Wednesday, August 25, 2010

Making a Business Plan pt 3 (Interregnum)

This post is rambly even for me. But it's the rambly part of the business plan, so there's that.

So, it turns out that successful entrepreneurs are very conservative. They're not actually big risk-takers. This dude from Case Western, Scott Shane, says so. And, well, so do a lot of other people who've looked into it. The big entrepreneurs tend to take on sure things. If we look toward Indy film god Corman, indeed by his second or third movie the buyers were paying for his pictures up front -- before he shot them.

OK, so that's one thing.

More than that, the average startup begins with $25,000 in cash. And worst of all, the average startup starts with a terrible industry to do business in. And we're not doing that, are we? Oh. Er.


Tina Tanzer and her zombie army in Day 2
Care to guess where the movie business is on the scale of "good" to "OMG this is a nightmare"? Right. Exactly.

So the trick is to suddenly make this a good business, right? Well here's the thing.
According to David Rimawi of The Asylum, the entertainment industry loses a billion dollars a year (although he doesn't really believe that number, it may be accurate, or at least it's a start.) So we're not in an awesome business. But there are people who can make enough money to stay alive. And The Asylum is the only example I can think of.

We could follow their lead more closely. They make the movies their buyers tell them to. We, uh, try to do that. Day 2 is basically what our distributor wanted. We hope. We think. I suspect we need to get closer to our buyers to find out what they want (I know, I know, "creatures" and "disasters".)

We also need to work up other "revenue streams". If we can get VOD to work for us I suspect that we could add between $10K to $20K to our North American revenue (which these days is starting to mean "make $10K to $20K for North America.)

For a little company like us, the big sale would be to cable TV. Or to make a picture specifically for cable TV. And yeah, we're working on that too.

It's my belief that there's a specific minimum size a business can realistically be in the US -- due to a bunch of factors going into the raw cost of doing business. Wow, that's a very "Drew" way to say that and it makes virtually no sense. Anyway, I think that number is somewhere around $250,000 in revenue a year. That basically means that the principal will earn the equivalent salary of maybe $40,000 a year. (Depends on how you calculate that.) As the business grows past $250K the principal will typically find that at least one person, if not two, working for him/her make more money than him/her. And the principal gets over that because that's just the way things are. And then whatever you do don't grown too fast or (egads!) buy property.

And that's my incoherent part 3 of "Making a Business Plan" -- a document in constant flux.


Kangas said...

It's all so BLEAK!!! (I am weeping right now onto my keyboard)

Andrew Bellware said...

Dispair not! We'll find a way out of this. Hopefully we'll do a better job than DeLorean and not get caught up in a Federal drug bust while we're at it...