Going Pro: Two Cash Flow Tools to Rule Them All

I’ve managed to track my finances with just two simple budget planning forms: a Budget Sheet, and a Cash Flow sheet.  Both can be easily done in Excel.

The Budget Sheet is designed to show income, both real and potential.

Date is obvious.

Paid is money that has actually come in, now in the bank.

Promised is money that I have a contract for, so it’s real.  They’ve put 30% down.

Expenses is a summary of my monthly expenses. I transfer lump sums twice a month as if it was a paycheck.

Actual is what my bank account should show.

#Mos is how many months of working capital is in the bank

Notes is to explain the change. I also use “Comments” in each field as necessary

Possibilities are project under discussion but without a contract.  

The Cashflow is a more detailed, expressive way to track the #Mos column above.   

The first column has the starting balance for each month, HI (Hurricane Images) Confirmed Income, Potential Income, Expenses Payroll, Expenses Business, Total Expenses.  Your expenses should be the same each month, letting you predict the future.

 

The trick here is to update the chart monthly to show exactly how much would be in the bank if no new funds came in.  This makes it easier to predict when you’ll be in financial trouble, and when to breathe easy.  As you can see, this snapshot in time tells me I'll be broke in January if no new funds/projects are completed.

Going Pro: How Much to Charge?

Moroccan Olive Seller

There are a lot of “cost of doing business” calculators (here, for example) and even more advice on the subject.  In my experience, they tend to be over-complicated and cost-heavy by design, almost as if they want to discourage you from starting your business.  They ask for the total cost of items (like your phone, internet, car, and “home office”) that you might also use in your personal life, driving up the budget, and put unrealistic estimates into the purchase of new equipment, etc.  When you’re starting out, don’t buy new equipment.  If you don’t own it, rent it.  These calculations are guesswork until you have several months of real costs for comparison, making the term “calculator” a bit nonsensical. 

Turkish Market

If You Don't Own It, Rent It

 

But there’s also a faulty premise behind the calculator.  The idea is that you’ll divide these costs by the number of working days or projects.  So if you’re a wedding photographer who expects to shoot 24 weddings in a year, you’ll divide your costs ($40K) by the number of weddings: 24 weddings at $1650 each. The implication is that if you fall behind on the number of weddings, you increase the cost of each one.  So if you’ve only shot six weddings in six months, you’ll need to up your rate to $5,000.  Which is ridiculous.  Not because it's a lot of money, but because your cost of doing business has very little to do with the market rate or what you’re worth. 

Shark skin in Hong Kong Market

My approach has been simpler.  You simply need to know your average monthly expenditure.  If that’s $4k, than you need to earn a grand a week, or $250 a day.  On average.  Which means that you need to bill for the days, weeks—but hopefully not months—that you’re not working.  This is essentially a mark-up on your time.  A cup of coffee costs around 20 cents, but they’ll charge $1.50 to cover rent, employees, insurance, etc.  You’re doing the same. For the time being, my ideal mark-up is 250%.  So if the project takes a ($1k) week, I’ll need to charge $2500.  That’s my short-term goal.  But it’s not what I charged in the beginning.  When I first opened shop, if the job took a week, I charged roughly a grand.  This meant two things: First, that I was less expensive than my competition; and second, that I would eventually go broke because I wasn’t continuously employed.  That’s where my extra working capital comes in.  I intentionally planned to underachieve for the first six months.  During that time I would prioritize building a client base, portfolio, and skill set—and slowly… slowly build up towards my ideal rate.

Going Pro: Working Capital-- How Much?

Jorg Gray Luxury Watch

When you’re thinking about starting a production company, odds, are your most pressing question is “how much working capital do I need to start my company?”  The obvious answer is that there is no magic number.  But there is a framework for thinking about working capital that can help you find the right number for you. 

Let me define my terms: “working capital” is my total monthly expenditures—both in life and for the company.  This includes the life bits like rent, food, internet, and gas; and the business bits like insurance, advertising, and depreciation.  I don’t include equipment costs in this figure, or set-up costs for company (things like website design, etc.).  I started with my kit pretty much intact, and I wasn't planning on buying anything in the near future.  If this was a watch shop, I had all of my necessary inventory, right down to the “Open” sign on the front door.

But video production isn’t like selling watches.  You need to factor in the turn-around time, from contract signing to final product.  If you shoot weddings, you may sign the contract a year in advance of the big day.  You need to make sure you’re in still in business when the wedding cake is cut.  (A more technical term for turn-around is cash flow.)  Turn-around time is project variable—some of my video projects wrap in under a month, others can go six before the final payment is made.  Personally, I decided my average turn-around time was 3 months. This means I need to have at least 3 months of working capital above my safety level.  Or panic point.

Media production also differs from a sporting goods store because the cost a wrist band is fixed; if you paid a fifty dollars for it, you can’t sell it for $49.99.  In media production you can (and probably should) charge less than a living wage on your first projects in order to build your resume and make connections.  A good rule of thumb to remember is that there are no "1-time discounts."  If you charge a client $500 for a video, that client will always expect his videos to cost $500.  You can charge the next client a thousand, but this one is pretty much set.  And that’s the path I took: my fee was above my physical costs for a project but below a living wage. Then I over-delivered on each product, and increased my rate for the next client.  I made exceptions to the “charge more” rule when the project was something I really wanted because of what it would do for my resume.

There's no such thing as a one-time discount

Since I began my production company as a part-time endeavor, I had the advantage of not starting at “day one” in terms of getting the word out and making connections.  I still had plenty to do, though, so I considered myself to be one month old as a company. Starting part-time, also gave me a better sense of my turn-around time, and how much I might immediately charge/earn for projects.  I could predict how much my monthly income would be in the beginning, how long it would take to finish a project (and thus charge more for the next one), and better predict how quickly my income my increase.  Remember, if your turn-around time is three months, your first month of income arrives in the fourth month of your company.

Find Your Panic Point

Which brings me back to my panic point.  If it takes three months to successfully make your first dollar, then it takes about three months before you know you’re not going to make that dollar.  If you have three months of working capital and the first project pays out in three months and one week, your business failed before it got started.  If, say, you have six months of working capital in the bank, then you'll have three months left when the first project pays out.  That three month mark I call the panic point.  But only having three months would mean I would always be living at my panic point.  That might be technically possible to maintain, but it really sucks to be on the edge of the abyss all the time.  And there's no wiggle room in case of emergency.  What you need is extra working capital to take the pressure off and allow for some degree of “failure.”  I set my goal at nine months of working capital in the bank.  I successfully overshot my mark: I opened shop with eleven months.

Let’s compare these estimates with national statistics:  Half of new businesses close in the first 2 years; 90% close within ten.  Those frightening figures are somewhat leavened by the fact that not all businesses close due to failure. Some are bought out; others just move on or retire. Six months of working capital is the most common recommendation for new businesses, and 12 months tends to be the longer, or outside recommendations.  Most businesses start with 3-6 months of working capital… and of course the majority of these are likely to be  the ones that close within 2 years.  “Service” types of companies, those that work from home, and those without employees tend to have less working capital to start, but don’t have a better survival rates.  70% of businesses start with less than $25,000 in working capital. Try to be in the 30% that has more. After researching the statistics, I decided I would have at least 9 months of working capital (which for me was more than $25K).

Save don't borrow

Best practices for starting a new company:

1.       Create working capital through saving not borrowing

2.       Start small and build up

3.    If the work you do in your studio can't pay for at least the studio, work from home.

3.       Track your finances studiously

4.       Establish yourself as an LLC or corporation to protect your personal finances

5.       Be a woman. Seriously, studies show women spend less on their businesses and are more likely to succeed in turning a small biz into a larger one

Strange tidbit of the day:  having too much working capital is also listing as a contributor to business failure.

Going Pro: Pro Bono - The Response

Day 45

The Watershed Project responded to my email. They’re excited to work with me. Their 20^th anniversary is coming up, so the timing of my pitch was excellent. It’s a bit of good luck-- but one’s odds improve just by playing the game. Ain’t no luck sitting on the bench.

Day 53

I had coffee with the Executive Director of the Watershed Project. We’ve known each other for years (she was hired on staff when I was on the board of directors), but were never close. We talked concept for the video. For the 20^th anniversary they wanted to emphasize how the organization touched people across the lifespan. We wanted to focus on people’s stories, so the video would consist of quick interviews. And instead of having people introduce themselves by name, we’d have them say how old they were. The questions would be designed to elicit how the Watershed Project had opened their eyes to their community.

Day 61

My first day of shooting. At an elementary school. Whoa, Nelly, that was a handful. I captured some good background footage of the classroom and instructors, but the conditions were a disaster for interviews. I got 12 kids at once. In an outdoor hallway. They were nine. (In the end, only one clip made the final cut.)

After the elementary school I filmed student interviews in a classroom, interviews in the field, three school field trips, five staff on site. As you can imagine, the hours for this pro bono project racked up quickly. What quickly became apparent is that I didn’t have quite the right gear—especially in the audio department—for this type of on the fly, one-man shooting. I needed wireless mics (I ended up purchasing the budget Saramonic), and a faster system for set-up.

What I didn't know was that the creation of this video would take 10 months due to a variety of reasons, some of which included my own distraction.  That taught me a couple of lessons as well:  First, these types of shoots can (and often should) take several months; don't try to rush it in a weekend because it's a freebie.  Second, commit to your pro bono projects with the same integrity that you would for a well-paid gig.  

 And I learned on my feet about the craft of story-telling, the quirks of my camera, how to get better footage on the fly, etc., etc., etc. 

 

Going Pro: Pro Bono in Your Portfolio?

Day 48:

I reached out to The Watershed Project today to pitch a pro-bono project.  There’s a never-ending debate among the photography/videography community about whether one should ever do pro bono.  In my view, those that are unequivocally against either have no business sense or are desperate about their bottom line.  They argue that your product is worth more, and/or that freebies steal business from legitimate professionals.  Both statements are overly broad.  At the beginning of your career, your expertise/product is worth exactly $50 (in my case it was $25 and a pair of ugly sandals—my first “paid” photography gig.)  And customers who are willing to bet hours of their time on someone with no experience are definitely not in a financial place where they could pay a small-yet-reasonable fee for a more sure thing.  Many clients who want pro bono can’t pay much more than zero, and those who can have such poor sense that you don’t want to hire on as their Creative.  So should you ever do pro bono work?  When you’re starting out—hell yes.  When you’re established—from time to time for a worthy project.

Theyyam Ceremony - Kerela - Hurricane Images Inc.

Here’s the question: if you were going to spend $6,000 on a video for your company, how many sample videos would you want to see before you felt comfortable trusting that company?  Two?  Six?  Twelve?  Six is probably how many I’d watch, but I get bored easily.  How many samples would you want to see if they were exactly the type of video you wanted for your company? That number is more like two or three.  But even three videos is a lot of pro bono work if you don’t have other videos that are close to that “perfect example.” If you're just starting out, you may need to invest in more than one pro bono offer.  I started with one, with the expectation that my first paid jobs may not be exactly in my niche.

#1 Takeaway: Make the damn pitch

A couple of years back I had a long-standing relationship with The Watershed Project (I was on their Board, actually), which gave me both some credibility and a familiarity.  The Executive Director left the company in the intervening years, but the new head had been on staff when I was on the Board, so I wasn’t starting from scratch.  Since my goal was to work with non-profits, they were an excellent choice for pro bono; the work we created would be almost exactly what my “real” clients would want.  Creating a video for them would help establish my niche expertise.  And if you remember from my earlier confession-- I was not a polished filmmaker.  This video would be a learning project as well as a resume builder.

Theyyam Ceremony - Kerela - Hurricane Images Inc.

So what was my pro bono pitch?  Here’s my email.

Hi --,

Hello from your former Board Member.   And congrats on the directorship-- I seem to be a little behind the times.  When did you take over the helm?  That's exciting and wonderful.

I've been working on a new project that I thought might be helpful for TWP's fundraising activities.  I still work part time as a health educator and community engagement coordinator, but two years ago I started working professionally as a photographer with the rest of my time.  Then about 9 months ago I started getting a number of requests to produce video for companies.  As I thought more about how I wanted to develop that side of the business, I realized that I really wanted to work with clients from the non-profit world.  Video is going to be increasingly important for organizations-- for fundraising, education, and awareness.  But the clients that are hiring me aren't exactly the type I'd like to focus on.

So I wanted to offer my video services to TWP free of charge for a project.  It's an organization I'm personally invested in, you do great work, and it's an opportunity for me create a product that's a perfect example of the work I'd like to focus on.  I thought that creating a fundraising-focused video for Bubbles and Bivalves might be one opportunity; I'm certainly open to anything that might be useful to TWP (such as a more general "this is TWP" video).

Is this something that might be of interest?

You can examples of my work at www.hurricaneimagesinc.com.

All the best,
 

So what works about this email, and what doesn’t?  Obviously, it’s specific to the organization and our previous relationship. That’s a strength.  I intentionally made the video as unpretentious as possible.  I didn’t sing my own praises or say what a great video they would get.  In fact, I highlighted both my relative inexperience, and my inability to get exactly the type of clients I wanted.  Why?  Why would I want to present myself as less than brilliant?

Let’s be real.  Most companies are struggling to some extent, trying to reach a higher level.  Non-profits are almost all struggling.  So I knew she’d be able to identify with the difficulty in reaching the right clients, right donors to sustain one’s work.  Even though I was a former board member, I figured she would have some suspicions about my motives.  Is this really pro bono?  What was a getting out of it?  I made it clear-- I wanted to work with a different type of client.  I also reckoned that it was better to lower expectations before she saw my samples, rather than raise them.  Maybe I’m being unnecessarily humble, but I think that’s generally a wise idea.  

The number one take away:  just write that damn email.  Make your pitch.

The number two take away:  be as human as possible.  That means not being perfect.  Set aside your ambitions, your agenda, and consider the situation from their angle.

Just found us?  You can find the beginning of our series here.

Going Pro: Getting Clients Pt. 1

Okay.  At this stage you've hopefully gotten a business license, an accounting system, a website, a phone number, and a business card.  What are we missing?  Clients!

The next five posts will delve into the process of getting clients, including how I landed my first few.  Finding new clients is one of the most difficult and frustrating parts of starting any business, and in truth what works when you're first starting doesn't necessarily work once you've got your sea legs.  Client acquisition evolves.  The dream is that eventually the clients come in on their own, but frankly I'm not convinced that's true for the vast majority of successful media companies.  For most of us, it's a chess game with an invisible and illusive partner.

My first move may be controversial to some.  But it's what I did, so I'm sharing.  Beacuse this blog can't be very useful if I withhold information.

Through my work (which has me creating two videos), I have a subscription to Videoblocks, a stock footage company.  There are pluses and minuses to the service and their collection, which can feel a bit limit... something I suspect is true of all stock companies.  I noticed they had an abundance of stock footage from Africa.  So I researched a non-profit, Schools for Africa, who's work I admired, and I created a promotional/fundraising video for them using the footage from my subscription. Why is this controversial?  Well, they didn't hire me to do this (and I don't explicitly state that), and I didn't shoot the footage myself.  The service I provided (and I do provide this service), was to develop the concept, write the script, edit the available footage, and add music.  In one sense, it's precisely the services I offer-- creating compelling video stories from footage they own; in another it doesn't distinguish between footage I shot and footage someone else shot.  And, of course, I would never distinguish this footage under any circumstance.  Nor would anyone else.  A TV show doesn't flash a disclaimer saying "this clip of the White House was supplied by Getty's."  That would destroy the story.  But because I wasn't actually hired to create this video, I feel the slight of hand more acutely.  Does the use of stock footage change the quality of story-telling and editing Hurricane Images provides?  No.  Does it change their perception of how accomplished Hurricane Images is?  Well, maybe yes.



Next Post:  Using a Pro Bono gig to get to the next level

Just discovered our blog?  Our Going Pro series documents the 40 weeks leading up to launching our media company, a journey from part-time photographer to full time video/still production.  You can find the beginning of the series here.

Going Pro: Contracts

Okay, the CAME-TV Boltzen 55W review was pretty sexy.  Now the boring stuff.

Contracts and budget proposals.  Obviously, you need them. My approach is to over-engineer them slightly-- I like them to be meaty but not so dense as to overwhelm the client.  Most people won't read a five page proposal or contract and you want them to understand and have appropriate expectations; at the same time you don't want a document so brief that it appears poorly thought-out.  I want my clients to feel like they basically understand it, but the technical aspects make them want to give over control to someone who knows what they're doing.  Three times in the past year I've had my contracts "sent over to legal" for review, and I've never been asked to modify it.  So I feel pretty confident that it passes muster.

My contracts always stay the same, but the budget proposal (which I sometime call the "Spec Sheet") is tailored to each job.  It can be longer depending on the client and the size of the contract.  It's supposed to lay out all of the details of the shoot so that we're all working from the same set of expectations.  We've talked through most of the details by the time I write up the contract and proposal, but never count on them remembering what was said.  Always write it into the contract.

A few bits, pieces, and golden rules:

• Never work without a contract
• Always require a retainer at signing
• Never call it a deposit (deposits should be returned if the job falls through)

Describing contracts and budget proposals isn't very helpful, so I'm including links to draft templates for each.  You can view my budget proposal template and the contract template by clicking on the links. 

Just found us?  You can start at the beginning of the Going Pro Series here.

CAME-TV Boltzen 55w Fresnel Review

Light.  You can't have too much of it.  Of course, when you really think about it a good video light is a technical marvel.  It needs to produce a lot of light, silently, with excellent color rendition, and no flicker.  I was hopeful when I heard about the CAME-TV Boltzen 55w focusable LED Fresnel.  I wanted a powerful light, and Boltzen came with some add bonuses (which I'll get to in a moment).  So how'd it stand up in real life?

CAME-TV Boltzen 55W Fresnel - It's tiny!

CAME-TV:  CAME-TV doesn't play with the big boys in high end gear like Wescott, but they are a name you can trust.  They produce quality gear at a relatively reasonable prices, and typically aren't considered innovators. The Boltzen is something of a bargain in the their line up, and is surprisingly innovative in design.

Size:  The first thing that surprised me was how small it is.  The Boltzen is about the size of an extra large travel mug.  It would be easy to pack six of these in a carry-on suitcase, making it great for traveling.  Light stands are now the burden for the mobile videographer.  Extra bonus:  built in barn doors.  Some folks expect they will give sharp defined edges to the light, but that's just not how Fresnels work (that's the job of an Ellipsoidal).  This is more gentle shaping.

CAME-TV Boltzen 55W Fresnel

Construction and set up:  They feel very sturdy.  You never want to throw a light around, but I don't get the sense I'll have to coddle it.  It has separate On/Off and light level knobs, which is nice because you don't have to guess the level if you turn it off to conserve power.  Some buyers have complained that you have to disassemble the light from bracket to fit it into the carrying case.  It's true, but honestly it took me 60 seconds to set up the first time.  Slightly more troublesome, though, is that the bracket nobs come complete off, leaving the possibility they'll get lost.  I may try and find a way to attach them.

Locking mini XLR power cable

Another very slight downside is that the length of the power cord to the brick is fairly short, leaving it dangle in mid air.  I tied my to the light stand with one of the wire twisties that came with the packaging.  The cord locks into the light, which makes some folks happy about the solid connection and others nervous about kicking the whole thing over.

"The big question is power"

But the big question is power.  I haven't seen any reliable specs on lumen, but I'm more of a practical application person anyway.  I set it up against my RPS Studio 100w LED for a real world comparison.  The RPS is a very good light for the price (about $280), though it suffers from light fan noise (I've yet to swap out my fan, which is recommended).  At distance of six feet, a shutter speed of 1/60th, and an ISO of 500, my meter reads f/8 for a perfect exposure with the RPS on full.  In the same conditions, the Boltzen gave a reading of f/5.6 wide open and f/8 with the narrow beam.  Which is impressive, given it's just 55 watts.  Housed in the reflector, the RPS produces a wider spread of light than the Boltzen, so that's where the additional wattage is going.  But if you don't need the spread, the smaller Boltzen provides just a stop less light wide open.  The narrow setting on the Boltzen is really quite narrow.  I'll be interested to see what happens in a softbox or reflective umbrella, because it's very small and hard otherwise. I haven't done a direct comparison yet, but the CAME-TV seems to be about as powerful as my Apurture 672 panel, with slightly better color rendition.

The color of the light between the RPS and the Boltzen seems quite similar.  I don't have a way to test for color accuracy, but I don't see a tint as yet.  And daylight temperature is a bonus-- you don't find that in real Fresnels which are traditionally tungsten. 

The fan is very quite.  In fact, I thought they had sent me the 33 watt unit without a fan.  I had to go back and listen for it. The fan will probably be noticeable if you have three lights going in a small room, but I don't think you can do better without going fan-less. Mic well and you'll have nothing to eliminate in post.

Wifi.  There's a mysterious reference to Wifi (and a micro USB plug) on the unit.  I've downloaded the app (which appears to be new as of March), but there are no instructions and it doesn't auto connect.  UPDATE:  I emailed the folks at Came-TV and they said they are working on a wifi module that will attach the the Boltzen.  Shame that it's not built in, but even so it has the potential to be very useful.  The app appears to be able to control six separate lights, and it would be great to be about to adjust levels while looking at your monitor.  I imagine future versions of the Boltzen will have wifi built in.

Those bonuses:  Smaller than I thought.  Barn doors help shape the light.  Separate Power and Level knobs.  It can run off a Sony NP-F960 battery, but you need to get the larger capacity version.  My 8700mAh only lasted about 40 minutes at full power, but that's still great in a pinch.  Oddly, my battery barely fit and I really had to wedge it in the slot.

Though a full stop weaker, the Boltzen is a smaller, quieter, and more adaptable light than 100W studio lights like the RPS.  At the moment, light in the $300-$400 range will generally be 55-100 watts, which is only the difference of one stop of light.  The difference between your choices are all about build quality, color quality, and features.  In that respect, the Boltzen does very well. 

CAME-TV has a solid reputation, and they get a lot right here.  It's a solid, professional instrument, and I could see owning two of them at Hurricane Images.  They make a Bowen adapter so you can attach it to softboxes, reflectors and grids, though I'm more likely to shoot through a scrim since the Fresnel-style Boltzen can "grid" itself. 

The CAME-TV Boltzen 55W Fresnel review:  worth the money, especially if you like the form factor.