A crucial part of raising funds for a feature film is being able to clearly show your investors the “money in.” In other words, how much is it going to cost them to get to a finished, sellable product. The best way to do this is with a viable production budget, which should represent the film’s negative cost — the total amount of money it will take to achieve a distributable “picture negative” (whether that’s digital or actual film). However, there are several mistakes filmmakers often make when budgeting a film that may undermine their fundraising efforts. Below are 10 tips they can employ to help avoid some of the most common pitfalls.
Run a Breakdown and Schedule First
I don’t know how many times someone has shown me a budget top sheet based only on wild guesses about everything from the number of shooting days to the equipment needed to the size and cost of the cast. This is a recipe for disaster. The only way to truly generate a reasonably accurate budget is to first break down the script so you know all the elements you need, how many pages of script take place in a given location, and myriad other useful intel for planning a production. From here, you can run a schedule that allows for adequate shooting time and lets you know what days you will need key elements like cast, cars, locations, special equipment, large props and so forth. Armed with this information, you can then create a meaningful production roadmap that can be budgeted.
Utilize Software That Tracks Actuals
Movie Magic Budgeting is a great software because of its easy functionality and intuitive design. However, unbeknownst to many filmmakers, it only lets you input estimated costs; it does not let you track your actual costs and variances. This is because EP, the maker of Movie Magic, wants you to buy their production accounting software, Vista. For projects that can afford it, hey, no problem, go for it. But for lower budget projects that are trying to maximize the money onscreen, try using alternative software that allows for both estimates and actuals. Showbiz Budgeting from Media Services is one. Another is Hot Budget (formerly Point Zero), an Excel-based program intended more for music videos and commercials, but which works just as well for indies.
Pad Certain Areas for Extra Protection
All film budgets should have a contingency to account for those unexpected overages, but that can start to get eaten up very quickly if you underbudgeted certain areas. If you have a bond company involved, they might start to get nervous if you dig into the contingency too early and often. That’s why it’s good to have at least a few areas of the budget you know are padded up — so that you can borrow from them if needed without drawing down your contingency. The bond company will often freeze areas of the budget that tend to skyrocket quickly, like film stock, legal fees and music, so make sure these cost centers are well padded. But other random areas like working meals, hard drives, production supplies or various post expenses, for example, can be padded to allow for an extra cushion as well.
Create a Notes Section
The top sheet should include some notes on major elements the budget covers and doesn’t cover. Is it a union budget, and if so, which unions? SAG? IATSE? DGA? Teamsters? Also, how many days of prep, production and post are being factored into the numbers? Is it budgeted to shoot in a specific city that might help explain why rates are higher or lower than they might otherwise be in a major production city like Hollywood? What’s included and not included in the budget that might be a question? A-list star salaries? Travel for crew and cast? Publicity expenses? Sound stage rental? This is your chance to help give your reader a more thorough understanding of the philosophy behind the numbers.
Use Globals When Possible
Software like Showbiz Budgeting and Movie Magic both feature a function called “Globals.” This can be a producer’s best friend. These are codes or names used to represent a certain value in the budget. For instance, let’s say you have a seven-week shoot. You might go into Globals and assign the code “SW” (for “Shoot Weeks”) to equal “7 Weeks.” Then, every time you need to put in the number of shoot weeks next to a line item, simply type “SW” instead of typing “7 Weeks.” What this means is that if the number of shoot weeks subsequently change (say from seven to six), you don’t need to go through the entire budget to replace “7 Weeks” everywhere it appears with “6 Weeks.” You only need to change the value of “SW” to equal “6 Weeks,” which will then automatically change it throughout the budget.
Research Rates from Reliable Sources
The pervasiveness of the internet has made researching rates much easier than it once was. Numerous online resources exist to help filmmakers hone their numbers. Media Services publishes a labor guide that professionals can access for free with a simple sign-up process. This guide is updated with current rates for SAG, DGA, IATSE and others across a wide variety of contract levels. The major guilds also publish specific scale rates, sometimes up to three years in advance, for acting, writing, production management and directing services. Some equipment vendors will publish their rental rates, which can be used as a basic guide, and rental networks like ShareGrid can help fill in the gaps. When in doubt, Google search vendors like insurance companies or caterers and call for pricing.
Know Percentage Rules of Thumb
If you’re non-union, paying rates above scale or paying for things in which exact amounts are still a mystery, it’s good to know a few rules of thumb. Screenplay fees are usually 2–3% of a budget. Director fees can range from 3–5% depending on the stature of the director and overall budget size. Total producer fees usually don’t go above 7–8% without calling attention. Financing fees average in the 3–5% range as well. Budget 10% for contingency and anywhere from 5–10% for locations. Of course if you know something is going to cost more or less than these, budget what you know. Post is usually 10–20% depending on the size of the visual effects and music budgets. And above-the-line costs usually shake out to about 1/3 of the budget on average depending on the level of cast.
Only Share the Top Sheet
When you’re done, you may wind up with a budget 30+ pages long. However, you only need to share the one- to two-page top sheet summary with investors unless they ask to see the entire line-item budget. (They usually don’t.) The top sheet is an integral part of your business plan and should be included in it. If an investor asks how you arrived at these numbers, you know you have the detailed breakdown, schedule and full budget to back everything up.
Tax Incentives Have Nothing to do with Budgeting
Sometimes, clients will ask me whether a given budget “factors in tax credits.” This kind of question shows confusion on what a budget fundamentally represents. A budget explains what a given film costs to produce. It says nothing about how that cost will be paid for. Tax credits, like equity, debt, brand integration, in-kind and foreign pre-sales, are merely methods to pay for the budgeted costs. A budget might be designed for filming in a tax-credit-friendly state, which you can call out in your notes, but the use of tools like tax credits should be called out in your financing plan, a wholly separate document.
Learn What’s Included in the Negative Cost
As we know, the negative cost is the amount of funding needed to complete the picture. It will include things like cast and crew fees, camera and lighting equipment, catering, transportation, set dressing, editorial and liability insurance. But what about distributor deliverables and marketing costs? While these are certainly part of the overall cost of releasing a film, they are not part of the negative cost and, aside from a few limited exceptions, should not be included in your production budget. Items like release prints, format conversions, E&O insurance, key art, trailers, press junkets and distributor screenings should be in a separate budget specifically created for P&A (prints and advertising), which will be dictated by the distributor and/or distribution strategy.
Hopefully these tips will help you step up your budgeting game and get you that much closer to securing the funding you need to make your next feature film a reality.