How to start a production company
With an increasing demand for video production and a large, diverse but competitive market, could this creative business opportunity be right for you?
Things to think about when starting a production company are:
What is a production company and who is it suited to?
In the digital age, the world is full of video content. Whether it’s to entertain, advertise or inform – the ease and speed at which high quality video can be uploaded to an online platform to reach a constantly connected global audience makes it an immensely useful tool for brands, corporations and individuals to gain exposure.
This has created a massive and endlessly diverse market for video production.
Adam Neale from Bold Content defines a production company as one that “makes content that allows businesses to communicate”. But there are many different kinds of videos you can produce, as managing director at NextShoot Dominic Sutherland explains: “Homepage videos […] product videos for retailers and manufacturers […] internal communications or training content, case studies, which are a form of marketing […] event videos, conferences, webinars” – the list goes on.
“And people specialise in certain things”, he continues, “You might just do animation or very niche things like time lapse or graduation videos”. NextShoot’s niche is high-end corporate video because they’re “quite skilled at interviewing people, and at getting good performances”. Instead of trying to make every kind of video you should work to your strengths – what kind of production do your particular set of skills lend themselves to? Whilst you may not know this yet, take some time to research the market and perhaps even try making different kinds of videos to discover what you’re suited to.
Sutherland explains that there are “more and more people coming into this space, and the entry point is lower and lower in terms of cost”. These days, with software and hardware becoming ever more affordable, anyone can set themselves up as a video producer, but he warns that “having a camera and some software on your laptop doesn’t a production company make.”
Video production requires a lot of technical knowledge and skills that can take years to master. Many people choose to specialise in one particular area such as camera operation, lighting or sound and will have a background or education in the medium. Sutherland says that “most people who are starting up a video production company tend to be people who are both shooting and editing”. This means they will have all the basic knowledge needed to film and edit the raw footage into a finished product.
If you have no experience or formal education in video production it might be wise to take a course or a degree. Even to the untrained eye, the difference between professional and amateur footage is startling – bad lighting, bad framing and most importantly bad audio are a death sentence. Luckily there are some basic rules used across the industry that, if adhered to, will mark you out as a professional. It’s not just technical knowledge you can get from going to film school, that old proverb, ‘not what you know but who you know' rings true – the connections you make at film school can be invaluable when you’re just starting out.
Creating a production company business plan
As mentioned before, there are countless different kinds of video production and you’ll need to decide what you’re going to focus on from the outset. Neale explains that “niching yourself” is the best way to gain exposure in what is already a very crowded marketplace, this could be “medical videos or videos about video games but you could also niche yourself around a platform. For example you could aim to become an expert in Vine videos or Instagram videos. Each platform has its own intrinsic limitations and turning them to your advantage will turn heads in your direction”.
Sutherland agrees: “Have a niche. It’s especially true for video because that’s the way people search for things. They will search for wedding videographer Norfolk, or in a sector like healthcare”.
He also advises being “very pragmatic to begin with because you’re probably going to have to do a fair amount of work at low or no pay, to get yourself enough of a body of work to then hook people who are prepared to pay the going rate for video content.” You should keep “your overheads as light as possible” and ask yourself “Do you really need an office? Do you really need to bring someone in?”
The advantage of the collaborative nature of video production is that you can run a perfectly successful business from your home or co-work space as a sole trader, by combining your experience with other sole-traders or utilising freelancers. “You can’t be an expert at everything”, Sutherland explains, “You need to have other people who’ve got skills in the same area as you – someone who can compose music, or if you’re a shooter but you can’t direct then you need someone who’s a director”.
Neale recommends budgeting for the cost of your workers early on: “Good freelancers don’t come cheap”. Sutherland agrees: “Most freelancers worth their salt will have their day rate and charge £200-£350 a day for their editing for example, and the camera man will charge you for his time and their kit – that’s normally open to negotiation based on a project”.
Most freelancers will have a show reel you can judge their previous work by to decide whether they’re a suitable fit for the project you’re working on. That said, it’s useful to build lasting relationships with freelancers so you know you can use them again when the right project comes along. Sutherland describes it as “a loose affiliation”.
Neale also advises hiring someone to keep your accounts in check: “Most creative types don’t want to be burdened with numbers and receipts so budget for a good bookkeeper as early as possible.”
Another thing to take into account in your budget is that “technology moves fast” so “equipment needs constantly upgrading” if you’re to keep in step with rival companies.
Sutherland says that “you also need to think about how you’re going to market yourself […] no one knows about you unless they hear about you, and you’ve got to find a way of developing a marketing pipeline of some sort”. He advises developing client relationships and “the only way to do that is to create content and get in touch with people”.
Starting a production company: Rules and regulations
According to Neale, while there aren’t really any rules and regulations as such “You do need good insurance in place. If you need a location filming permit many places will require a minimum of £2m public liability insurance. Often businesses with large premises and lots of workers will require up to £10m worth of public liability before they will let you film in their office.”
“Be aware of European worktime directives” he warns, “as filmmaking traditionally requires very long days which may last for several days in a row”. Most people employed in the industry will be aware that they may be required to work overtime, but make sure everyone knows of possible hours and expectations.
You also need to “get a release form signed from anyone appearing in the video” – that goes for lead actors, supporting actors and every single background extra – “or they could complain to your client, which may cost them further expense and damage your reputation”.
If you intend to use music in your videos “you should avoid using copyrighted music […] unless you have clearly agreed this with the client and they accept liability in writing”. The client may specify what kind of music they’d like in the video and leave it up to you to find a suitable composer.
How much does it cost to start your own production company?
Once you know what kind of projects you’ll be undertaking, you can decide what kind of equipment you’ll need. If you intend to outsource things like camera work and sound recording to freelancers then their daily rate will probably include the cost of renting their equipment.
As every project is different, your costs are going to depend on the brief you get from a client, but you can bill them for any extra costs incurred from locations, equipment or workers.
Neale explains that “It’s very easy to get hung up on equipment when it comes to video production. There’s so much to buy and so many shiny new toys that keeping a level head and concentrating on the bare minimum you need to run the business is not easy.”
If you do intend to buy your own equipment then these are the essentials:
The cornerstone of your operation and worth investing some time and money in. Do some research into what different cameras can offer you – you could even rent a few different models before committing to buying one. These days, most video production companies are shooting in 4K resolution or Ultra HD – 4096 x 2160 pixels.
According to Neale, a “A DSLR camera can go a long way. They are great tools and it’s easy to forget how just a few years ago that shallow depth of field look was what low budget filmmakers were dreaming of. Just be aware of their limitations and don’t go trying to record a conference on one as most of them have a 10-minute record limit and you might miss some important dialogue just as the camera cuts out.”
Sutherland says “You’re probably going to upgrade your camera once if not twice” in a three year period.
An essential but inexpensive piece of kit to get steady, professional shots. Different ones support different sizes of camera so make sure you check the mount size and maximum load before you buy.
Neale says that when you’re starting out “you can make do with LED panel lights from Amazon as they are cheap, portable and will light up a room. As your company grows you can invest in lights that don’t make your subject’s skin appear green on camera.”
Audio recording equipment
Bad audio makes all the difference between amateur and professional looking footage so it’s wise to invest in some decent gear. Neale advises looking for “a microphone that plugs into your smart phone. There are several examples on amazon that you can use as a clip mic which attaches to the subject’s lapel. Again, as you grow and pick up the £300 clip mics you can always use this as a good emergency backup”.
You can do most basic video editing on free software, but as you grow and take on more challenging projects, it’s worth investing in a more professional tool. Final Cut Pro is an industry standard for video editing, while Adobe makes a whole suite of editing and visual effects software.
How much can you earn running your own production company?
Neale warns that “It’s a really tough business to make money from. Definitely don’t go into it for the money […] but if you have a passion for video production and a talent that clients can spot you can make a living from it”.
Sutherland agrees: “I think you need to start off being realistic by assuming you’re going to spend quite a few months actually at very low pay while you build up materials”.
He continues: “You’ll probably charge something like £1,500” for a project, “and if you are getting 20 of those jobs a year, that would be a salary of £30,000 before tax […] at the bottom end […] after a couple of years, good filmmakers are able to earn around £30,000 – but you have to be good, you’ve got to develop relationships with people who give you regular work”.
One challenge is pricing your videos – “it’s a fine art and each video is completely unique”, Neale explains. Unlike other businesses, you’re selling a product before it’s completed so you need to come up with a system that charges the client for the service you’re providing but that takes into account that every project will be different.
Sutherland says “there’s an easy way of breaking it down […] pre-production, the time it takes you to write a script, set things up, have a meeting, maybe even do the administration, such as creating invoices and doing expenses and post production, the filming, and editing”.
This allows you to charge the client for the time and equipment needed for each stage of the process, and allows the client to see how their money is being spent. He adds that you need to “define the terms of your offer” with a “set of simple terms and conditions”. Sutherland explains that you shouldn’t be “shy of making demands […] It’s part of the business […] If you’re clear with people in advance they like that”. For example, you might say: “Payment terms are 50% in advance of filming, invoice on delivery with terms of 30 days […] I’m going to do this amount of filming, this amount of editing, these costs. Anything beyond that is extra and you get two sets of amendments: i.e. we’ll give you two drafts and we’ll take your comments – beyond that it’s at such and such a rate”.
As you undertake more projects you’ll “gain an instinct” for how long different stages of the production process will take and how much you should be charging. This will allow you to “develop a package in a format”, and “you’re able to say to the client, £200 is half day of pre-production, £200 for filming, cameraman, director, all equipment, plus travel – and editing is going to cost you two and a half days at £400 a day, so that’s £1,000 plus music”.
Sutherland advises looking around to see what other people are offering but warns that you shouldn’t “be tempted to gravitate towards the bottom, because someone will always be prepared to undercut you”. He explains that “these things always work on the 80-20 principle. It’s the lower paid jobs that will absorb 80% of your time. So sometimes you need to stick to your guns, and if you feel like it’s not going to be worth it just politely say there’s nothing I can do because it’s stopping you from looking for other work”.
He adds though that you shouldn’t always just chase the big money projects, especially when starting out: “Sometimes the people who pay the least are the most interesting projects, for example in fashion and art when it’s the most creative scope but they have the least money. So sometimes actually the hook for doing it is not just philanthropy but the project is interesting […] people will say to themselves ‘I’m going to get one really good shot for my show reel’”.
Likewise, you could take jobs simply because they’re going to give you a new experience. You might “undercut” your normal price because you “want to film in a helicopter”, or something with a new “kind of retailer or a big pharmaceutical company”, and that work “will encourage you to get other work”.
Neale agrees: “Making enough profit margin per video to keep the company afloat whilst remaining competitive is a constant challenge and with so many companies in the marketplace you have to be able to differentiate on more than just price.”
Starting a production company: Tips and useful contacts
- Focus on producing videos that suit your creative strengths
- If you want to stand out in a crowded marketplace, find a niche
- Keep your overheads as light as possible – do you really need an office?
- Do anything and everything at the beginning to develop your skills and create a diverse show reel
- Develop lasting relationships with clients and freelancers
- Get your pricing right – it's easy to underestimate how much work a job will take
- London Camera Exchange: Supplier of new and used video recording equipment.
- Prokit UK: Supplier of professional video recording and broadcast equipment.
- British Film Council: A list of useful unions, guilds and foundations.
- Advertising Producers Association: Represents the interests of production companies, post-production and visual effects and editing companies making commercials.