Are You Doomed Without Pre-Sales?

As a follow up to my previous post on the topic of Keeping It Real, I want to address some of the comments I received on the following statement I made:

”  if you’re independently financing a film without cast and pre-sales from distributors, don’t think you can raise any money over a few hundred thousand and have a sound Business Plan for investors.  I have filmmakers showing me their Business Plans on projects with $3 million budgets and $7 million in P&A that make my jaw drop because I don’t know where they think they’re going to make back a few hundred thousand from, let along $10 million!”

One of the concerns many filmmakers seem to have is what if they DON’T have a project with *true* bankable cast attached and therefore can’t go out immediately and secure pre-sale financing from distributors.

In other words, are you doomed if you can’t get pre-sales?

The answer is NO and here’s why — not every film is going to be suitable for pre-sales in the first place. And that’s fine because there are other forms of financing to explore as per my Micro Budget Blueprint like private equity, tax incentives, and crowd funding/sponsorship.

Let’s look at Private Equity for a moment – you’ve heard me say before that you don’t want to expose investors to any more than you have to when putting together the budget of your film. Meaning…if you have a $1 million budget, you don’t want to raise $1 million in private equity, rather you want to cover at least 25% of your budget with tax incentives, and possibly even another 25% in pre-sales (eventually) or a combo of crowd funding + sponsorship –  so that all you need to raise is $500K and therefore only exposing investors to half your budget. Make sense?

You see,  even if you are planning to use pre-sale financing for your film, chances are you’ll need a certain percentage of private equity to fill the gap (could be anywhere from 10%-50%). So better to get comfortable with the fact now that at some point in the process, you’ll need to seek out private investors (no one gets out alive!).

So you want to take all this and make sure it’s communicated clearly in your film’s Business Plan. You want to show investors that you’re willing to dig in and do the work to mitigate their risks. That means gettin’ busy with packaging (if you have a narrative film), and looking at ALL forms of financing for your film and diversifying your funding sources.

Just to reiterate – even if you’re planning on doing pre-sales for your film you will still need at some point to raise private equity money. Very rarely is a film financed with 100% pre-sales.

So now I want to ask you – how are you planning to mitigate the risks of your investors? Are you prepared to raise some private equity for your next project or do you have another plan in mind?

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In 2 weeks I’ll be running an accelerated version of my Business Plan 2.0 Virtual Intensive. I decided to do this specifically for those of you who either need to get a proper Business Plan together by AFM or are trying to be proactive before the end of 2011 and get the ball rolling with the financing of your film. Check out all the program details by clicking here, and take advantage of the early bird discount that expires end of this week.

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