Writing a business plan for a movie can be a challenging task and it’s easy to get lost in the process. However, there are some key points to consider, that can help to guide you through the process.
Corporate goals
Every new movie project is also a new business venture and should be treated as such. As very businesses it has (or should have) – a unique business idea that should be able to be described with realistic and quantifiable goals (as opposed to artistic goals). Putting this down in a business plan is a matter of being objective in every aspect from production costs, to what it takes to reach break-even: How many weeks it needs to run in the theatres, on how many screens, in what cities, how many attendances. What quantities that needs to be sold on DVD and online VOD-services. What prices and revenue are needed from foreign sales? As well as anything else that affects the business side of the movie.
The business plan should be like a cocking recipe, in terms exact quantities, activities and procedures that are needed to reach the goals – so be very specific about goals and order of activities. How will the plan be executed? What is the strategy behind the plan? All corporate goals, are needed to be broken down in to sub-goals. The strategy needs to infuse the entire organization in terms cast and crew, financing, time management – and what subcontractors and service providers are being used. The business plan should NOT contain any abstract or sweeping references, anomalies or metaphors that are open for too much interpretation. Instead it should argue for WHY this very specific recipe will work – as a business! A business is based on estimated sales of products and/or services so do not make the mistake to first produce a production budget – and then try to get the sales estimates to cover the expenses! This is fantasy projections, not sales estimates! A business is built the other way around: by adjusting cost according to sales! The business plan should also contain a lot financial information, of which the financing plan and production- and marketing budget, might be the most important. However, don’t forget to put your funding needs and requested investment amount in the plan or as an attached investment proposal.
Biographies and track record
Many investors look upon their investment, not as an investment in a business – but rather in the people behind the business. This is why having a well written biography and relevant track record is so important. To improve this section of your business plan you might want to perform a SWOT-analysis of the team (evaluating their Strengths, Weaknesses, Opportunities and Threats). What kind of market- and industry connections do they have? What level of experience? Do they have a strong “branded” name in the industry? Is there any demand from buyers on more movies from them? How they’re looked upon by the capital market? How have their movies performed before? What kind of individual conditions do they have? How financially dependent are they on this particular project? Are there any risks that their personal financial situation will affect the business? Are there any health issues to be considered?
When you’re writing biographies, don’t forget the board of directors, advisers, mentors and important sub-contractors, as well as service providers that you might have long term agreement with – or worked with before. Also, you should never hesitate to tie people with more experience to your project, either as mentors/advisers or with an executive producer credit.
Profit & Cash flow projections
All financial estimates in all forms and shapes, such as estimated sales-, production- and marketing budgets, cash flow projections – should of course be included in the business plan. Maybe most important is to include a so called “revenue waterfall chart” which shows how the recoupment are prioritized among investors, that is to say: What their risk is in relation to their possible rate of return. E.g. senior financing (or “top financing”) has usually priority and are recouped before mezzanine debt with higher risk (but also greater Rate of Return) – and all equity participation usually is at the end of the line, just before any deferred payments.
Exit & repayment strategy
The business plan should of course include a plan for how potential investors will recoup their money. This can either be done as an equity partnership, where the investor has continues participation from the revenues – or it can be structured as venture capital or a loan, with a planned exit. Even if you’re looking for an equity partner, you should structure an exit strategy where the investor is not tied to the project for ever. You also need to describe what kind of observation right, control and executive power the investor will have over the business. Investment are usually either “passive” or “active” – where an active investor might be part of the board of directors or directly involved in the management. For lenders need to describe your payment plan for rent, installment, mortgage – and any kind of collateral. You also need to know if it’s a matter of a short-, medium- or long term loan – and if the loan can be converted into equity (by an option right) – or can be sold or transferred to a third party in any other way. A short term loan is usually loans that are repaid within a year. (“top financing”/“senior financing” – that is the first to be recouped). Medium term loans if loans for one to five years (e.g. mezzanine debt) – and long term is any loan for over five years (bank loans, private equity loans). Remember that investors don’t like surprises, so be as transparent an honest as you can be.
Use attachments
Most of the information in a business plan can benefit from being included as attachment, rather than part of the business plan itself. Attachment that you then just need to make references to. Those can attachment can be anything from financial estimates and budgets to agreements, contracts, letter of intents – and even brochures and copies of news articles.
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