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advice for new post house biz

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Thom Stromeradvice for new post house biz
by on May 1, 2006 at 7:21:14 pm

I am in the process of starting a post production house with a friend.

I'm writing to request advice and seek basic info from those who have succeeded and those who have failed in such a venture.

Why is this a good idea? Why is this a bad idea?

We have a few clients ready to give us business but no contracts have been signed. We plan to start small with just one edit room (I'm the editor) and she will produce and help pull in more clients.

How do you attract clients when you are a new business? How do you decide when to upgrade equipment to meet the changing demands?

Any advice from real world experience would be greatly apprecciated.

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Thom StromerRe: advice for new post house biz
by on May 1, 2006 at 7:28:25 pm

Just for the record: I read Nick Griffin's excellent article in the COW Magazine and found it to be very helpful. I was writing to see if others in the COW Community would mind putting their two cents in, or if Mr. Griffin has some further insights.


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Nick GriffinRe: advice for new post house biz
by on May 1, 2006 at 9:07:17 pm

Thom -

One thing that a surprisingly large number of people seem unaware is the fact that the COW is a massive archive of past discussions. I strongly recommend that you spend some time glancing through the older threads and learn from people who are a whole lot smarter than me.

But since you asked, I'll address some of your specific areas.

WHY are you starting a business? Just because you want to or because there's a number of people just beating down your door to do business with you? As has been said here many times, "build it and they will come" is a formula for bankruptcy, or at the very least years of discomfort.

The short answer on how to get clients is to let it be their idea and then be available to answer their questions. This is in marked contrast to the notion that they have to be "sold" something. Your task therefore becomes letting people know what you specialize in and that you have some availability should they need your services. Here's where personal style and flair come into play. Client says, "I want THAT LOOK and Thom knows how to do that." Of course better still is when THAT LOOK is something you created and are perceived as the only source for it.

Granted, this is only what the more sophisticated an knowledgeable clients should be thinking. The more normal and mundane are thinking, "I need a video project done and I don't really know how to go about it. I'll ask one of my buddies who they've used for this sort of thing or I'll look in the Yellow Pages or Google it and get really lost. Oh wait... here's a DVD that somebody just dropped off telling me about how to get the most out of my next video project." (You get the idea -- especially if part of the idea is knowing why I don't write dialog!)

When do you upgrade and when do you expand? When you absolutely HAVE to. When the upgrade will EASILY pay for itself in a matter of months -- ESPECIALLY true with technology. One of the worst positions you can be in is to have years of payments left on obsolete equipment. Computers and software age faster than mayonnaise in the summer sun.

Finally, here's the best advice I can offer. Don't start a business without having already done the same tasks on someone else's clock. Work for someone so you can get a realistic idea of how things, including things as basic as business itself, work. And not just you, either. Your producer friend must learn the trade before trying to do it on her own. Learning from the bottom up is a tremendous waste of time. Trust me, that's how I did it. That's why I don't yet own that tropical island I've always wanted.

Hope this is of some help. Read the archives. They're a vast wealth of information.

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debeRe: advice for new post house biz
by on May 7, 2006 at 5:49:40 pm

Nicks advice is, actually, heartwarming. There's a lot of good stuff in there, and nothing I am about to say is meant to contradict him...I don't know that I am going to, but if it seems like I am, I don't mean it!

The best advice I can give you, Thom, is really know your market before you do anything rash like cash in your retirement account to build a facility.

You may already know that. There wasn't a lot of history in your post. We don't know if the clients you have are a good, steady client base that can sustain rent and leases and overhead. Obviously, contracts can't be signed yet, but how much work do you do with them already? If you increase your overhead, and have to charge them more than what you currently charge, will they come along with you, or find someone else in your old price range? That's not always bad. Trading up for clients can certainly have it's advantages, but it does hurt to lose a client, regardless. Also, we don't know what level you work at, how long you're been an editor, how much experience your producer/sales person has at either producing or sales. There's a lot of unknowns, so forgive me if I either shoot too high or too low for your circumstances.

I know a guy who put his entire future on the line about six years ago to build his post facility. He'd been in the business for about 15 years working at the best facilities in our area. He had a stellar client base, a great reel, and a TON of promise. The first four years were pretty rough. The bottom fell out of our market in 2002-2003. I had a stretch of seven months where I worked a total of seven days. ( I'm a freelancer. I work with my friend occasionally, but I'm not an employee) You have to be able to survive things like that. Hopefully, you'll never experience a work drought quite that bad, but timing is everything. If he had to do it over again, he may have chosen a completely different time to open his shop. Perhaps several years earlier, or a couple years later. When he did was the worst possible time in our market to try to get a new facility off the ground. Of course, you can't know that. You just have to take the plunge.

The past two years have been a bit better for my friend. Eventually, I think he'll come out ahead, but it's been a rocky road for him. You have to be able to handle the ups and downs and financial foibles that come with a fledgling business. He took a LOT of risk, and it's just now starting to pay off. His risk was greatly magnified by our local recession. There were several times in those middle few years where he talked about liquidating it and moving to Florida or Vancouver or Toronto and taking a staff job. He stuck it out, and to his credit, the business is currently booming! If they can sustain it for another 24 months or so, he likely will be able to pay off most of the debt he accumulated in those first several years.

Through it all, he's only had a handful of steady, repeat clients. He took on several seasons of locally produced national cable program(s) to pay the bills. Those types of programs hardly ever pay full rate. He kept up with his lease, and that was about it. He's had many clients come and go and come back again, but as for steady...even with his pedigree, it's tough to keep clients over the long haul. It's tough to find steady clients.

Now, my story is a bit different. My risk was actually minimal. I ended up with a very nice niche of clients this guy turned over to me when he built his facility. (Backstory: I used to be his assistant back in the early '90's. Were still great friends. He & his wife and my husband & I do all sorts of social things together.) These were all his clients with in-house Avids & FCP systems. Still, I felt the sting. Those seven months of virtually no work were followed shortly by another five month dry spell. I survived it because I had money in the bank from selling my first house. Eventually, I DID end up with three steady, predictable clients. I only have one of them now. One fell victim to a merger, and all production moved to the other company's HQ in another state, and the other moved his business to Colorado. That's too big of a commute for me! These were things I couldn't have planned for. I mean, really, who expects an insurance company that's been around for 100 years to all of a sudden stop production? Their employees stay for decades, so unless I royally screwed up and they "fired" me, I never thought that client would dry up. Yet they did. The one who moved to Colorado, his biggest client by far has corporate offices here. I never expected him to pack up and move three states away, either.

Replacing those two clients is one independent producer who used to work at the insurance company. With the merger, her job moved to the other HQ. Her husband's job did not. He also works for that company. She quit and started her own communications consulting firm. The other main client I have now is a production company that gets so busy at times that their staff guy can't keep up and they come to me with all the overflow work. There's a lot of it, when it happens.

I've spent at least the equivalent of my wages my last year on staff, and likely at least 20% more, acquiring gear in the last 2 1/2 years. I have my own little edit suite now in my office. My risk has been smaller, but my profits have been bigger because my overhead is so low. Eventually, the guy with the facility will blow me out of the water on profit, and one day, he may be my boss, who knows, but in the meantime, I slept a lot better than he did during our recession. I agonized over every purchase over $, really, over $200. And virtually every time, that piece of gear paid for itself so fast I couldn't believe that I ever doubted the expense.

I worked my tushie off when I had work, and I pounded the pavement when I didn't. I keep my clients' welfare always in the front of my consciousness. Parents need to be with their kids, husbands with their wives, and anything I can do to make their lives easier keeps them coming back. It's so much more than the editing. There are other editors out there that cost more and have higher-end gear, and frankly, probably are better editors than I am, but my clients like me, love my work, and the price is right for their clients. I have stumbled upon a great balance that someone with a ton overhead can't strike.

Find the balance. If it's a big room with a high-end machine room core and you have the client base to support it, then by all means, do it. If it's looking ahead and buying what you need only when you need it, there might be more white-knuckle days, but the payments might be easier. And you might sleep better.

How are you with risk?

More than a couple of cents' worth.

I hope something in there helps you!


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