What would you do with $20,000 to start a video business?

El Director said:
If you really want an office/studio, how about living out of it?
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that's what i'm hoping for one day. a large live work studio. I already pay about a grand a month just for the apartment I live in now. If i could find a great space for around $1500 that would really be ideal.

is it worth paying an extra $500 a month (out of my 20 grand) so have this type of set up?

If I could make it work, I have so many ideas, it really could be something special.
 
Yeah

Yeah

Yeah, I know the insurance is a buzzkill, but try to think of it a different way. Try to think like ok, I'm going to bill my clients for this, I pay 3.15% or so on my production costs for insurance, I'm going to bill my clients 5%, no exceptions. That's internal paperwork, though, no client gets the right to know what I charge by line item. That's none of their damn business. They just get a quote. But for your records, you can feel better by saying, "Oh ok well I paid $8,000 in insurance, for the basic package, but I recouped $6,000 from insurance line items throughout the year. Well that's not so bad." That would be even if you only did half of the production work that you paid for. I think I pay for $300,000 or something per year, or $250,000, can't remember. If I do more than that much money in production, I gotta pay extra. But that'd be a good problem to have because if I make $500,000 gross, I'm not going to be paying out more than $250,000 for production costs anyway. Personally, I got screwed on insurance this last year. I've shot two projects under my current contract, from October 2008 to this year, and that was just $10,000 in production. Pathetic. So I paid a ridiculous sum, I don't even want to think about it, makes me sick. I should have found some way to partner with someone else, but I obviously thought I'd be doing a lot more work. We're just getting going and now we have a TON of contracts in the works and proposals out there, but they'll all be for next year, so I will get my $8K worth but not this time, hahaha.

I will just share with you some of my experiences and the fact is we all have our own different opinions and experiences but I've *made a lot of mistakes* and you can learn from my mistakes rather than having to go make them yourself ;)

A lot of this is stuff other people said, so I'll just re-iterate that:

1) Don't get an office any time soon. Seriously. We did that mistake. $1,050 per month, crappy office, best we could find really. Had $15,000 in stuff stolen from us there, then the landlord we were subleasing from stole another $1,050 -- he was in mortgages, he fled and took our last month's deposit with him, never returned it. We were outgoing. It was a very bad experience. You don't need an office. Nobody cares. If you're a huge production company and have a big image to maintain, get an office, but then it has to be A GREAT OFFICE. Something someone walks into and says, "Ok wow these guys are LEGIT," and to do that costs a lot of money. You better be making a LOT of money. And when I say a lot, I can't keep my company afloat on less than $200,000 in annual income. I'll consider getting a nice office if / when we start making minimum $1 million per year gross. That won't end up being that much money for me anyway, if we even got so lucky, because $500K will go to production costs, a bunch more would go towards commissions, we'd probably need to hire another project manager at $50,000 a year or so, we'd probably need another sales agent, I mean it would all add up to growing pains that would meant I made probably $200,000 per year or so, which would be fantastic, but not like I'm super rich level. Then it'd be time for an office though because giving up another $25,000 a year for a nice office, no biggie if you're making that much, it may help you coordinate better and grow bigger.

At this point, I work from home, so does my sales employee. She has a dedicated phone line, we keep in touch daily, she sends me reports, it's a great arrangement.

2) Don't buy equipment that you think is cool or that you may need. Seriously. And don't listen to people on this site either about what you need. I'm sorry, there is a lot of great advice here, but people get you thinking you need a lot more than you do. Lens adapter, for instance, never used it. We have gotten some amazing results without ever needing those Nikon lenses and RedRock adapter I bought. I'll sell that kit to anyone who wants it even, lol, it's in a nice Pelican case all perfectly cut for it. Never used! Not even once. Sad. The lenses I bought used, though, but they had the maximum rating on the lens site I got them, lol. I bought generators, used once, never after. We should have rented! Too many things you just don't need. Rent what you need and figure it out.

Computers and cameras are the worst offenders of depreciation, but I feel like cameras pull their weight. I don't feel that's true of the computers unless you're doing a ton of work. They really are just a loss-leader. Yes, you need a great computer to edit footage usually. Yes, it's expensive, and needs maintenance and upgrading constantly. But you can't seem to ever make your money back on the goddamn thing unless you're a pro editor yourself because there are so many people out there who have their own setups and will charge just like $25/hour, so you can't bill too much for computer usage. I don't bill at all for any equipment usage, it's just factored into my higher profit margins, and then I have to pay for it all out of that. It's accounted for, but not specifically billed.

My cameras, on the other hand, I bought one HVX200 for $5,000, full price, one for $4,200 from my business partner, I know it was used once because it was our company, lol, so I got a good deal there. I've used them both extensively, but I've also rented them out enough times to make seriously about $4,000 or so on the cameras. That's pretty good money! So are they worth less now? Sure. I don't know what I'd get for them. But I can tell you it wouldn't be worth selling them because I make enough just renting them out. If someone said I'll pay you $2,500 for a used HVX I'd be like are you crazy?! I get $200/day just renting the camera, no way I'm selling it for that, lol. So they have been a fantastic investment, not only getting money back directly but also doing work with them so that the average I've paid to own them per day of usage would be like $50-100, not the standard rental rate.

3) Don't buy expensive ads. Seriously, don't do it. You can listen to everyone else if you want about how important advertising is. Wrong. Getting your NAME out there is important, but advertising is a gigantic waste of money for what we do. We spent $2,000 on a TV commercial, we got 3 calls, none converted to leads. I spent $2,800 on a magazine ad run, 4 total ads, I have yet to receive a single call with 2 of those past. NOT ONE CALL! NOT EVEN ONE! That was just like wiping my butt with the money and throwing it down the toilet. Even be careful of conventions. I spent about $5,000 on one, and I got maybe 10 leads, which isn't very good, but of those only 2-3 were promising at all, or high dollar, and they didn't convert either.

Since hiring my sales lady, she has gotten me 7 proposals, we've directly submitted bids now by request for $210,000 worth of work! If we can land even a few of these deals, we'll be doing great. And our biggest one, an $80,000 contract, is looking very good at this time, they're really interested. Our furthest away ones are the smallest, actually, so that's working out alright. She costs me a few thousand a month and can make hundreds of phone calls and do all of this great research into the market. All that for the price we spent on a TV ad or a stupid magazine ad run. It is not worthwhile. Be smart with your money. I authorize her to spend money in small amounts, like $20 here for a business conference, $40 there, etc. Stuff that a small company can afford, not like massive amounts of capital.

4) Do not target people who don't have money. You think this is obvious, but it really isn't to most people. We started wanting to do indie music videos. Where do you think that went? Nowhere. Because nobody who isn't signed has any money to pay you for a quality music video, and if you do a music video for $500 unless you spend seriously a month or two negotiating free deals or doing your own amazing production design or whatever other connections you have, YOUR VIDEO WILL SUCK. So not only will you make no money, but you won't get anything useful for your reel either. Just don't bother with this market, not worth it. Focus on corporate work. Don't bother with students either. They don't have money. If they do have money they're stretching it thin anyway (USC students, etc.).

5) Choose what you want to do. Who are you? What is your brand identity? What type of work do you do? These are questions you must answer. Sometimes, you think that you do "all types of work," and I know that I thought that of myself, but you really don't you just don't realize it. For instance, yes, I can do all types of work, but I do it my way, and that means I don't get out of bed for less than $4,000. I won't go shoot your event. I won't shoot your wedding. I won't shoot anything for you. I won't step outside of my condo if you're not paying $4,000 absolute minimum for the project, and then I'll have a crew of about 3 people including myself, all of my pro equipment, etc. Otherwise for $1,500 to $2,000 I may hire a videographer and tell him where to go do his job, he'll bring back the footage, then I'll edit it or hire someone else to edit it depending on what I feel like doing or have time for doing. But I'm not going anywhere for that kind of money. You, however, may say, "Look I know how to shoot really well, I know how to light well, I LOVE shooting stuff, anything, I was born to shoot stuff!" Ok great, well you are going to be more hands-on in the production side than me; I'm more of a producer type, I make things happen, I oversee quality control and deal with customer relations, and I know a little bit about just about everything now. But I don't know a lot about any one thing. I can edit competently, I can tell you a bit about every camera, I know my lighting, but I can't go shoot stuff myself nor do I want to do that. I don't care, lol. So for you, you may decide, "Hey look this guy is paying me $800 to do something I know I can go shoot in 5 hours, then edit at night in 5 more hours, that's a great day's pay!" Yes, I agree, it is! Do it! But I'm just saying you won't find me there competing with you because I can't run my company that way. I can't afford my overhead on small projects. I have to nail down the big projects to make things work. C'est la vie.

Those are just a few words of advice, take 'em or leave 'em, but I wish you the best success either way!!
 
Dustin, I feel your dream, man but if you waste your buddy's money, you're gonna lose a buddy. You'll know when you are ready to start your own business and you just aren't yet. Staff at various places for 5-10 years then go freelance for 5 years or so. After that, you'll know exactly how to best spend some money to start your own company. Until then, you'll really just be spending it.
 
thanks Jonathan, I really liked your post.

Here's what I've learned:

- Don't buy gear
- Don't buy advertising
- Don't get an office
- Don't make low budget music videos

Grinner, awwww c'mon man! yeah right, I'm obviously going to spend this money. My friend gave it to me and said look man, I really believe in your talent, I want you to really go for it, I hope this helps. boom, 20 grand. well I know that there are ways this money can help me, even if it's none of the things listed above.

For example, I could offer to make a free commercial for a local business to build my reel, and really make something top quality. I do have a lot of gear, but the money could be spent on motion graphics and stuff like that. Stuff that maybe a smaller business wouldn't normally be able to afford. And maybe they can hook me up with free burgers for life, who knows. Anyways, I can go around doing this for multiple businesses, until I build up a nice quality reel.

I might also be in the market for some good scripts... If i find something really good that I want to make, I can put some money into that as well.. which is more about my passion, but whatever..

I guess that's all I can do. Feels weird. most businesses are so much different. they get a store and sell stuff out of that store. they get advertising, and it works. our business is word of mouth, references, proving your worth, trying to sell yourself.. or getting Jon LB's sales lady.

I wish I had a sales lady....
 
Find a person to work off straight commision. The reason I mentioned marketing co's might be good is because they market products for other co's, they know video can be a good sales tool and they want to make money. Pay them a commission to market your sevices to other co's or thier clients. It won't cost you a dime to talk to a few of them.
 
I'm very intrigued by this.. I once had someone who sent emails on behalf of my web design company back in the day. he made 1 sale, on his second day, and I thought I was a genius. He worked on commision too. but then 3 months later, he had never made a second sale. so that was that.

perhaps this would be different. Although it really seems the first step is building up that high quality reel, because right now, there's simply nothing to be marketed! "I'm awesome, take my word for it!" yeah right.

Maybe I'll just take a few dvxusers on a cruise and pick their brains....... hahhahaah. jk fellas.
 
Just use one of your buddies demo reels that looks good. Put your name on it and buy him some beers. Who really cares and it will save you lots of time. :beer:
 
You know, I think I'm going to sell stock footage demo reels after that last comment. $500 and I'll sell you a licenese to one bad ass demo reel with your company name and # on it.
 
Dustin -- yeah, a free commercial for a local business isn't a bad idea at all. Just make sure it turns out really well. Spend the extra time, and money if necessary, to make sure that it really is top quality work.

But also, I wouldn't do work that you think basically you won't be getting. I mean, my problem is, even if I somehow decided well gee maybe I could get two crappy consumer camcorders and go film music videos "live" at a bar where a band performs and charge them just $300. Uhh, first off, no, my ego is too big to do that kind of crap. That's just pathetic, I'm sorry. Someone has to do it but professionals should not. EVEN IF I wanted to do that, how could my reel possibly convince anyone that I could do that? I mean I can't show you a $10,000 video that got into 18 film festivals and say, "Oh yeah, I did that, so totally I could do a $300 video that looks great." No I can't. If you don't have money I can't help you. Music videos are expensive. I'm sorry, reality sucks, but you can't do great work on no money. When people say you can, they're wrong. They are like this, "Well look I made this amazing music video and we only spent $100!" Uhh, really? How many of your friends worked for free? How many hours did you put into it? Yeah, that's what I thought. If you're billing yourself at $0 an hour, that's just not realistic, it's a lie. Sure, you can spend a lot less money and a lot more time, but my time IS money, that's what it means to be in business, so if a band paid me $2,000 to make a good video, of course I could do it, but it would take me hundreds of hours, and I'd spend all of that money making the video. I'd make nothing. One way or another you can't get around saying that quality filmmaking times time and money, or a lot of time and a little money, or a lot of money and not as much time ;)

I was not into the idea of hiring someone just on commission because I don't believe you can really expect them to work or find you work when there's little incentive. It's basically like oh ok this production company says I'll get 10% if I refer work to them. Well if I see anyone who needs it, I'll try to help 'em out and make a few bucks! But do you really think anyone is going to sit there for weeks on end making phone calls and doing research on your behalf? Are you serious? I hired my sales lady, Ivy, July 9. It is September 14. We do not have ONE closed deal yet. That's two months. And she's very, very, very good. I definitely know I hired the right lady. But it takes TIME for big deals to pay off. You don't call up a major company, and these are some major companies we're dealing with in their markets with operations in numerous states, and say, "Hey yeah so we'd like to do some virtual tours for you, we charge $5,000 per one, so let's see looks like you guys have about 25 properties, how about we cut you a deal and we'll do them all for $110,000?" "Yeah that sounds great, god we were just sitting here HOPING someone would call us about video work, and as it so happens -- this is amazing -- we have exactly $110,000 in our cash reserves to pay you! It's such a great economy, who doesn't have that kind of money lying around?"

Look, that's a wonderful dream to have, and when you go to sleep at night you're free to have it ;) But back here in reality, we're making calls to companies in late summer that are planning budgets for 2010. If we weren't making the calls now, we wouldn't be getting in the door next year. Some of these companies have no money left in the advertising budget this year, but they are interested in video work and they are willing to set aside the money next year. But that means that I had to have the operating capital to hire a sales lady and keep her on for a year period, because you figure the first 6 months is going to be a lot of beating down doors and hoping to get a few responses. That takes dedication. And some people say, well, if she's getting paid hourly, she doesn't really NEED a commission too. True, but she knows this is a startup company, and that if she doesn't produce results, there will not be a company anymore and her job will cease to exist. And it's always a worry, trust me, I thought about it a lot, that you get someone who basically mooches off you for X period of time, runs you dry, and then leaves, no big deal for them. You're screwed, out of money, and sleeping on your dad's couch, haha.

But that's why you have to hire the right person, of course. It's not an easy process and honestly I think there's a lot of luck involved, as for whether you get the best person. You don't really know any time soon.

For me, this has been a great solution, because seriously if it takes a lady (who turns 40 this year) who has 15 years experience in sales two months just to get close to closing a few deals, working hard, imagine me trying to do this? I suck at sales. I'll readily admit that. In life you need to know what you're bad at so that you can at least get some help, haha, not just think you can do everything then fail miserably. I get depressed if I hear a no response. I could e-mail a few companies, they say not interested, I screw around the rest of the day and think this will never work out. I hate using the phone too, I'm awful on the phone. She's great on the phone. So there was no way I was going to be able to do this. I'm great when you put me into the situation to explain what I do and let me show you my passion for making your company look great and doing great work. That, I can do. The customer relations side is fine. But the cold-calling nervously hoping that this company is interested and basically feeling like my entire life hangs in the balance with every call, no, that's just bad. It's much better having someone who is more relaxed about it all, because she cares, but not as much as I do. I care too much, and it makes it worse.
 
thanks for your insights jon... cold calling doesnt really appeal to me either.. and i certainly cant afford hire a wonderful sales lady at this point either. i wouldnt want to sink all my money into that when there's no guarantees it would result in any work. maybe one day tho.

I think I'm going to put the money into building a solid reel. a website, business cards....

one thing I was thinking about is making a brochure / flyer about our services and sending that out to a bunch of local businesses.. but again, i'd already need a solid reel in place.

really not to sure what to spend this money on now, aside from helping out some businesses by making free or very low cost advertisments, and in turn helping myself by adding to my reel.
 
Yeah

Yeah

Well the key to sales seems to be persistence, from my experience with my sales lady and what she does.

So it wouldn't be a bad idea to send out flyers of some sort, but that can be expensive too, you can easily spend thousands doing that if you're sending out a ton. If you do, you should follow up with businesses on the phone and ask if they received your flyer, and if they say no, then you have an excuse to tell them a bit about what you do, or if they say yes then you see what they think and if you might be able to provide more information or schedule a sit-down meeting, etc.

For me, sure, there's no guarantee of work, but if I didn't hire her, there is a 100% guarantee of no work and going out of business. There are no guarantees in life, or in business. Most businesses fail. My best chance was to hire someone who would be able to generate leads for the company and hopefully get some deals on the table. But yeah you need a reel first, and even our reel is fairly limited right now, so we're hoping to build it up and have even more success after that point.
 
Can you research what industry is benefitting most from video as a sales or training tool, get a TARGETED mailing list for those industries, both email, physical mail, phone number, ceo or decision makers name etc, email a web presintation with demo reel that specializes in training or sales videos or whatever the targeted niche is going to be, follow up with a hand written letter and a phone call. Start in your town or ZIP code so you can go in for a meeting if need be.

People say direct mail is a waste of money, it is not if you know how to use it, a friend of mine in KC has built a $50M company off of it.
 
If you do a couple free corporate training or sales videos make sure the people / co. you do them for is in agreement that when you are done they will call and mail a dvd to 10 or 20 people they know in the same business and tell them how good you are and how much the video has benifitted thier business.

I'd do it for a free company video, could really open doors if you select an industry that will really benefit from video. Make sure your not doing this for an industry where it is just a novelty.
 
El Director said:
If you really want an office/studio, how about living out of it?
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That's a good idea and one that I was considering actually.

I am establishing an office soon myself but luckily for me the space was used primarily for storage and I have a gentleman's contract with the landlord to pay a small rent every month until the business picks up.

I also agree on buying only if needed, the resources are there to rent/borrow but if you purchase, its just one more item you have to maintain and if you are not using it, well, that's just a waste.

Most importantly is to make a business plan, not only for your own focused direction, but if you were to affiliate with a marketing company who may bring the clients to you or going out and getting a few jobs yourself, parts of your proposal would be taking information from this document and thus you can give a much more polished and direct presentation of your company and what you do. Basically, you appear more competent.

I'd say, if not an office, get a place or establishment where you can talk to your clients one on one. Nothing says unprofessional than meeting your clients in your bedroom.

Hell, just to let you know how much I avoided that, whilst I was going to university, I would actually ask to use one of the classrooms with air conditioning for sound recording, I would book the classroom for 3 hours more than I would need and an hour before the clients come I would set up the teacher's desk with a few chairs next to it with pencils and sheets of paper, so as soon as the clients came in, they'd be met with the feel of an office environment and material to write down their ideas and points on the meeting. Doing those little things makes a BIG difference.
 
ChipG said:
If you do a couple free corporate training or sales videos make sure the people / co. you do them for is in agreement that when you are done they will call and mail a dvd to 10 or 20 people they know in the same business and tell them how good you are and how much the video has benifitted thier business.

I'd do it for a free company video, could really open doors if you select an industry that will really benefit from video. Make sure your not doing this for an industry where it is just a novelty.
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I'd be careful with that. I've had circumstances where people have actually said 'well, if you did it free then why can't you do it free now?'

I think you should attach a price at least at cost to whatever you do, that way when you are in greater demand, people would be already accustomed to paying you for services and most likely have no problem paying higher costs if needed.
 
deathwinger said:
I'd be careful with that. I've had circumstances where people have actually said 'well, if you did it free then why can't you do it free now?'

I think you should attach a price at least at cost to whatever you do, that way when you are in greater demand, people would be already accustomed to paying you for services and most likely have no problem paying higher costs if needed.
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I agree, my thinking was if he is going to do one or two free for a demo reel why not have them be your sales tool in exchange?

Maybe tell the first business to help build my demo reel it "normally" cost $8500 but we will wave the $8500 (or what ever price) if the dentist or what ever type business it is calls 20 people and tells them how much they have benefitted from it.

Get a list of those 20 businesses so you can follow up etc. Knock the price down to $5k if it pays off on a referal and make the same deal with them for a promotional discount.

You gotta have a mixed bag of marketing tools in this day and age, it's just one thing to consider.
 
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