How do I run a video production business?

[roxics]

I've had a rough three years. After losing my job of almost twelve years back in 2018 I wasn't sure what I was going to do. Luckily I had been doing some freelance work here and there for the last few years and was able to fall back on a little bit of that until I got another full time job. But that job only lasted seven months before they started making cutbacks across the board. So there I was again, about to turn 40 in a few days, without any job prospects, no college degree and only my job experience. I once again fell back on doing freelance work and it's been that way ever since. Two years later I'm still not used to it. I don't make near as much money as I did working a full time position and it's completely all over the place, not to mention the loss of benefits, yet somehow I continue to swim. I'm still here. I'm still doing video work and paying my bills. Despite the stress and instability, I do really like the freedom and flexibility. On top of that, for the last year I've had one guy I hire to go out on shoots for me and I'm about to bring another one into rotation. So for the last year or so I've been mostly an editor/manager.

I realized this year that I have to stop thinking of myself as just some between jobs freelancer and reframe my mindset. I have to look at myself as a small business owner. Because whether I intended it or not, I seem to have started a small business that is growing. The problem is I don't really have any experience with this from a paper work perspective. Like taxes and stuff. I notice that places want to see things in quarters (3 months), like when I went looking for a new apartment for the first time as a freelancer. Most places wanted to see my taxes for the last quarter and I couldn't show them anything because I hadn't done anything like that. I was and still am doing my personal taxes every year with the 1099s I get from clients. I'm running everything as a sole proprietorship but nothing is registered anywhere. The only real official thing I've done is get an EIN so I didn't have to pass my SSN out to everyone.

So if you have any advice on paths I should take and where to start with this, I'm open.

 

[Peter C.]

I know what you are going through. Ive thought about switching from an independent contractor to full time solely because of the high cost of self insurance (10k with 6k deductible), couple that high self employed taxes and costs of equipment that gets out dated... its not easy.

 

[JPNola]

Before anyone chimes in with what you should do, let me say that it is possible to make a good living carrying on as you have been, in a sort of seat of the pants, casual manner. For most of my career that was how I operated. No LLC, invoice as an individual, send in quarterly estimated payments ( most times ), self-prepare taxes ( rather casually ).

I am not saying it is wise and I am not recommending that casual approach. Only saying that it IS sustainable. Maybe that knowledge will reduce your stress. It IS possible to make a living the way you have been going. I did it for almost 30 years.

Now, that said, it clearly isn’t working for you at present. So something needs to change.


___________

 

[Jim Feeley]

Two resources that I've found really helpful over the years.

Small Time Operator
How to Start Your Own Business, Keep Your Books, Pay Your Taxes, and Stay Out of Trouble, 15th Edition
BERNARD B. KAMOROFF
https://rowman.com/ISBN/97814930402...ur-Taxes-and-Stay-Out-of-Trouble-15th-Edition
Was THE standard book for people starting small businesses. Written by a CPA, so short on inspiring tales, long on nitty-gritty. This edition is from 2019, which I haven't read. But the book's been around a long time. Probably available at your local library, local bookstore, and various online places.


Nolo.com
Small Business
All the information and resources you need to start and run a successful small business -- from bookkeeping to hiring independent contractors to sales and marketing tips and strategies.
https://www.nolo.com/legal-encyclopedia/small-business

And some of their books:
https://store.nolo.com/products/business-suite
Great free articles and affordable books written and/or edited by lawyers, but in a style that can be understood by normal people. Really good stuff that will help you decide between remaining a sole proprietorship, forming an S-Corp, or forming an LLC. And about a whole lot more. Really, I've benefited from Nolo's products a lot over the last 30 years or so. And they seem to have a clear sense of what you can DIY and what really needs the attention of a CPA or lawyer. And even when I've had to turn to an accountant or lawyer, what I learned from Nolo helped me understand the rough basics in a way that helped keep my bills from them under control. I've found their stuff to be more useful than some other online and print resources, at least for background info. And a lot of their books are available at local libraries...

Good luck!

 

[Alex H.]

First thing, honestly, is to hire a good CPA. They can walk you through all of the taxes, incorporation issues, etc.

It may not be that you’re quite at the point that you need to incorporate as an LLC, or to file quarterly taxes, but every freelancer needs to see their operation as a small business. If you aren’t already, you should also be itemizing with a Schedule C. This opens up a lot of helpful deductions. Again, hire an accountant and you’ll have someone who can give you professional advice on all of this.

One thing to note: filing paperwork to incorporate or to get any kind of business license puts you on your state’s radar, and they’ll want their cut. Not sure about Connecticut, but many states levy a “usage tax” each year, which is basically a percentage of the value of the professional equipment you own; something else that an accountant will be able to talk you through.

I found myself in a similar situation back in 2017, losing a full-time job and realizing that my best course of action was to return to freelancing. Fortunately, my wife’s MBA gave her a clear understanding of building freelance as a business. The biggest thing to keep in mind right now is the 5-year plan. Any time you start a new business, assume that the first 5 years will be plowing what you make back into the business. Maybe you need to update your kits, or build your new website, or print up a ton of marketing/PR materials, or attend networking conferences. Whatever it is, it may not feel like you’re making much money - or even paying yourself any real kind of salary - but at the five year mark you can make an assessment of success and profitability. If you turn that corner earlier than 5 years, which is certainly possible, that’s even better.

 

[ahalpert]

I agree with JPNola. The important thing is that your business is growing. You don't necessarily need to register or incorporate or anything. But it makes sense to do cost/benefit analysis for all your options. If you start posting serious profits, you can probably save money on taxes by incorporating.

Maintaining and growing your clientele is the most important thing. If nobody is hiring you, you won't have a business to tax anyway, or income to pay rent/mortgage.

You can get health insurance through the ACA.

In some ways, being a freelancer has more security than working a full-time job because you can lose your job and all your income at once. But it's highly unlikely that I will ever lose more than half my income simultaneously as a freelancer with numerous clients, which is itself a very unlikely scenario. And in your situation, you might be able to stop hiring a shooter and take over the shoots yourself if your work volume decreases. So, in a way, you have more stability than you used to. And if you keep at it, your income will probably surpass your previous income.

One thing that was very stressful for me initially was realizing the seasonality of the work I received. My winters now are busier than they used to be, but it's still the slowest time of the year for me. And it used to be a dead zone. The first few years that I freelanced, I was always blindsided and stressed out by that time of year. Now, I'm fortunate to have some year-round clients, but I also expect and accept the lapse in work from the others.

 

[Peter C.]

I agree with two points touched on. Incorporating helps to separate your personal and business finances for tax purposes. But this alone wont make you more money and like alex said once you incorporate you will then be put on a list where state and city/town will want you to pay sales and property tax. Being a business entity you will have more standing than an individual but again doesnt give you more clients if you dont market yourself.

 

[KarlSutton]

The 5 year mark is good to remember, back in the 90's/early 2000's I had a music production company, and the first 5 years was a building/re-investment stage that seemed to go on forever, then it hit a phase where it was very profitable and that made it a lot more fun.

 

[filmguy123]

Two big reasons to incorporate are separation of personal assets from business, and credibility.

However, these are often tossed around a bit too rapidly without more nuance. It should be noted that, especially as a single member LLC for example, separation of business/personal can be circumvented if you are sued. It's called piercing the veil and if someone wants to attack you, they will file a suit with an attempt to recover any losses by challenging how true/needed your LLC really is. They will look for a record of you filing meeting minutes with other members, separation of bank accounts, etc. and for many small time operators the reality is that if someone wanted to challenge this they aren't nearly as secure as they think they are. It can be a false sense of having a shield. YMMV per state, this is what my lawyer told me, so check with your lawyer, but ask about this.

The second is that of credibility. It is much more credible to ask a client to write a check to XYZ Business, LLC than to your personal name. One screams "I am a hobbyist" and the other shows "I do this for a living". But the other caveat is that, IMO, this *used* to be more true even 10 years ago. These days, there are just so many more freelancers out there that two things happen: first, people are more used to working with freelancers directly and don't care in the creative field; and concurrently, people are so much more used to small time freelancers trying to look professional by incorporating that they also don't care. This sounds paradoxical but the real point is this: in my personal experience, people look at your work and your operation and it becomes very clear very quickly if you have a dedicated office and staff, or are basically a one man show, and having a check written to you or an LLC doesn't make as big of a difference for small business owners these days. Put another way, I think people used to see having an LLC or not as a sign of legitimacy, but today in a world of freelancers it seems people see talent alone as a sign of legitimacy and LLC or not, they will still ask if you have a dedicated team/office or what not.

That said, I have never run into what Alex is talking about in my state with a usage fee. Here, it is only $100 a year to update license. I see no reason not to have an LLC as all disclaimers aside, separation is better than no separation even if its far from bullet proof, and the credibility of an LLC is better than taking personal checks. My 2 cents. Your state may have specific variations on this.

As for taxes, I have an accountant but I continually question it each year and I am wondering if it won't be long until I break off using TurboTax business. Before people come hammer me, hear me out. Early on, I had a ton of questions for my accountant. I don't anymore. I sort of know the flow and its rinse and repeat. However, I really like just out sourcing my taxes to the security of someone who knows what they are doing. They fill it all out, answer questions, and that's nice. But recently, as I said, I have a more gnawing suspicion that thanks to technology like turbo tax I should just do it myself. Here is why: It costs me over $1000 a year to have an accountant do this, and I still do all the "hard stuff" - I sort all my purchases into a spreadsheet, tally all my 1099s, yada yada yada, and they look it over to make sure its entered correctly with new tax codes etc. But I find I am still doing hours of work, including occasionally correcting their mistakes, and the price keeps drifting upwards.

Meanwhile, every 2 years - and this is at a smaller local firm - I get a new person working on my taxes. And I am pretty sure they are using some automation software themselves, why wouldn't they be? So what I am contemplating these days is sitting down for a day or two to really study my taxes as every year my structure is largely similar, and then switching to TurboTax, and keeping in touch with a tax consultant on an hourly basis to just answer any questions I have or come in and run my stuff by them if I need to. I don't know if this is a great idea, but 3 years later I am still pontificating this and feel its inevitable. The software these days is just so good and I am not sure how much time I am really saving anyhow. It's sort of the "if you can work on your own motorcycle for basic things, you will probably do a better job than a big shop mechanic that churns it through, because no one will care about your stuff as much as you." Again, YMMV this will depend on your comfort, personality, and also your specific accountant.

In any case, starting out, I would recommend going to a firm for the first few years just because you'll have plenty of other stuff to worry about and it's nice to learn the ropes that way. And figure that one out down the road.

Beyond more paperwork legal advice... general business advice...

I've always taken the approach of pursuing excellence and quality over quantity and it's worked out well for me. YMMV. Part of this is my proclivity towards the craft over the business, and my hate of churn and burn content. It also seems to me that the bottom is falling out on churn and burn and I'd rather work to play the field of people looking for something only I can do vs competing with bottom feeders to click bottoms or hold cameras. I don't mean that in a derogatory sense, I mean that in the sense that working in this industry if you aren't offering something very unique is getting harder and harder.

So for me, I have focused on developing a storytelling style, filming/editing style, and something unique that is harder and less generic for others to replicate. I don't sell my services as video, I sell them as communications with video as one of the major tentpoles, but at its core I am offering communication services that happen to take concrete form primarily as film, but also as copywriting or brand story architecting.

And, the 80/20 rule is your friend. Focus on your best clients. It's easy to get repeat work from a few great clients than trying to play the field with a bunch of meh clients. Also, don't jobs that you don't want to represent you. I haven't done weddings in years, but I think this advice translates: my advice was only do high end weddings, because they look best on camera and they connect you to other high budget couples. It positions you to portray your portfolio with excellence. I said you'd be better off doing 4 high budget weddings a year than a dozen low budget weddings: you'll make about the same, and you'll develop clientelle in a much more lucrative position, and the momentum of the excellence of your portfolio will snowball.

I'd say the same with your clients - if you have a bunch of videos for rinky dink stuff, you're going to be the rinky dink business. You'll probably have to pay your dues, don't believe the lie to never do anything for free/cheap, there is nuance there. Be very hesitant to do anything free or cheap, but picking a few strategic calls is often the only way in. A good rule of thumb is never do anything for free or cheap from someone who tries to get you to do something free or cheap for exposure, because that's rarely worked out for me. I don't mean never to work with a low budget, but there is a difference between that and a sense of carrot dangling coercion. Exceptions of course (story below). The main point is to pursue your optimal video - say you want to brand vineyards. Go to your dream vineyard and tell them you want to make a free video for them to sell your services as a trade, and because it will be your key portfolio piece, you will throw your back into it and they'll get a free video. Much easier to sell services at a high rate to other business then with this credibility.

Today I've made been all over the world making films and have been compensated fairly for it. My first non local travel gig doing this was definitely a pay the dues moment. In a last second call, some organization had their on-staff videographer get violently ill about a week before they were set to fly to Haiti post earthquake for a film. This organization had no budget for the film, because it was suppose to run through their salaried staff member and they were a bit desperate. They asked me if there is anyway I would consider doing the film for $1000 and their on staff guy could edit it. Well, I wanted to shoot international work and I had no portfolio, so I said yes (even though I'd charge more these days just to pack up and prep for the trip, or for a single day on location, etc.), but only if they let me edit it as well and put my logo on it/call it my own piece as an outside agency. They said sure. Wen I was there I worked 10x harder than I needed to, just completely threw my back into to make the best thing they'd ever seen. A brutal week. And returning home, I didn't shortcut the editing process. They needed 1 3 minute film, I made them multiple cuts including a 12 minute version. I did my best.

They were extremely happy with the end result, and I now had a portfolio piece that was killer (well, for the time). Unfortunately for their on staff video guy, they repurposed funding for international videos to work with me. Within 1.5 years of that event, I had been to India, China, Indonesia, Panama, Nepal, and other places in the states like Alaska and LA for travel gigs - not just with them, but for other organizations that saw the videos and said "hey, who made that? We need a video..." So, it just snowballed from there.

Well, that may be the polar opposite of what your goals are but just dropping my anecdotal experiences in there. Food for thought. Best of luck and make sure you end up doing something you enjoy, or at least can tolerate, it's really the only way to sustain in this industry these days. That looks different for everyone but advice to make this sustainable would be avoid doing something you hate, otherwise, well, you'll hate it and burn out.