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$7000 investment in new production company. I Need advice.
Hi!
I am starting a video production company after a few years of video editing for a hobby. Even though filming wasn’t my main focus, it will of course be a main factor in the business and I have been training with a professional and studying for the past 2 months.
The time has come and I’m opening a production company. I did lots of research and came to a conclusion that I can get started with $7000, that would get me stuff like a camera, lights, mics, headsets, tripod, and all the other main equipment that I will want to start with.
Next week I have meetings with 3 different potential investers that are interested to invest the sum that I have come up for me to get this business on the road.
My question to you guys is the deal I should propose to these investers. Of course, there are many ways to do this so both sides benifit, but I wanted to hear from someone with experience.
I want to present different aspects of the deals and different deals as well so that they can start negotiating from. I will go over one thought real quick, to give you an idea where I’m at. Of course I’m not posting ALL the details of a deal and of course a lawyer will look it over, but I want some general direction. Again, I’m just throwing out general numbers and percentages. I want to hear from you guys what you think.
1. Invester gives me $7000. His overal profit from the deal will be $7000 (%100) He will get %50 of every event I do until I pay off in total $14000. ($7000 for his investment and $7000 profit). Once the $14,000 is paid, the deal is over. He has no partnershipin the business.
2. If I hadn’t paid the invester at least $7000 in the first year, his profit from the deal will go up to %150. (saying that we agreed at first to %100 profit). If I pay him $7000 within the first year, his profit goes down to %80.
More can be added like what happens after 2 years and so on…
Thanks!
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23 Replies
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One more thing… It’s the deal I need advice on. Not the price. Thanks!
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“He will get %50 of every event I do until I pay off in total $14000”
That is quite steep, would you be able to make enough for your own needs (rent, car payment, food etc) you would have to be doing twice the amount of business to make the same amount of money, and that would be EXTREMELY difficult if you are just starting. If all you need is $7000 you might consider looking into a small business loan (they definitely wont have 100-150% interest).
Another option would be to rent your equipment, and incorporate that into your production fees (you should be incorporating equipment cost into it any way even if you own the equipment).
It is HARD to start your own business and tying your to an agreement involving you paying 100-150% interest, is way to risky in my book. I don’t want to discourage you but many small business never make it, and if you are bound by something requiring you to pay 100-150% interest would make it even harder. Personally when I started up I did a combination, I got a loan for my camera, and I rent additional equipment as necessary because not all events require more. I factor both into the cost that I charge.
On another note the most you have been studying “the craft” for several years, but that is actually a small part of the business, the bigger part is the business part. Most business fail because of a lack of business knowledge, especially if you plan on growing and bring on employees.. I am not saying that you don’t, it is just a common thing that I see.
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Thanks for the reply. Of course I realized after I wrote this that a bank loan costs much less, so %100 is silly. Just shows that I lack business knowledge. But I can’t keep this from stoping me. I must start a business of my own. I will try to get all the advice and help I can, whether from sites or friends. But I’m at a point that I have no choice and must get out there and work my way through this and I know I will succeed!
I also realized that %100 is silly because a bank loan takes far less interest then that, but the question still stands, An invester will ask me what he gets out of this and I will have to have to realistic business plans for him and that’s where I need business ideas.
About renting… well, the camera is too expensive to rent since I will be needing it a lot to practice on and it’s just that kind of thing I’ll want with me at all times. The lights… maybe I can rent these but I still need the $7000 that I came up with and I’m ok with that sum since it’s not the biggest sum in the world for starting a business.
Here in Israel, where I live, the video business is better then in the States. It’s not as competitive and there is a market is more open, so I’m not worried about getting jobs.
I also realize that my lack of business knowledge is a big disadvantage, but I have no choice. I will fight and struggle to make it own my own. I will turn to forums and friends to ask questions before making deals (that’s what I’m doing now) and I WILL succeed.
Thanks for the reply.
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Zvi, with respect, to be blunt I think your business plan, such as it is, is a little “embryonic” still. I think you’ve way under-estimated the amount you need to put into this, and don’t yet have a true understanding of all your costs, much less a solid plan for getting buisness. If you jump into this unprepared, you won’t last long, I’m afraid.
The most common error in this business is thinking that buying a camera makes it a working business. The first tools you need are really a phone, email account, and computer. It is about lining up jobs, getting people to front you some money, then the fun creative that pays off the front money and gets you some profit, which you re-invest to grow the business.
As far as equipment, the lights and tripod and mics are all good investments to make as purchases, (particularly used) because they are used every time and don’t go out of style, and retain resale value. My take on camera ownership is, it’s best to rent what you need only when as as you need it. If you only use it once or twice a month, but pay for it every month, you are losing money. Ebay is full of slightly used cameras bought by self-styled “Indie film-makers” who committed to 365 days of payments and depreciation for a camera that got used for only 20 some hours. The camera is a tool, a means, not the end. The end is a finished program you can sell to people.
In the States, we have a number of resources for people with a dream like yourself: SCORE and the Small Business Administration are just two of them. Have you looked around where you live to see if there are any such similar resources avaialable to you? If not, the next best thing is to read up some more on the business of running the business. Amazon.com for used books, maybe a community college type course lcoally, and all the resources of the internet are open to you. I urge you to take advantage of the collected wisdom of people who have done this before you. Build on their success, avoid their mistakes. Best of luck to you.
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thank you for the reply.
I totally inderstand what you are saying and I am researching starting small businesses as well.
I have thought about this very issue, “what comes first”… to get equimpment, or to get jobs lined up. I am afraid to get jobs lined up before I have ever held a proffessional camera. I have researched video filming and watched dozens of hours of tutorials, and have much practice with the shooting techniques themselves, but only via a small, SONY Hi-def $400 camera. I have had possitive feedback from my work and I fell if I don’t get a proffessional camera to learn and practice on, how can I commit to real job?? To rent a camera for 2 weeks in order to practice with (hardly enough time) would cost about half the price of the camera itself!
So thoses are my thoughts. I feel that I want to feel prepared to shoot with a proffessional camera before I commit to a job. (Maybe I can try to commit to jobs that are in a few months from now, and when I know I have commited jobs in a few months, I’ll feel better getting equipment, knowing that I have what to pay it off with… just a thought).
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Zvi, then I think I agree with you that you are not ready…YET. One thing I would suggest you do is, apprentice yourself to someone already established, that uses a more advanced camera and work as an assistant to them for a while. That’s common for beginners in the biz here that want to turn pro: LEARN from a pro. For example, volunteer to run second b-roll camera for an established wedding videographer for a paltry sum, just to get the practice. If you click with the guy, he may even refer you some business and supply you with one of his cameras, if he’s for example double-booked some weekend.
Again, my experience of this is only in the States, but over here, you can go to a pro broadcast video equipment rental place and get some hands-on experience with the cameras right there in the sales room when they are not being rented. The typical pro rental shop here indeed *encourages* people to do this, since the better you know their rental gear, the better care you will take with it, the more often you’ll rent it, and the more positive and profitable of an experience everyone derives from this. It’s a mitzvah:-)
So I would budget myself the time to pay one or more of these places a visit, let them get to know you, perhaps establish an account with them for when you are ready to rent, explain you are going to start doing some productions and eventually rent a camera from them, but you need to get some hands-on tutoring first. Indeed, I think it would be a great chance for you to try out all the brands they have and compare and contrast their features to see what you thik will work best for you.
Another route we have for gaining experience here is local cable access channels and comunity college instructional classes. Both let you get training and experience with hands-on use of all the hardware. The larger cities have such classes going on monthly or quarterly. There are also 3-day and 7-day seminar training camps run by companies like Sony, that have company pros walk you thru every step of an actual production from pre-production thru aquisition and final editing. You could make it sort of a business vacation to take such a course, and you probably should. Over here, you might even be able to get a business tax deduction for it (ask an accountant).
Invest in your skills in these ways first, then work on the company idea, so you can back up every promise you make to a client with solid pro performance. And don’t give up!
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I say AMEN to all that Mark has said.
You say “Just shows that I lack business knowledge. But I can’t keep this from stoping me. I must start a business of my own.”
Please don’t take it hard but just because you don’t want it to stop you douse not mean that it wont. Without “business knowledge” ANY BUSINESS CAN FAIL, even if you are the most talented person out there in your craft, if you don’t know what you are doing on the business end (which is the biggest end of any business) you can shoot yourself in the foot. Start by reading the Business & Marketing forum here on the cow.
You say you must start a business of your own, many people I know myself included only do there video production business or graphic design business on the side, because it is hard to hake it full time on your own. There are things like medical insurance and other benefits that come from working somewhere else, if you had to provide these for yourself the cost is MUCH greater.
I wish you the best of luck, but definitely do a lot more looking before you leap.
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Thank you all for the advice. It’s not that I CAN’T run a business, I just am not very familiar with business terms. That is why I have turned here and signed up for a course on starting small businesses and have been sitting here at my computer all night writing a professional business plan.
I am a quick learner and not a push over, but sometimes I need to hear something once so I can learn it and use it. I have worked out deals before in my life but it was in areas that I was more familiar with and knew where to start negotiating from.
Maybe I will have to take some falls in this business at first, but I have tried to find people that are hiring and it’s just not worth what they pay here. I’d rather work my a– off and learn all there is to know about running a business and succeed, learning from my own mistakes and from others.
I’m 34 years old, divorced with 5 kids and I am responsible enough to make it on my own. Since I know what I’m getting into, I am not afraid of problems that might come my way, and I will deal with them one at a time and destroy them before they distroy me.
I have good friends that have been in business all their lives that I consult with and I have you guys! I don’t feel alone. I’ll show you all, and get back to you in 6 months from now and tell you what’s going on. I’ll surprize you. 🙂
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Nobody here ever said you cant run a business, we just want to point out some of the hard things that we see that you might run into.
Again I personally sagest that you might want to consider keeping a regular job at the same time as starting your business. It gives you some regular income and benefits while you establish yourself in the video business.
My father has been doing this for over ten years with his consulting business. Its not that he cant make good money if he went full time with his consulting, but loosing a supplemented retirement plan and medical benefits from his regular job and having to provide them for himself would take way to big of a bite out of his take home pay, thus making it less then his current full time job.
Once you have a bit more experience with the camera (you said you wanted more), with running a business and have some established clients you can then go full time.
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Q: How do you make a million dollars in this business?
A: start with two million.
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