How to Write an Independent Film Business Plan - 6/7 Financial Methodolgy
In part 6 of my 7-part series on independent film business planning, we’re going to go over the text portion of the financial section of the business plan. This is where you explain the methodology you used in your financial projections, the general plan for taking in the money, and then an overview of what you’re going to present in the final section, the pro-forma financial statements.
It’s pretty common to send this section out as a standalone document, or perhaps paired with the deck or executive summary. That said, the reason it’s at the back of the business plan is to force your potential investor to flip around through the plan and better acquaint themselves with your prospectus and project. That, and this is relatively standard practice across multiple industries.
Investment Plan
This subsection is devoted to how you intend to raise your funding. As a hint, the answer SHOULD NOT be that you intend on raising your funding entirely from equity investors. You’ll want to outline where you intend to raise each part of your money from, as well as how that money will be raised.
Some questions to ask yourself here are as follows, how much are you planning on raising in tax incentives? How much are you planning on raising in product placement? Do you have any pre-sales from a distributor or sales agency? Are you planning on any other forms of backed debt? Did you have a successful crowdfunding campaign? How much are you looking for in equity investment? And how much do you intend to raise in unbacked debt?
For more detail on this, you should check out one of my most popular articles.
Related: The 9 ways to finance an independent film.
You’ll also want to figure out if you’re staging the investment. By this, I mean are you planning on raising money for development first? Do you plan a separate raise for completion or marketing funds? There can be some pretty big advantages to raising funding for your film across multiple rounds.
For more information on this, I encourage you to check out my blog on the 4 stages of independent film investment.
Related: The 4 stages of independent film investment.
You absolutely must to make sure they understand your offer. Some questions you’ll need to answer are: What’s the amount you’re raising in equity and what percentage ownership in your project are you offering for that funding? What’s your minimum buy-in? Who are the other stakeholders?
Additionally, you’ll want to highlight the potential revenue for your film and give them their estimated Return on Investment (ROI). This will have to be done after your pro-forma financial statements. You’ll also want to outline when you expect them to break even.
Financial Assumptions
This section is primarily about outlining the assumptions you used while making your pro-forma financial statements. You’ll want to outline the criteria you used when creating a comparative analysis, as well as what assumptions you made while creating your cash flow sheet, and waterfall to your company/expected income breakdown.
For more detail on financial projections, please check out this blog below.
Related: The two main types of financial projections
Pro Forma Financial Statements
Finally, you’ll want to outline your Pro-Forma financial statements. For reference, these are the following documents.
Topsheet Budget: A snapshot of how the money will be spent on your film. You can only get this by doing a full detail budget. If you try to make a top sheet from scratch, you’ll end up creating more problems than you solve.
Revenue Topsheet: An overview of money to the company and to the investor.
Waterfall to Company/Expected Income breakdown: An outline of how much money your film will make based on your comparative analysis, and from what sources. Generally, when I make a waterfall like this, I’ll also deduct the fees from various other stakeholders including platforms, distributors, sales agents, and producer’s reps (if applicable.)
Internal company waterfall (capitalization table). This sheet is something that not everyone does, but it essentially outlines where the money will go once it gets to your company. I feel this is necessary if you’re using a more complicated financial mix that incorporates debt and tax incentives.
Cashflow Sheet/ Breakeven analysis: This document is an overview of how money will flow through the company and subsequently come back in. you’ll want to highlight when they can expect to recoup their investment.
Research/Sources: This is self-explanatory, it’s the research you used in the other sections of the plan, particularly the films you used in the comparative analysis.
Thanks so much for reading! I’ll be back next week with the final installment going into much more detail on the pro forma financial statements.
The reason I was able to write this blog series is that I’ve written a few dozen independent film business plans. If you need help with yours, you should check out my services page.
If you need more help researching for your business plan, check out the indiefilm Business Resource Pack. As mentioned above, it’s got a whitepaper to help you with your research, as well as lots of other helpful links and resources to aid in the creation of all the documentation you’ll need to talk to your investors. Plus, you’ll get a monthly blog digest full of helpful content so that you can be as knowledgeable as possible when you speak to your investor contacts.
Finally, if you want to check out the other sections of this 7 part blog series, I’ve included a table of contents below.
Executive Summary
The Company
The Projects
Marketing
Risk Statement/SWOT Analysis
Financial Section (Text/Methodology) - This Post
Pro-Foma Financial Statements.
