How to Start A Production Company That Actually Makes Money
Production companies are like children –everyone’s got one, but only a few are worth the effort. When you factor in competing for projects, distribution, and actually getting the project made, starting a production company can drain you both emotionally and financially. Luckily, we’ve compiled the essential guide on how to start a production company that will both lift your spirit and make you successful financially.
In this article, we cover everything from coming up with a memorable production company name to the oceans of paperwork you’ll have to swim through so you can actually turn a profit.
Let’s dive in.
1. What do you love?
Do you ravenously consume indie documentaries? Does organizing a music video shoot get you out of bed in the morning? Are you a television junkie?
Do you watch an episode of The Office daily?
The first step of learning how to make a production company is taking a step back to reflect on what excites you. If you can channel what you love into your company, it’ll make the hours of work go by faster and, in turn, push you to work harder.
But brainstorming what you love extends far beyond what your Netflix queue looks like.
Love the thrill of being on set? Then you might want to start a production company that produces many short projects, in lieu of one a big feature each year.
If you have a keen eye for a good story, you might want to think about starting a production company that plays in the scripted narrative space.
If visuals arts aren’t your thing, why not start a music production company.
What is a production company anyway?
In its simplest terms, a production company handles the physical production necessary to bring art to life, whether it be film, television, video games, music, music videos, or even comics. Often production companies are either approached to make a project or develop projects in house from scratch.
2. And…what are you good at?
Just because you love watching competitive eating videos doesn’t necessarily mean you can eat fifty hot dogs in a five minutes.
When coming up with your production company, it’s important to make a list of your skills and accomplishments.
Finding the intersection of what you love and what you’re good at is paramount to starting a production company that will stand the test of time.
If you love stand up comedy, but are great at churning out a product quickly, then you might want to start a production company that churns out digital comedy shorts for YouTube networks like RoosterTeeth.
Leaning how to start a production company is knowing how to make yourself as effective as possible, and that starts with knowing what you’re good at. It also means know what you’re not so good at.
3. Who do you know?
Whether you’re in Hollywood, California or Hollywood, Florida, starting a production company that has any chance of success requires connections.
Friends with a bunch of cinematographers? Know a bunch of actors willing to trade money for experience? Are you Steven Spielberg’s son?
If you know a lot of people in the world of tech, it may behove you to start a production company that makes explainer videos.
4. Research the competition
Once you’ve decided what arena you want your production company to play in, it’s time to research production companies like yours that are working, and others that are not.
Carefully research other production companies in your field to see what the market looks like. It’s important not only to find production companies that are producing the content you hope to produce, but also production companies that are operating within the same budget.
A great resource for researching the film production companies in NYC and Los Angeles is IMDBPro. You can find budgets, what’s currently in production, and what’s been in development hell for years.
Producer Pro-Tip: Understanding the Market
Cameron Woodward, a co-creator and producer at Sprinkle Lab, says, “It’s critically important if you are hoping for a financially secure production business to build a community of ‘buyers.’ This could be a distribution company, a network, a fanbase, or advertising creative directors — whoever they are, getting to know who is in the market for content and helping to solve their problems with your production organization is the magic alignment you’ll need to build a successful production company.”
5. Brainstorm some dope production company names
When it comes to naming your production company, you’ll want a title that says the most about your brand in the fewest amount of words. In many ways, production company names epitomize a production company’s brand.
Creator of Lost and Force Awakens director, J.J. Abrams named his production company Bad Robot, perfectly encapsulating its signature sci-fi voice. Veteran film producer, Scott Rudin, opted for a simpler approach when naming his film production company in NYC, landing on Scott Rudin Productions.
While vastly different, they’re instantly recognizable and immediately sum up each production company’s voice. You can’t recreate a first impression, so pick one that stands out.
If you’re stuck, don’t fret. We compiled 30 ways to brainstorm production company names.
Examples of Production Company Names
Imagine - Ron Howard and Brian Glazer’s company. The name is clean and instantly classic like most of the films they release.
Synocopy - Christopher Nolan and wife Emma Thomas’s production company. The name comes from the word “syncope,” meaning the loss of consciousness, which can happen if you watch Inception on acid.
Sandwich Video - Adam Lisagor’s company. While not instantly recognizable, the production company has produced countless television commercials and explainer videos, known for their quirky, intensely visual style.
6. Trademark the Name
Once you’ve made a list of production company names and crossed out all the duds, it’s time to apply for a trademark.
But before you shell out the cash to process your application, first check to make sure your name hasn’t been taken.
You can easily do this by searching the USPTO trademark database.
7. Set artistic goals
Before you set up entertainment payroll or option a script, set both a short term and long term artistic goal for your production company.
Above all, your goals should be simple and attentable. Instead of making your artistic goal, “winning an Oscar” make your artistic goal something along the lines of “producing an science fiction short film,” or “producing a national television spot, or “ “making a music video that’s animated.”
Of course, you’ll have to temper these ideas with reality and what work actually comes in, which brings us to…
8. Set financial goals
Obviously the only financial goal that matters is be profitable. However, when starting a production company it’s important to roughly estimate how much of the profits you want to reinvest back into the company each year.
In the early days of starting a production company, it’s important to reinvest most of your profits back into the company. While it will cut into your weekly paycheck, it allows the company to keep chugging along to more lucrative gigs.
You’ll also want to keep your production budgets as lean as possible starting out.
Early budgets can range anywhere from a few hundred dollars all the way to hundreds of thousands of dollars — the challenge is found more in how a producers spend the budget, rather than how big it is. The profit margin in your production business is either found in carving out a margin from your project budget or finding distribution and success in the entertainment market with an audience.
Producer Pro-Tip: Go Line By Line
Cameron Woodward says, “The best way to build a financially successful production company is by thoughtfully managing your production budgets, line-by-line. As productions grow in complexity and departments — camera, art department, post-production — each department will have different cost requests and it will be up to the prudent executive producer to properly allocate the budget to optimize for profit and the look and feel of the film.”
9. Determine your business type
We’ve avoided it long enough, but it’s time to get into the legal mubo jumbo.
Before you can cash your first check or hire your first crew member, you have to set up your production company as a legal entity. Choosing the right one is crucial as this will affect filing your taxes on your production.
What are the different types of businesses ownership structures?
Sole Proprietorship – is the most common structure chosen to start a business. In this structure, there’s no difference between yourself and the company, which means if the company takes a hit, so do you.
Partnership – is basically a sole proprietorship, but with more people. Each partner adds equal value to the company, sharing in the profits and losses.
LLCs (Limited Liability Company) – is a separate legal entity than the people who created it. This is great for a production company because if someone tries to sue you they can only sue the company. It deflects responsibility from its members (owners).
C Corp – is an independent legal entity that’s owned by shareholders. The business not the people who own it are legally and financiall held accountable.
S Corp – is a special type of corporation where you can’t be taxed twice (once as a corporation, and twice as a shareholder). However, it can only come through a special IRS tax election.
10. Assemble The Dream Team
The question of how to start a production company can be rephrased as “How do I convince a group of people to never sleep again?”
You’ll want to surround yourself with people who can expand your business in ways you can’t.
Your dream team could be ten people, or if you are criminally insane, just you. Ideally, you have people covering the major workflows of your production company.
What are the roles of a production company?
Head of Development – also known as a Creative Lead, this role in your company is in charge of finding great scripts to produce. This can sometimes meaning procuring great IP or coming up with concepts to pitch to clients if you’re producing commercials.
Head of Production – this person is in charge of actually producing the content. This includes hiring a director, crew, casting, handling the finances of the production, and procuring film production insurance.
Head of Post-Production – this person oversees the editing process, including visual effect work, foley work, motion graphics, and more.
Head of Distribution – this person handles selling your film. If you’re a commercial production company, this person would make sure that all the assets are delivered to the client.
11. Write the business plan
With all these all these elements in place you can now write out a business plan to hold your production company accountable.
At this point, it’ll seem like a regurgitation of everything you’ve researched, but having it on paper will help you stay organized (and also get funding).
The U.S. Small Business Administration recommends putting together a business plan, including the following:
What goes into a business plan?
Executive summary - a brief description of what your company is and why you’ll be profitable. Include: a mission statement, that you’re a production company, your leadership team, employees, and location.
Company description - a short summary of what makes your production company different than the rest and what types of clients and productions you’ll make.
Market analysis - here you’ll briefly describe what you learned when researching your production company at the onset.
Organization and management - briefly describe your partners (if any) here, and then declare the business structure your production company will be following. An organization chart can’t hurt, nor can your teammate’s resumes.
Service or Product Line - Here you would describe the types of clients you’d create content for, and how long it would take you to turn churn out a television pilot, feature film, etc.
Marketing and Sales - Briefly describe how you’ll gain new clients and buyers for your final products. Here, you would also describe an example of how your production company will take an idea from start to finish.
Funding Request - If you’re going to seek out an investor (more on that below), here you should explain how much money you need and where it will go (equipment, cast, operation costs, VFX).
Financial Projections - here you would describe how much money you think you’ll make in the first five years and beyond. The research you’ve done upfront will certainly come in handy here.
12. Secure funding
Maybe you’ve got a few million dollars lying around your apartment. Maybe your father invented the Toaster Strudel.
Once you’ve got a solid business plan for your production company, it’s time to take it out to investors.
Investors can take many shapes and forms from venture capitalists to family friends. If you can’t find anyone to invest (or don’t want to give up equity), you can always self-finance or take out a loan. However, on the other hand, you’re putting yourself on the hook.
Some ways to fund your production company include:
-Sending your business plan out to a studio, or a larger established production company. -Procuring an angel investor (who doesn’t have to be in entertainment) -Applying for a government artistic grant -Partnering with another production company in NYC, Los Angeles, or overseas -Crowdfunding through online websites like Kickstarter or Seed & Spark.
Pro-Tip: Keep Stock of What You Have
While the cost of starting a production company may seem gargantuan, it begin to slim down when you take stock of what you already have. Rental services like ShareGrid are great if you’re looking to keep costs low in the first few years of your production company. Use Wrapbook if you don’t want to spend too much money on an entertainment payroll company.
13. Get an accountant and set up payroll
Accountants ensure your production company is paying exactly what it needs to the IRS. And because entertainment payroll is more complicated than a Terrance Malik film, producers often turn to entertainment payroll companies to handle most of this load.
You can hire a film payroll company like Entertainment Partners Payroll or ABS Payroll Services, or go about it yourself with Wrapbook.
Cheaper and more efficient, Wrapbook allows you to easily onboard crew, collecting tax forms, paying out guild requirements, and direct depositing into your cast and crew’s bank accounts. It also comes with worker’s comp.
14. Produce some spec work
Ask any Hollywood screenwriter and they’ll tell you, “You’ve got to have a great sample.”
The true is same for producers. Before studios hire you to produce a short film, commercial, or music video, they’ll want to see what you’ve done before.
When producing your sample work, make sure your production company’s voice shines through. While you’ll want to avoid being gimmicky, having an extremely memorable demo reel will make you stand out in future client’s inboxes.
Pro-Tip: Make a Fake Commercial
Have an idea that a huge brand would never go for? A product that doesn’t exist? That might be the perfect beginnings of a buzzy spec commercial that could make its way around the internet and lead to future jobs. These guys did it, and so can you.
15. Really nail the first gig
Obviously, you want to blow the first gig out of the proverbial water. But many forget that the first gig will only be judged by one person: the client.
As you hire a crew and dream up your artistic take, be sure that you accomplish everything your client wants. Ask questions often. Write down all of the notes.
That way, if things you go wrong, you can always point the client back to the deliverables mentioned. And if your client’s happy, there’s a good chance you’ll get recommended.
16. Pat yourself on the back
For better or for worse, Instagram, Facebook, and (sigh) Twitter are here to stay, so make sure to share your final product online.
Not only will it help lead to more work, but potentially an online following. If you post correctly you could have your own distribution network before you know it.
17. Send Thank You Notes
Once you’ve wrapped up the job and are looking for the next one, be sure to send a thank you note to your clients and freelancers. It’s a simple gesture that goes a long way.
It’s also a great excuse to email past clients to see if they know anyone who needs a producer.
Learning how to start a production company is a game of trial and error. No two paths to success are the same; however, these guiding principles should push you into landing more gigs and out of the red.