Hey filmmakers. Welcome to Going Bionic #223. Today we’re going to discuss how to make your business plan more appealing to potential investors. I’ve considered hundreds of business plans over the last 20 years. I’ve heard pitches on everything from motion pictures, TV shows, video game companies, concerts, radio stations, DVD duplication, production slates, online magazines, oil drilling expeditions, bottled water, wind energy, real estate, private schools, leasing airplanes, airplane parts, car parts, melting metal, minerals, foreign currency exchange, a Christmas lights company, an ostrich farm, alpacas, a production backlot, hotels, motels, jewelry companies, garment factories, a surplus store, antiques, technology and several more that I can’t remember off the top of my head. While I said “no” to most of the business plans I read, I did invest in more than a handful of them, (namely films, real estate and video games). When I look back at why I said “yes,” to the ones I did, my reasons were because a) I believed in the people and b) I believed in the product. Of course, I didn’t hit a home run on each investment. In fact, several of them were strikeouts. However, the ones that worked really worked, and went on to become towering grand slams.
In all of my years on considering business plans (as well as writing several of them) I’ve come across several faux pas that will likely kill most investors’ interest. Thus, here are five key things to know about your film/TV business plan in order to give your dream the best to become reality.
Investors Don’t Actually Read Business Plans…
Most investors are too busy to read 40-60+ pages on why you need their money. They’d much rather know how much money you need, and when they’ll see it back. Thus, it behooves you to keep your business plans on the shorter side. While there is no exact number of pages to stay under, a 25-30 page business plan will usually illicit a stronger response than a document north of 50 pages.
Another effective practice is to send a three-page “executive summary” of your business plan to potential investors, before you send them the full document. Doing so will substantially shorten your “investor response time” and it will also filter out those investors who aren’t interested in investing.
Make Sure Your Comparable Films Are Realistic
If your project is a $500,000 comedy, don’t compare a $20 million dollar studio comedy as a basis of what kind of return the investor can expect. Remember, investors are successful enough to have disposable income to risk, so they’re not stupid people. Thus, comparing a small film against a much larger budget with studio distribution and massive advertising budget is only going to discredit you with investors. The better play is to compare films that have your budget and genre and received the kind of distribution that you seek.
Make Sure Your Profit Assumptions Are Within The Realm Of Realism
Plugging in realistic numbers of what your film should make on the platforms it’s likely to wrangle (VOD, DVD, cable, TV and online streaming) will go a long way toward helping your investor analyze your investment.
Contrary to popular belief, investors don’t care about your film getting a theatrical release; all they care about is making money, losing money for tax purposes, getting an executive producer credit or a combination of the three. Thus, don’t spend a chunk of your business plan detailing how much money your film can make theatrically, because investors may demand you secure theatrical distribution before they invest.
Side Note: One thing that always gets my eyes rolling is to see $12 million to $30 million dollar profit projections on productions under $1 million. While achieving those astronomic numbers are “possible,” they certainly aren’t probable, and most investors cut checks on market probabilities, not once-in-a-generation possibilities.
Do Not List Actors That You’re Currently Courting
It’s probably not a good idea to list the actors you’re going after, because most investors will wait to see if any actors are willing to commit before they invest. Of course, the problem is that you usually need to be funded before actors will attach themselves to your film. Thus, it’s best to only list the name actors who have already committed to your project.
Do Not Use A Sense Of Urgency To Land Investors
Far too many filmmakers try to use their own sense of urgency to convince investors to invest. Either they can only get a location for a specified period of time, their film needs to be shot during a specific season, or they only have an actor until date. Whatever the reason, trying to hurry an investor into cutting a check is rarely a good idea. Investors always look at the worst case scenario; like what happens if they invest, and you can’t get the rest of their money? What happens if you get the money and you lose the actor/location anyway? Remember, investing in a film is a huge risk to begin with, so the last thing investors want to do is deal with time-sensitive issues. Thus, always keep in the back of your mind that no matter how much of an urgency you may have, your investors will not share in your urgency.
Okay, that’s what I have for you today. As always, I thank you for lending me your eyes, and I look forward to borrowing them again next Tuesday. Until then, I hope you have a great week! I can be followed on Twitter @Lonelyseal.