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You mean we actually didn't run out of money? Or, How I learned to stop fearing and love the Budget.

How would you set about making a film without knowing what you had to spend and where you should spend it? It can be done but there had better not be more than two or three people involved and no poduction schedule to meet. It would be far easier to make a simple budget and to know what you need and when you will need it.

Budgets - What good are they and who really needs them?

To answer my own question, anyone making a film needs one.  Whether it's a big, anal phonebook or a small humble set of notes scribbled down on  a yellow legal pad, you'd better make sure you have one and that it is realistic. 

Of all the requests we receive from our clients, more are to review, create or validate budgets than for any other service.  The reason for all this concern is that unless you own a printing press with an endless supply of paper and ink to print money, anyone can get into serious financial trouble when making a film, DVD or a television series.   How do you protect yourself, your partners and the project itself?  Well to start with and before you begin anything, you must know how much money you need to raise to produce your film, or if you already have a fixed number carved in stone, how to allocate it within the various areas of production

Easily said but not so easily done as there as not a lot of people around that can accurately quote numbers for all the services, in all the various areas in which you will need to assign costs.  You may know a good deal about what animation costs and how many people you may need to hire and for how many weeks, and what fringe % to add if they are union and working in house or if they are freelancers and will bill as a contractor and what workman's comp insurance will cost and what kind of buffer you should allow in contingency in the event the production falls a bit behind and you need to keep everyone one for additional  days, weeks, months...?

All well and fine if you have the animation covered but what about music, studio musicians and their local, or singers or performance songs.. what do they cost?  Composers, music licenses, ASCAP, and publishing rights and clearances.....?  and then there's all the post stuff and the crew gifts.... Who gets gifts in animation?   What about legal and insurance,? What's E&O insurance and rights clearance and what do they cost?  Do you need a bond?  What's that cost?  How about you need a NAME, what does Robin Willimas get?  Too much?  What would Craig Nelson cost?

You get the picture.  There are a lot of categories and services to be weighed and considered if you want to be a producer.   A perfectly crafted budget is a beautiful thing... It's efficient, elegant and exact.....And it doesn't exist.  No budget, no matter how knowledgeable the person drafting it is, will ever come in precisely on the nose.  Too many moving parts, too many human factors, creative ambiguities, currency rate fluctuations, illness and a myriad of other unpredictable factors will all conspire to take it off course.  But the joy of a well made budget is that all these factors will be taken into consideration and there will be room within the numbers to shift, add, subtract and to make adjustments as the production moves along...  If you are producing a big budget feature or a small pilot film, the concern should be that you understand what ALL of your costs will be to complete the project and you allow for them in your budget and then allow for a little more.

So if I am to call this little piece Budgets 101 - what are important things to learn in order to maximize the efficiency of the tool you are creating:

Don't be shy about asking a lot of questions of a lot of people.  If you're not a post person call around and get bids that breakdown the fees.  Everyone will want to give you a package bid which may be ok but you will never learn anything and you won't be able to easily compare one bid against another.   At the end of the day a flat fee is fine and perhaps even desirable but you will need to know that you and the contractor are speaking not only the same language but exactly the same dialect.

Don't be tempted to budget for the lowest bid (in anything) if it is appreciably lower than the others.  The problem here is that if this person or company goes south on you, you have nowhere to turn.   The money needed to go back to one of the other bidders won't be in your budget.  That means you are now on that famous slippery slope where you start to take money from others production areas to make up for your mistake of relying on the lowball guys... A couple of these and your in a mess.

Don't assume a director or key person will stick around (without being paid) while the production is being sent offshore (as most DVDs, TV series and mid/low budget features are nowadays).  There is normally a time where people are waiting around to start to see material sent back to them for approval by the offshore studio.  Be sure you know who you need to keep on staff and budget for them sticking with the production all the way through post, if need be.  Normally this would be the director and the production manager for sure...  In large studios these people are on staff year round so there's no consideration but if you have a small, seat of the pants production you need to think about not only who you will need but how long you will need them for.

Along with your budget you should also create a cash flow based upon your production schedule.  Unless you have all of your production funds at hand from the start of production you will need to work with your budget and production schedule to create the cash flow.  This will assure that when certain areas of production are underway, there will be funds available to cover the cost.

Don't forget taxes, licenses, travel and equipment rentals and/or lease/purchases.  If you are going to need more hardware you will probably want to lease it.  I suggest that you also consider forming a Limited Liability Corporation or LLC.  This is sort of an abbreviated Corporation in the U.S. that allows a number of partners to enter into a single project and provides the individuals legal protection.  Most films today are made using this structure, each project is a stand-along legal entity (LLC) and is normally dissolved after the project is completed.  Of course anyone considering this should speak to their legal advisor and/or accountant to see if this is best for their particular situation.

There are many, many other things to consider and to ponder while creating a budget for a specific project.  You can probably find what is called a 'Pattern Budget' or use a template from some other production.  This may serve you or it may lead you astray.  A 'Pattern Budget' is a generalized budget for a specific type of production, say a Television/cable episode based upon an order for 26 1/2/ hours.  There are many of these floating around any you probably know someone that has one or has made one... These budgets can be found for episodes costing 150K, 200K, 250K to $300,000.  There are several variations for DVDs as well because in the current market most everyone knows what the budget parameters are for these programs in order that they have a chance to perform in the black. 

So what's wrong with a pattern budget.  Well nothing if you are willing to conform to a blueprint drawn for a track house while you're dreaming of building a custom home.  Staying with this analogy, maybe the home you want to build needs a lot of stone work but the budget for a track home wouldn't allow for that expense.  So what should you do?  If you are determined to use a pattern budget go ahead but carefully review all the number in each category and adjust them to fit your specific needs.  If your film requires a ton of effects then make sure your budget reflects that need.  Maybe you reduce your animation and put a load of camera moves in... who knows but the budget should know and reflect what you want and what you need.

Above and Below the Line stuff -  All you need to know here is that Producers, Directors, Writers and Actors are ABL along with some other people who will have had nothing actually to do with the making of the film. Those others are given titles such as Associate Producers on the credits even though no one knows who they are or what they did.  For the most part these are people that either brought or arranged for funding or rights or made an introduction to a star or some other deed or act that allowed him/her/it to demand a fee and a credit, thank you very much!

Below the Line numbers are for the rest of the people and services needed to make the film.  When it comes to making money it's better to be ABL.....

Okay, that's enough for today.  Many readers may never need to make or review a budget, but if they do they should take their time and make sure they're getting all the numbers right and that they are talking to experienced, professionals who can give them information they may rely upon.  As many budgets as I've made over the years, I still call friends or associates at times to double check myself.  Things change, prices may even go down as technology becomes more readily available and they certainly can go up in the blink of an eye...  I recently had to budget for a completion bond on a film project (production insurance) and I was a little surprised to find that hardly anyone will bond animation anymore.  Because I hadn't tried to bond anything for a number of years I had to hunt around a bit but got a quote finally from a company I had used before but it should have been easier...  No one knows everything, asking questons is a good thing...

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