movies have a high risk-reward ratio

3. The film does not generate revenue for three years

4. The film has a net negative cashflow for five years

5. The NPV (cummulative discounted cashflow) payback is about seven years

6. The movie industry is in tough times and the economy is stressed

So funders will consider each of these items negative attributes, and the longer the period for payback, the more risky the project. Even neglecting continuity issues (folks who come and go), we could easily come up with dozens of market/technical factors that could adversely influence a project over time. Certainly this has been the case over the last five years.

So investors will prefer funding a known commodity that turns a profit in the typical 18 window. They'll be in first position, getting a 20-100 percent return on their investment before going into a 50-50 split with the production crew.

For a quickie course on your 15 page plan and the significance of the top (budget) sheet, look at chapter 14 on Financing in Dov S-S Simens "From Reel to Deal" - at the end of the chapter he has numerous references. Other chapters like Budgets might be worth a review and even though Dov tends to be a sensationalist, you'll find lots of useful ideas on the business side of filmmaking.

Warm Regards, Michael
 
Thanks Michael.

I know what you're saying, but the problem is that even with 18 months it's too long for investors to wait. And 18 months presupposes a distribution deal in place, otherwise where is the payback coming after 18 months?

Starting with a great script (based on a published novel that sold 50,000 copies) and a name actor ... ok, there should be a way to package this project and get a distribution deal. So what should I do? Call the major studios one by one? Put an ad for investors? (That runs into regulation problems).

So the only thing left is to come up with a business plan that one can show around. A feature film takes one year to complete, with post, and then if there is no distribution deal in place, a movie must make the festival circuit and the filmmaker sits on pins and needles to see if a festival will accept the movie.

Festival dates and deadlines make a filmmaker wait for one, two, three years before the outcome is known. What if no festival accepts the movie? Yet, because the movie is based on a great script and has a name actor in it, it has a potential to make money.

So what type of a business plan is realistic for a filmmaker who doesn't want to do "genre movies"? Personally, I don't like the term "genre movie", because it really means exploitation movies. It doesn't mean anything: what genre are we talking about? There are great classical movies in every genre. Most movies fit into some genre, even if some of them are hybrids.

The reason I mention genre movies is because the consensus is that you can finance a genre movie, because the turnaround is fast, but is it? So it should be possible to use the same business plan (approach) to financing worthwhile projects also.

The question is how do you deal with the long period required for repayment of the investors? Is there a way to pay back the investors before the movie is exhibited? That's why I'm looking for a distribution deal before raising money.

Tell me what you think...
 
I'm in the same road.

All we can do is
have a great movie, that according to the market will sell,
and a few name actors.

What do you guys suggest
Start calling distribs and telling them who you will have in your film and what the story is?
 
filmman said:
Thanks Michael.
<clip>
The question is how do you deal with the long period required for repayment of the investors? Is there a way to pay back the investors before the movie is exhibited? That's why I'm looking for a distribution deal before raising money.

...if there is no distribution deal in place, a movie must make the festival circuit and the filmmaker sits on pins and needles to see if a festival will accept the movie.

Tell me what you think...
Click to expand...

Rehi,

Great explanation of the problem and your environment - now that the issues are better defined, we can give some helpful responses.

Generally, I see you have a few options:

1. Build a little, test a little... (demonstrate your proof of concept via a trailer, mini-episode, etc). As you profess, most investors won't take a chance on your lengthy payback, instead making the film community pass the taste test among their peers at the festivals. And when the likes of "Bottle Shock" don't even get a deal at the festivals, we know these are tough times! They left Sundance empty handed even though the had a name cast, a director with a track record, and an accessible story (according to Stacey Parks newsletter).

2. Get a guardian angel on your team - someone who is excited in your project and close to the investment community

3. Self-fund the movie (make the cast/crew biz partners, pay contingent in positive cashflow)

4. Bring someone on the team who has disposable income (rich Uncle)

5. Work the back end, creating a partnership with the distribution channel

6. Get an agent to pitch/peddle your business plan


I've prioritized these scenarios from top to bottom, although I'm sure others will have a handful of other notions and will probably change the rank order. Anyway, continue to develop alternatives, then evaluate the each based upon your SWOT (Strength, Weakness, Opportunity, Threat). Also, the further you go down my illustrative list, the more critical your business plan becomes to move ahead - IMHO, a very difficult sale based on the payback.

But even better, look for surrogate projects and follow the smart money. Hopefully you can find a match for your business model, genre, environment, management, and cast/crew; world-class marketers "embrace and extend" so look for successful productions that you can slip-stream, then go for it.

Regards, Michael
 
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I am speaking from a manufacturing/small business point of view but there might be some pearls in here somewhere. I like what Michael says, build a little, test a little. First look at the business plan as a real tool similar to a piece of your equipment. Plug in real information to get real results out of it. If the payout seems to come out 18-24 months or longer then don't tweak the numbers to make it look better anyone looking to finance it will ping on that real quick. When I wrote my first business plan my first trip was to my local SBA office for a $35.00 course on how to write a successful business plan. Best part of that was the ability to list the SBA teacher in the business plan as a technical consultant. Second was the referral from the SBA to several banks with an introduction. When a bank or individual sees that a business plan has been reviewed by the SBA it tends to help. My business plan was for an injection molding company. I was able to use pending purchase orders for goods to generate a 250K line of credit against the PO's. This was an interest only line of credit so the maintenance cost of the line was fairly low (relative). Related to film, if you can benchmark a similar film with similar distribution that should allow you to plug in realistic financial numbers and a timeline. The next thing is to get a letter of intent or something better then a handshake to attach to the business plan. This might allow you some early funding access in the way of a line of credit against the distribution. I have never looked into film financing, not sure if there are banks/lending institutes that cater too film work? Using the SBA allowed me access to three banks that where willing to fund my business each at specific levels that they where comfortable with. In the end I went with the bank with the better terms and higher funding options. No surprise that the bank was familiar with manufacturing and specific to government/military contracts. The other two banks where more brick and mortar retail. I would think going with a bank/funding option that is familiar with a movies cycle would work best.

Hope there was something in there worth while. I am new to posting here, I use my video gear at work for training videos and short promotional for the more technical services we provide. I have learned.....well just about everything dealing with video here at DVX, just wanted to say hi and maybe give back a little for all I have learned.

Steven
 
Hmm

Hmm

I always find any business plan is taken more seriously when hand-written, especially on nice stationary like say the back of a napkin from Sharis or Appleby's.
 
Regarding item #1 above (build a little, test a little), here's a podcast to reinforce where a segment of industry is heading:

http://filmmakingcentral.com/fmc2/ (episode #16)

Webisodes like the Prom Queen are generating two minute cliff-hanger episodes on the popular social video websites.

Yes, I understand that this probably isn't what you were looking for, but if your other alternatives leave you empty-handed, consider it as a fallback option. Certainly you could record a handful in a week (minimize locations/sets) with a minimum budget and using sites like Vimeo allows you to do revenue sharing. Once you build up an audience base, you could then covert the project to your feature film (using prior work for your trailer and promos).

Regards, Michael
 
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It will take a long time to begin with a trailer or some kind of promo reel and then raise money slowly. It would be better for me to raise a small amount of money and begin production on the full feature length movie.

I guess I'm looking for a different sort of business plan than the traditional one that most businesses use. Perhaps a reverse business plan :-)

thinking out of the box?
 
business plans are a pain in the artistic butt. And everyone will tell you that you need one. I have to use mine and get some money before I can say I did it right.

But I like the rich Uncle. I don't have one, anybody want to loan me theirs? :-)
 
Right on, Filmman! Scenario planning is what it's all about. We start with PMO - Present Method of Operation, then start crunching the what-ifs. Go to your spreadsheet, make rows for your revenue and expense line items, organized so each column is an period of time (typically a year). Make another worksheet in the overall spreadsheet file, with a different set of assumptions and note the difference in payback, etc. Then tweak the numbers within an individual sheet noting which numbers are critical to the payback - we call this a sensitivity study (someone can help you do regression analysis, if you're really into it). Perhaps your existing software will do some of this although I've found spreadsheets generally provide much more flexibility.

Anyway, yes it's also a worthwhile adventure to start from the back-end and work your way to find the numbers that pass the "smile test" (a reasonable payback). Doing so you'll certainly get comfortable with sunk versus variable costs and look for ways to defer early costs (the most risky period) and be pushed to identify creative new revenue sources.

So yes, tops-down budgeting is equally as valuable as your existing bottoms-up approach. BTW, whatever your final set of numbers, if you're dealing with a sophisticated film investment community, the figures should be along the lines of other business proposals. So here again, it's worth your effort to get a handle on fundamental data used by others (try Reel to Deal, etc). No, certainly the film community isn't eager to share their projections or business proposals, but you should be able to get a handle on ballpark numbers. Even doing "back of the matchbook" proposals, good investors will do ratio analysis which offers a quick glimpse and overall sanity check.

Have fun, Michael
 
it's amazing how a crazy question <reverse business plan> resonates with someone more sophisticated in financing! Ok, then, I'm thinking of taking the financing of my present movie, Felliniesque Players, and then write out the business plan for it as if it hasn't been made yet.

Felliniesque Players is a no-budget feature film project. It happens to be the most entertaining and artistically satisfying movie I ever made in my 40 year career as an indie filmmaker. If this movie doesn't make me serious money, then my whole career as a filmmaker is a joke. LOL. This is how much I like this movie.

Felliniesque Players happens to be the kind of movie I like to work with the most. Tell me if I'm on the right track.
 
Since Felliniesque Players has a great deal of production value and all of it accidental, it would've cost me about $1,000,000 if I had to recreate it, and even if I could it wouldn't be as good. That's the part that worries me about the business plan. However, I must tell my potential investors that I can make this movie for $1,000,000. But I have to do better than this.

So, I'm going to say that I can make Felliniesque Players 2 for $150,000.

I would like to write a two tier business plan.

1) $150,000 business plan for a 35mm feature film production. My film and lab costs through a release print will be $35,000. The production will be $100,000 and $15,000 will be contingency. If I don't need the contingency, I can put this into PR or maybe doing a few sneak previews or even four-wall a few screenings.

2) $15,000 High Definition digital production with a digital master for screening. $5,000 for cast, locations, costumes, make-up, transportation and food. I have the camera, lighting and editing equipment. i shoot my movies alone -- one man crew. And $10,000 for digital screenings and PR.
 
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