You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your film production company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a film production company?
Here’s how your annual start-up costs might break down:
Workspace: up to $10,000 or more per year. As a start-up, you might be able to conduct business in a spare bedroom or your garage. As your team grows, and you need space to store more equipment and gear, you will quickly outgrow your home. You won’t often conduct business meetings here with investors, so it doesn’t have to be more than a space that’s safe, secure and spacious enough to use comfortably.
Production gear: up to $15,000 or more. Yes, people have actually made respected films with natural lighting and their smartphones, but this is more of a novelty. It’s much likelier that you’ll need computer hardware and software, microphones, booms and lighting, and a decent digital camera at the very least. Some of your equipment can be leased. Here’s a useful checklist of possible equipment needs.
Employees and crew: anywhere from $20,000 to $100,000 a year or more. Try to keep it as lean as possible.
Marketing materials: $1,000 or more. You’ll at the very least need an attractive and professionally rendered website and business cards.
Insurance and licensing: up to $6,000 a year. You’ll likely want fire and theft insurance for your film equipment, and liability insurance at the very least.
What are the ongoing expenses for a film production company?
Your expenses will grow as your business grows. If you’re good at budgeting your expenses for production, you’ll be able to take on more projects as funding grows. Your largest overhead costs will likely be renting office space and paying your employees. Most of your other expenditures will be on a per-project or per-assignment basis.
Make sure you factor all travel expenses into the initial quote you give to your client.
Who is the target market?
Your end “customers” are the viewers—the people you want to attract to your finished product. One of your starting points should be to carefully profile the demographics of your future viewers before beginning the project. This clear understanding of your audience will help you in securing funding; writing, directing, scoring and producing your project; and also finding distribution outlets once the final project is complete.
You also have a second critical audience: your financial backers. This might be venture capitalists, government grantmakers, or commercial clients, but it’s likelier (at first, anyway) to be an informal group, including friends, family and others with discretionary income to invest in your business.
How does a film production company make money?
Films make money in different ways, depending on the form of distribution. This can include box office sales, the sale of individual DVDs, sales to streaming services, and even such ancillary sales as product placements and merchandising of your film, which can be especially lucrative in the case of large-budget films that reach a massive audience. For commercials and industrial films made for corporations, you’ll be paid an agreed-upon rate that might be a day-rate, hourly rate or flat fee, depending on the project. Here’s a helpful article with more tips on pricing your commercial work.
How much can you charge customers?
See what the market will bear. Whether you’re selling DVDs in a weekend film festival such as HorrorHound, or working with corporations to produce industrial films, you should charge rates that will make you competitive in your region.
Prices for film projects vary wildly, depending on the type of client, the demands of the project, and so many other factors. Key Moment Films, a wedding film service in Florida, charges up to around $5,000 for their basic package.
Conducting thorough market research in your area will give you an idea of how much you can charge clients, depending on the kind of project they want you to do.
How much profit can a film production company make?
The U.S. Bureau of Labor Statistics states that directors and producers made a median salary of about $71,000, or just under $35 an hour, in 2016. However, that’s highly variable depending on your area of specialty, location, talent, reputation and other factors. Also, you should keep in mind that these salaries reflect professionals who are employed by bigger companies.
According to www.IBISWorld.com, film and video production is a $45 billion dollar industry, with only seven companies, like 21st century Fox and Time Warner, controlling over 80% of the market share.
To make space for your company in this industry, you will need to start small and find reliable local clients who value the quality of your work. By slowly building up your portfolio and finding your unique niche in the market, your company could reasonably bring in $50,000-$100,000 in annual profits.
How can you make your business more profitable?
Salesmanship and the overall quality of your work will be the key ingredients driving the growth of your business. Your distribution channels will also be critical. Some major film companies bring in over $100 million in box office revenue, but still lose money due to enormous production and marketing costs.
For inspiration on the possibilities of independent filmmaking, this article lists some films that were produced on a modest budget but ended up making millions.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your film production company is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a film production company. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain state and local licensing or regulatory requirements may apply.
- For more information about state licensing requirements, visit SBA’s reference to state licenses and permits
- For more information about local licensing and permitting requirements, check with your town, city or county clerk’s office, or get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A film production company is usually run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a film production company.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your film production company will be in compliance and able to obtain a CO.
In businesses where services are provided on an extended basis, a services contract is often put in place outlining terms and conditions of service. You should always require clients to sign a services agreement before starting a new project. This agreement clarifies client expectations and minimizes risk of legal disputes by setting out payment terms and conditions, and service level expectations. Here is an example of one such services agreement.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a film production company
Register with Production Hub, a directory of video and film production companies and crews, if you’re seeking commercial work. Also, put together a reel to demonstrate your talent. To display your films, TV programming or documentaries, attend trade shows and enter your work in film festivals. (Entry costs can be high, so try to only enter shows in which you think you have a chance of performing well.) Here’s a good resource for submissions information for major film festivals.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Your work is your calling card. Maintaining a strong presence on social media is also critical. You can show your portfolio, an entire small film, or a clip of a longer work on YouTube to demonstrate your team’s capabilities. Then solicit followers on other social media, such as Facebook, Twitter, LinkedIn and Instagram to join creative discussions and create backlinks to your work. If you do win awards, hire a public relations or publicity firm to publicize your achievements and attract new fans and customers.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Film Production Company In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
You should be a creative storyteller and technologically adept in film or digital production. Your expertise might come from film school, employment in the film industry or a background in creating film content. Even a five-minute demo film counts if it’s a good portfolio piece.You must also have a strong knack for business, since a large percent of your time is likely to be involved in raising funds from investors and seeking partnerships for the production or distribution of your work.
What happens during a typical day at a film production company?
Your typical day might include many of the following responsibilities:
- Soliciting new business clients if your area of business is commercial work
- Writing your own scripts or reviewing the submissions of other screenwriters
- Attending fundraising meetings or events to present your project and secure financing
- Attending networking events or scheduling meetings to find editors, cinematograhers, actors, co-producers or other talent who might add creative value to your projects
- Appraising shooting locations, securing permits and scheduling shoots
- Auditioning on-camera talent and/or interviewing crew members
- Paying salaries and bills, invoicing clients and attending to other business and office matters
What are some skills and experiences that will help you build a successful film production company?
Your portfolio is critical for getting new clients and for finding investors, partners and collaborators. If you’ve worked for others in the business, showcase the best of your work. If not, create your own content for demo purposes.
You should also have the self confidence to be able to sell yourself and your vision. You must be a master storyteller in describing a film that might not, at the moment, involve more than a few storyboards. You must also have a good business instinct to carefully budget a short or extended shoot and editing session, as well as the costs to market your work and find a distribution channel that can help you turn a profit.
What is the growth potential for a film production company?
The U.S. Bureau of Labor Statistics predicted a “faster than average” growth rate of nine percent for directors and producers between the years 2014-2024. There’s a steady growth of venues for media content in the form of streaming services, cable programming, online programming, video on demand and other new media outlets in addition to the traditional channels. However, keep in mind that there’s also more competition out there. Anyone with even a cheap digital camera (including a phone!) can call themselves a video production company and share their creations on the internet.
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a film production company?
Start small. Write a business plan to help you envision and document your idea, how you’ll make money, and where you’ll find financing and distribution.
Keep your plans modest. Don’t initially think in terms of releasing a slate of films. Instead, carefully plan out the first production; its success will attract investors and viewers for your follow-up work. As a commercial production house, make sure your clients pay at least 50% up front, and stick to a fixed payment schedule.
How and when to build a team
Keep your budgets as tight as possible by doing as much for yourself as you can. As your needs grow, try to form relationships with other independent creatives, with the idea that you’ll share profits rather than provide them a fixed salary. As your company grows, you can eventually add salaried employees starting with your areas of weakness. For instance, hire people who are good at sales and networking if you prefer devoting most of your time to the creative aspects of the business.