The length of time required for picture development varies with different companies. Most new production companies need to pass through a minimum of 25 main activities in order to produce their first motion picture. The first 20 activities on the list typically involve production development. A production company can conduct important operation, risk mitigation, tax and profit benefits by separating key details such as the production and ownership of each picture, the picture development and the company’s brand and asset management.

Production Company Development EmphasisOne of the key areas that young production companies have to deal with is development financing. Many production companies actually launch with only their teams and development financing because their primary goal is to develop their first pictures. In such scenarios, producers often begin by planning the activity projection for the first pictures. This is followed by the preparation of cash flow projection. Producers will analyze the cash flow projection and compare this to the capital needed as well as the potential earnings of the development company.

Preparation and Production of Investment Documents

If the configuration of the investment model and the preparation of the cash flow projection are complete, producers can commence with preparing a business plan and the private placement memorandum. Again, this is best done with the assistance of a business accountant and an attorney, as each party plays different roles.

The attorney is responsible for the:

  • Authorship of the PPM.
  • Review of the presented terms.
  • Review of the legal language used in the documents provided by the producer and business consultant/accountant.

The business accountant will prepare:

  • The cash flow projects that appear in the investment documents.
  • The different notes attached to each projection.
  • An analysis on the use of funds.
  • Details of fund source.
  • Tax issues.

The producer is responsible for the preparation of the introductory letter as well as the business plan. Other duties include the composition of the company mission statement and information on the development team.

The business accountant organizes the investment material and presents it to the producer for review. The producer then delivers that material to the attorney, who presents a final draft—following the approval of the producer—with digital and hard copies. There are no hard and fast rules to producing investment documents, but a key detail is to make sure that the content offers substantial value to the investor partners who will be reading them.

To this end, the PPM should be simple and clean. The business plan can however be glitzy.

Raising the Financing of the Production Company

Securing the first investor is vital to serve as the incentive for other parties to commit to the company’s mission. The most effective approach of raising financing is to consider each investor individually. Producers should take into consideration the different factors that can encourage a person to invest, such as the genre of the movie or a particular script in their control. The projected return on the investment is also used sometimes as an incentive. Meetings may be in private, or conducted over a group presentation. The key point is to choose the most strategic method of approach as it applies to each investor.

Some of the ways of that you can improve the outcome when meeting with investors include the following:

  • Let the investors know beforehand how long the meeting is going to take.
  • Keep the entire presentation short (not more than an hour).
  • Start with an overview that highlights some of the important producers currently in business.
  • Identify how your production company intends on following in this direction.
  • Discuss the investment you need to begin this specific path.
  • Be prepared to answer questions and listen to comments.

Business plans and documentation are important. Nevertheless, most investors will focus more on the skills, qualifications, and competence of a producer. Investors are more likely to commit to the plans of a producer who has had a lot experience in the industry, is confident, dedicated, and has an organized plan.

Communication between Investment Partners

It is considered good form and useful to the sustained growth of the production company, for investment partners be kept routinely informed of the different aspects of progress in the company, usually by the producer. Producers can communicate with investment partners every quarter via email or letter. Maintaining a steady flow of communication between the company and investment partners is worthwhile, as it increases the confidence of investors. Producers who are too busy to remember this can assign assistants to prepare routine drafts that they can customize, edit, and send as needed.

Working the Development Plan

A lot of care should be giving to the content and adaptation of the development plan. It serves as a benchmark that guides the expectations of investors. The development plan is also used to gauge the progress of a company. Each of the milestones within the development plan should be completed within the assigned period to ensure the continued success of the company. To guarantee this, the producer’s role and function will include the following areas.