So You Think You’re Ready to Start a Production Company?

Production companies (whether you’re making TV or film) are unlike any other kind of business. I’ve seen a lot of them crash and burn because bright-eyed people fail to manage the fundamentals of content creation. The “Make great content and people will pay for it” mantra is, frankly, bullshit.

So what are those fundamentals?

• Finding demand
• Turning a profit
• Controlling costs
• Hiring people

If you can’t do those things well, you should never stay in business. I’d like to dive into each to help you understand how to make awesome content and maybe make some money too.

Finding Demand

This is the hardest parts of running a company that makes content, which is why I mention it first.

Simply put, demand is getting people to see your product and convincing them to buy it. It means finding the right audience for your content (buyers, not consumers) and finding a way to reach them.

How do you find or create demand? You have to drive buyers to it. It’s actually easier and cheaper these days than it’s ever been. In a lot of cases, you can simply put it on YouTube or Facebook or Instagram and buy ads so the an audience can see it. Put it in front of a few people and if your stuff is good, word of mouth will spread.

Creating demand does not mean posting your content online and hoping to earn ad revenue. That only makes money if you get really popular by getting really lucky. And the revenue isn’t dependable. YouTube could make a change to their platform one day and ruin everything you worked for.  Use the platforms, but control how you get paid and connect with your consumers through your own site or platform you control.

There is no such thing as viral. You can’t make something “go viral.” It happens once in awhile due to countless variables we can’t control. It’s like winning the lottery (which I like to call an “idiot tax”). Expecting something to go viral is always a gamble. A performer like Billie Eilish, who first built a huge online audience, is an anomaly.

Instead, be smart and strategic, even if you don’t have much to spend. Spend your $5/day (or whatever you have) on ads and comb through the data that becomes available to find your audience. Eventually, however, you could get to the point where your’e spending $500-$1,000/month on advertising.  Just make sure that spend is eventually less than your income (control costs).

To be clear, I have completely oversimplified the process of paid traffic, but the point is: you have to spend some money to build awareness around your project and discover who your audience is.

Turning a Profit

Your next step is to decide how you’ll turn your product into cash.

Does the total costs of your content creation, marketing, and delivery equal less than you sell it for? If you can’t earn more than it costs to make, sell, and put in your buyers’ hands, that content is a loss. If you’re constantly losing, you won’t be in business long. This is Business 101 shit here, but it has to be said.

It’s okay to think small. You don’t need to produce a blockbuster. You don’t even need to make $100K. Find a way to make $1,000 a year or $500 a month. Then invest that money into your next project. Scale up over time. It all starts with a single sale.

Most importantly, think about your margins. This is where I see a lot of people fuck up. Content businesses that succeed have big margins (the difference between total cost and the purchase price). If it costs you $5 to deliver a product, you have to sell it for at least $10. Ideally you should sell it for $20 or $30.

This is especially true if you only sell one, fifty, or a hundred units. You need big margins when you’re small because you won’t be able to take advantage of economies of scale. End of story.

Controlling Costs

Frankly, this is an area where I see a lot of producers fuck up. People fail to take their costs seriously and blow out their margins.

Your costs include everything it takes to produce, deliver, and monetize your product. If you have $100K to spend, you can’t drop it all on production. You need cash to put it in front of potential buyers. A lot of content creators blow their wad on the film and forget they need to spend money to shop it around.

When it comes to overhead, you need to minimize your costs as much as possible and still deliver creative and interesting content. Opt for scalable costs wherever possible. Yes, you’ll pay more per unit right now, but you’ll be able to shed weight when things are tighter.

Here’s what I mean: Think of your production company like a lung. A lung inflates with air, reaches its peak, and then deflates when it lets air back out. There’s nothing wrong with a deflated lung. The deflation is part of its cycle – its purpose.

Your company will do the same. After principal photography, your company will rapidly deflate. Grip, electrical, and camera will leave two days after principal. Set decoration and wardrobe are gone three days after that. Production and accounting take off five days later. Eventually you’ll shrink down to just your editors and post-production coordinator.

This kind of deflation is completely normal, so you need to fashion your company to accommodate it. For instance, you shouldn’t hire a full-time sound guy if you only need him for two days a month. Just hire him for the two days. Yeah, you’ll pay more per day than if he was full-time, but you’ll pay less overall.

The same applies to your office space. You probably don’t need a five-year office lease. Use a WeWork or a Regus that you can scale up and down depending on your needs. Keep things lean.

Hell, if you’re really small, you can get away with holding meetings in coffee shops and cafes. There used to be a stigma about that kind of thing, but it’s less of a problem now. Some people will judge you for it, but that might be a cost you’re willing to pay to operate lean.

Hiring People

People are the last piece of the puzzle you need in place when you start a production company. You need devoted, hardworking, talented people. And you need to pay them well.

If you take on unpaid interns, you’ll get inferior work. That’s just the way it is. There are lots of places to hire freelancers, gig workers, and specialists. (Just be mindful of the Internet Con Man, who is just as prevalent as the Hollywood Con Man.)

Who should you hire? Generally speaking, you can divide the labor tasks in a production company to these categories: production, marketing, inventory, sales, and delivery. Limit yourself to two of them and hire consultants or outsource to handle the rest. You have some leeway on this rule in the beginning, but you should phase yourself out of all but two categories as quickly as possible. A single person just isn’t capable of being good at more than one thing.

What you DON’T need are partners.

Not once in my entire career have I ever seen a production company work with more than two partners. Never. When you have more than two people, they create pockets of dissension and disagreement that creates problems in your organization. I’ve seen companies with three partners explode in a year. I’ve seen companies with five partners explode in months.

If you have to bring a partner on board because your business demands it, make it someone who compliments your skillset. If you’re the creative, bring on a business-minded person, and vice versa.

Anyone beyond a single partner should fall into one of two groups:

Paid Employees

I prefer this group. Hire people you can shed when it’s time for your business to shrink. Hire experience, give them clear tasks, and pay them well so they give you their effort.

Keep in mind that you don’t always have to pay people to do the work. You can also pay them to teach you how to do the work. For instance, you might pay a DP a few hundred bucks to show you how to light a setup, rather than hiring him for the entire shoot.

Profit Participants

I don’t like hiring this group because you have to compensate them with downstream revenue. Plus, everything gets messy when there’s money on the table. People’s moral compasses start to spin like a fucking top. But sometimes it’s the only way to make your project work. Don’t give them ownership, and cap their compensation so you aren’t paying them forever.

Are You Ready?

If you think you can generate demand, turn a profit, control costs, and hire the right people, then you’re probably ready to start a production company. Start small at first. Don’t try to create the next summer blockbuster. If you learn how to address those four problems early, you’ll be well on your way to running a profitable production company.

Oh, one other thing: You’ll notice I didn’t mention film school. Honestly, I think it’s mostly a waste of time (and a lot of money) unless you go to a top-notch school where you can build a big and very connected network fast. But if your only option is a school no one has heard of, just get to work.