What other expenses might there be in development? If you didn't write the screenplay yourself, or if your partner didn't write it, you may have to pay someone part of their fee up front for it. If it comes from a book, or a short story, there will be option rights, and that definitely will involve money, for even if the author gives you a free option, there's the legal fee for drawing up an option agreement.
How about the Private Placement Memorandum—the formal summary of a proposed commercial, literary, or other venture, containing all the information on the type of corporate entity as well as the definition of gross and net, and the way in which investors will recoup their investment and share in profits? Potential investors need to see something of this sort, which comes laced with heavy, boilerplated legalese.
Then there is a separate, optional document, a Business Plan, which is generally used as an informational marketing tool. This should contain a synopsis of the script, a budget top sheet, a time frame for production and release, narrative bios of the talent involved, positive comparisons with other films like the one you're producing, a detailed statement of the risks involved, and coverage of any special aspects of the production (e.g., in our case, shooting digital video; with Street Trash it was having free access to a Steadicam). It does not contain the legal entity, and the terms under which an investment would be recouped; all of that is in the Memorandum. It is a more seductive document. In fact, the contents of the Business Plan should be couched in beauty, meaning it should be designed by an art director, and include such graphics as a logo for the film. Potential investors need to see both the Business Plan and the Memorandum, but the Business Plan should be placed before the Memorandum: It's all about appearance in this industry. (How often did your mother remind you about tucking your shirt in?) A gorgeous presentation does half the work for you. I bring an art director on board long before the director. In fact, the art director comes on board right after I do. You'll need stationery, business cards, mailing stickers, all with that same logo, to allow people to perceive you as professional. (That is, I'm assuming, if you're doing a film for more than ten or twenty thou. If your budget is miniscule, things may never reach the stage of preparing a Memorandum, or even a corporation, and your investors will find out if you're professional or not when you're done.) Go to the art department at a local college and get a student to do a logo for free, copy it onto your stationery, and keep your fingers crossed.
So, now we've got legal fees, a legal/financial entity, possible literary rights to deal with, and an art director to have a hand in the preparation of the Business Plan. But that's not all: we can't forget duplication costs, mailing costs, phone bills, lunches with potential investors, transportation, stationery supplies. It goes on and on.
And it could go even further, depending on what kind of film you're making. With The Sweet Life, a bittersweet romantic comedy, there was no inherent problem in familiarizing potential investors with the genre.
But with Street Trash, there most definitely were going to be difficulties in that regard, so on that film, as part of development, we shot a three-minute promotional trailer to show to investors in order to help them visualize what we were doing. It was shot on film and then transferred to video. Today, it could, theoretically, all be done digitally. But no matter how it's done, there will be expenses involved—a day's shoot or more, with lunches for cast and crew, possible minimal compensation for cast and crew, transportation, equipment rental, supplies purchases, making multiple copies of the video.
Let's put it another way: On Street Trash, we raised $35,000 for development, all of it to be spent before a single penny was raised from investors for the film itself. With The Sweet Life, the development figure was only $8,000. Street Trash ended up costing around $900,000. The Sweet Life looks like it'll come in at around $250,000. Is there a relationship between the budget of the film and how much one has to raise for development? Only in that it makes sense, if the budget is low, not to spend too much on development. Just keep in mind, certain costs— such as incorporation—don't go down just because the budget for the film is less. Alas, the cost of making copies at your local copy store remains constant, too.
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A business plan is an essential document for anyone commencing a new business, already in business and critical for anyone seeking funding from a venture capitalist. The business plan needs to be comprehensive, well thought and should contain sound business reasons. You can get all the info you need here.