Understand the Film Financing Industry and Cash in on the $8 Billion-Plus Indie Market Getting investors to support your film is one of the most difficult challenges of filmmaking. To cash in on the $8 billion-plus independent film market, you’ll need a sound business plan and a firm understanding of the financing process. Founded by Louise Levison, the foremost authority on film financing, Business Strategies can help you make sense of the industry. For a professionally written business plan, Business Strategies is the clear choice. If you plan to write your own business plan, Filmmakers and Financing: Business Plans for Independents (hyperlink) is a must-read resource. The following is a summary of key elements of a business plan. For more information on Filmmakers and Financing, read “About the Book”.

The Executive Summary: Don’t start here; end here. Since the executive summary is where you tell readers what you’re about to tell them, it makes sense to write the business plan first. Until you’ve put your business plan together, you can’t properly summarize it. Avoid the temptation to distill your plan before you have one. The Business The starting point for many film entrepreneurs is the creation of a business. But what is your business about. Knowing yourself is key, as are: Formulating goals Presenting the “plot” of your -film Choosing the legal form for your projects Management and organization your will need to review not only your personal goals, but also the goals of you.projects Evaluate all business types, management structures and growth strategies. When you write your business plan, you’ll need to have an idea of where you are and where you’re going.

The Films/Projects Scope: Investors will want to know if you’re biting off more than you can chew. If you’re launching a company, as opposed to just one film, they’ll want to know you’ve got enough work to sustain you. Be honest and be factual.. Films This is where you show investors what you’re planning to produce. Give them just enough to get interested – the goal is to intrigue them, not overwhelm them. Include a synopsis of your scripts, but again, keep it simple.

Attachments: The goal of a business plan is to show value to investors. Attachments like options, book deals, star power, director and money already attached to the film are critical to include. Remember: if you can demonstrate value, you’re more likely to persuade someone to make your film.

The Budget: For investors to consider your film or business, they’ll need to know how much money you’re looking for. A realistic, honest statement of your film budget is vital to securing film backing. Don’t just guess at a number; do your homework and come up with a sound budget number based on data. The Industry It’s critical to understand that much indie film money comes from sources outside the film business. Your potential investors are going to need a primer on the industry. A short summary of the movie industry – and your niche within the industry – is crucial. You’ll want to identify and describe your segment within the movie market. It’s also a good idea to give a brief explanation of differences between studios and independents. Focus on the sector that you’re working within. Finally, you’ll want to include facts and figures about the production and exhibition of films.

The Market Strategy: Your audience needs to know where your film or company fits within the epic industry that is moviemaking. Define your segment: Are you producing art or specialty films? What is the history of your genre? Are there trends or cycles within your segment or genre? Who are your audiences? What are their characteristics and spending habits? What production costs are associated with making your movie? Before an investor makes a financial commitment, you’ll need to demonstrate that you’ve done some serious market research. Do your homework. Read the trade magazines and other publications. Research Internet promotion opportunities. Build a network, and have a clear and realistic plan for self-promotion and self-marketing. Non-traditional Films Large format films, direct-to-DVD movies, and small screen films each have unique market characteristics. What can you tell investors about the audiences for these films, the trends within these markets and strategies for promoting your film or company?

Distribution: When writing your own business plan, you’ll need to educate investors about the distribution system. The most common question in many investors’ minds is, “What is a distributor?” Many investors will know little or nothing about the respective pros and cons of studio distribution versus independent distribution. Risk Any business plan should include a statement of risk. If your film flops, a risk statement prevents investors from claiming they weren’t made aware of the perils of their investment. Financial Strategies When writing the financing section, always seek a realistic amount of money, and always focus on finding a financing option that is the best fit for your project. Be careful what you promise and keep a critical mind about what financers promise. Also, make sure you can explain your financing plan – smoke and mirrors fool no one. Funding can come from a surprising array of sources, such as entrepreneurs, art lovers, special interests and foreign investors. The structure of your financing can vary significantly from film to film. What type of finance do you plan to pursue? Presales, co-production, below-the-line deals, negative pickup, limited partnerships, limited liability companies and bank loans each come with advantages and disadvantages.

Financial Plans: No one can successfully run a business without looking to the future. Forecasting is one of the most important elements of a business plan – and among the most frightening for most people. Key elements to include are: Financial assumptions Domestic theatrical rentals Domestic ancillary revenue Foreign revenue Total revenue Negative costs Prints and ads Total costs Gross profits Distributor fees Cash flows If you are writing a business plan for a company, be sure to account for overhead associated with running your company on an annual basis.

Tackle Your Business Plan with Louise Levison’s book, Filmmakers and Financing: Business Plans for Independents Now in its sixth edition, Filmmakers and Financing is the industry standard. This book explains in a step-by-step format how to write a business plan and includes a companion website that offers a complete course in forecasting as well as other proven tips for writing an investor-winning plan.

Click here to read more about Filmmakers and Financing.
Click here to purchase the book online.

SAMPLE STATEMENT OF RISK FACTORS

Investment in the film industry is highly speculative and inherently risky. There can be no assurance of the economic success of any motion picture since the revenues derived from the production and distribution of a motion picture depend primarily upon its acceptance by the public, which cannot be predicted. The commercial success of a motion picture also depends upon the quality and acceptance of other competing films released into the marketplace at or near the same time, general economic factors, and other tangible and intangible factors, all of which can change and cannot be predicted with certainty. The entertainment industry in general, and the motion picture industry in particular, are continuing to undergo significant changes, primarily due to technological developments. Although these developments have resulted in the availability of alternative and competing forms of leisure time entertainment, such technological developments have also resulted in the creation of additional revenue sources through licensing of rights to such new media, and potentially could lead to future reductions in the costs of producing and distributing motion pictures. In addition, the theatrical success of a motion picture remains a crucial factor in generating revenues in other media such as videocassettes and television. Due to the rapid growth of technology, shifting consumer tastes, and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors will have on the potential revenue from and profitability of feature-length motion pictures. The Company itself is in the organizational stage and is subject to all the risks incident to the creation and development of a new business, including the absence of a history of operations and minimal net worth. In order to prosper, the success of [your film’s name] will depend partly upon the ability of management to produce a film of exceptional quality at a lower cost, which can compete in appeal with higher-budgeted films of the same genre. In order to minimize this risk, management plans to participate as much as possible throughout the process and will aim to mitigate financial risks where possible. Fulfilling this goal depends on the timing of investor financing, the ability to obtain distribution contracts with satisfactory terms, and the continued participation of the current management.