DIY Part 3 Business planning and pitching
By Therese Fingleton and Jennifer Wilson
Developing a business plan
While the business case is concerned with why it’s worth realising a project, the business plan is all about how you are going to realise it. In many ways its purpose is to marry the key assertions from the research done to make the business case with a solid finance and management plan. Whether it is for a single product or a whole new business, statistics show that having a plan makes you 47% more likely to succeed. That alone is a huge motivation to do your planning early.
The project or product business plan
Although you are anticipating that another business entity will produce your project (with you as the writer/producer), presenting a strong product business plan to potential producers and publishers will help them understand the potential of the concept and position you as serious about your craft.
Part of the aim of a business plan is to outline the cost of realising a project and its expected return over a specified timeframe. The project or product business plan ignores infrastructure costs associated with setting up a new business, and focuses solely on production costs and the estimated product revenue. As its function is also to reiterate the business case (the why), the product business plan needs to outline why the idea is unique, how it fits in the market, the marketing and distribution strategy, the associated revenue models and the resources required to deliver it.
The entrepreneur’s business plan
The entrepreneur’s business plan is both for the product and for a new business venture to realise and monetise it. Writing an entrepreneur’s business plan can be a little more daunting, but should still be only around 5–8 pages long. If you’ve got more than 30 pages – it’s far too much. The entrepreneur’s business plan should cover:
- what the business is, what it will deliver and what makes it special
- who you are and why you are the right person at the right time to build this business
- your competitors and your competitive advantage over them
- evidence why this business is likely to be a success
- factors that will help you succeed, which is often called a SWOT (strengths, weaknesses, opportunities and threats) and examine the environment you will be in and what impact this will have on your business
- your audience or market and your strategy for reaching it
- how you will earn revenue (what your business models are). This might change over time so talk about it.
- the hard part – the money. How much do you expect to spend and how much do you expect to earn? Try to estimate the first year on a month by month basis, and then the next two years on an annual basis. You should be able to read the business plan text (the earlier sections) to see how the numbers are supported. Don’t be afraid to ask for assistance with the numbers.
Remember that making money from the beginning is both unusual and unlikely – showing a deficit is normal – but you need to think about how you will fund your project. Also, don’t stint on paying yourself, in fact make this your first priority. If you decide to put some of your pay back into the business, that’s fine, but without you there is no business at all.
Funding and finance
Depending on your revenue models and the motivations for commercialisation you defined earlier, it is most likely you will now pursue one of three options:
- secure independent production funds
- secure production funds and/or go into production with a commercial partner (broadcasters, games developers, publishers, etc.)
- pursue the start-up investment route to start your new business venture.
Independent production funding/finance
A number of state and federal government arts and screen agencies offer production funding. For those crossing from traditional media, in particular page and stage writers, it is important to remember you are moving into the ‘screen’ industries. This will inform who is providing funding. If you are successful in securing some government funding, then try to use it as leverage to obtain additional funding from broadcasters or publishers.
Funding can also be secured through philanthropic organisations with a vested interest in the target group you are trying to tap into, particularly if you are working on a youth or educational product. Some of these might provide interest-free loans rather than grants.
Crowdfunding describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organisations.
The Foundation for P2P Alternatives
Crowdfunding [http://p2pfoundation.net/Crowdfunding] is an emerging funding option for independent productions. As described by the Foundation for P2P alternatives, it is a form of crowdsourcing (see Introduction) applied to finance. Instead of seeking finance from institutional sources, the supporting community is asked to support the project in a distributed fashion. A much cited example is A Swarm of Angels, a peer-funded film, funded using the Internet to locate 50,000 people each willing to pay $25 to fund a one million dollar film.
Commercial production partner/funds
This is where your finely-honed pitch and business plan becomes very useful. You should have proved your concept by now, so get out and speak to market partners. If you haven’t yet managed to bring an experienced producer onto your team, now is the time to do it. Their experience will be invaluable in getting your project in front of the right people.
Start-up investment involves a number of key stages and options.
You probably know what this is by now as it’s most likely what you’ve been operating on; employees (typically founders) working with little or no salary. This is typically done when working full time in a ‘real’ job and/or drawing down on a mortgage. It is reasonably simple at the early stages but needs to be properly accounted for eventually.
Seed capital is the money you use to fund the start-up of the business. It might be a small amount, it might be in dribs and drabs, it might be in the form of a loan – but seed capital is what would normally buy the equipment you need as well as the time you need to do the work. Time is one of the most important things you can buy.
3Fs – family, friends and fools
First, start with family, friends and fools. You are unlikely to fund the whole business from here, but successful companies have been started with a bank loan and the support of parents. The 3Fs are unlikely to want a major slice of your business and are really backing you, not necessarily the strength of your idea. You should consider the money you get from 3Fs as a loan, even if you do give them some equity in your company. As a loan, pay this back as soon as you can. The quicker you can pay it back (with or without interest) the more likely you are to be able to draw on this again should you need to.
Angel investors differ from venture capitalists in that they usually invest in your company seeking a return on their investment, but normally don’t require the same equity stake. In the case of an angel you might find a consortium that together provides you with the seed capital you need. Angels might also offer support services – sometimes they are lawyers or accountants who just want to help small businesses get started and in addition to a (usually smaller) sum of money, they might offer you skills, assistance and pro-bono work. Bear in mind that there is some cross-over between angel investors (who are investing in your business) and venture capitalists (who are taking some of the capital, or equity in your business) and the lines are blurring.
These hard-nosed business people are looking for what might be the ‘next big thing’, and are interested in giving you money to make this happen, in return for a sizable stake in what you do. They will be looking to not only get their money back, but at least double it over a three-year period. They will be as interested in how they can get their money out (their ‘exit strategy’) as they will be in what you are delivering. Venture capitalists will back businesses that might not turn a profit on the basis that someone else will pay more to buy the company at some point in the future. Some good examples of this are MySpace, YouTube and Facebook – none of which was sustainable as a business (their income did not exceed their costs), but which had a huge value (billions) based on the high numbers of users.
Be aware that some venture capitalists will offer you money in kind (office space, telephone, stationery, use of equipment, etc.) rather than money – and this can make it a very expensive decision in the future.
Equity is the ownership of the business you create. If you own the business, you have all the equity (100%). In return for the money that people invest in your business, either in the beginning as seed capital or as you go along, you are likely to need to give away some of the equity. Before you start, work out how much you are prepared to give away and how much you are determined to keep. If you are in a partnership, determine how you will ‘dilute’ your stake – will each of you provide the same amount?
In general, think of there being 100 shares in your company. In order to have control, you need to be able to manage (as your own or in the hands of people you completely trust) 51%. You should aim at giving no more than 30% to any one investor (and that is a substantial amount) and multiple investors, each with their own equity stake, can spread your risk. You don’t want someone else deciding what your company will do, so you need to make sure that no-one (other than you) can exercise control by having more than 50% of the shares (or equity). As a general rule, look at giving 10% to 3Fs; 20% to angels; and 30% to venture capitalists. As this will add up to 60% of your equity, try to avoid needing all these forms of investment and limit the amount you give them to less than the numbers above.
Pitching your idea and your business
Pitching tests the appeal of your project, its relevance, its viability.
It forces you to know your project.
Jackie Turnure, 2006
The need to pitch your project is a reality of the new media industry that makes many writers uncomfortable. Being able to deliver a concise and compelling pitch is vital in helping prove your concept and you will have to pitch your idea over and over again, to everyone from new team members to investors. Practising your pitch will help you become adept at convincing others of the validity of your idea. Because the new media industry involves players across traditional media such as publishing, film and television, as well as IT companies, education providers and government, you never know when or where your next opportunity to pitch for investment will emerge,.
You would usually pitch your project in order to:
- sell your idea to a new team member you are trying to bring on board, or to a producer or developer, who will produce it
- sell your idea to a party who will fund you (a partner) to produce it (government agency, philanthropic organisation, broadcaster, publisher)
- sell your business as an idea to an investor, such as an angel investor or venture capitalist.
The pitch you give will usually take one of the following three forms:
- Elevator: a 15-second presentation on the project
- Document: a document (of varying style and length) that outlines the unique selling proposition and associated market opportunity of the project and may include illustration of design concepts
- Presentation: a formal presentation that is often an engaging oral version of what’s in the document, complete with user experiences and visual aides.
How to get to pitch
You’re all dressed up and ready to go, but you don’t know how to get invited to the party! Once you’ve exhausted the 3Fs, you need to work out how to find investors who are desperate to back you – if only they knew where you were! There are groups in the digital space who run workshops to introduce people to investors, so keep an eye on newsletters, especially Slattery IT, who have a newsletter called Slattery’s Watch which includes information on events they host such as venture capitalist events: [http://www.slatteryit.com.au/watch.html].
Also, have a look at Michael Stone’s presentation, which not only provides a checklist for many of the things mentioned above, but also information on the angel and venture capitalist investors.
Generally, while investors get asked for money a lot – there aren’t always a lot of things that interest them, so they continue looking for the next opportunity. You’d be surprised who is either an investor (even if just in a small way) or who knows one – and introductions are definitely the best! Investors, like all business people, respond well to a ‘tease’ that grabs their interest. This means both knowing their interest (do some research on other things they have invested in) and finding a hook for your project that will appeal to them.
Don’t be afraid to make a cold approach – but don’t do it with your whole business plan. What you need to provide is a concise two-page summary that explains what you are doing, helps them see the potential of what you are offering, outlines what you would do if you were funded (you don’t need to spell out the money here) and has both the ‘hook’ to catch them and details on how they can contact you. If they don’t respond, chase them nicely once then write them off. Bear in mind that anything you send them is unlikely to be returned, so don’t send materials that you might want to use again. Ready? Ok, it’s time to refine the pitch.
The elevator pitch
Although a creator will rarely have cause to deliver in an elevator, this is the pitch you will deliver again and again at every coffee break at every seminar, networking event and business meeting. Practice it with family and friends and at the water cooler so that when the opportunity arises you can tell anyone in less than one-minute what your project or product is all about.
The pitch document
This is a formal document to be sent to those you identify as a target for your project such as partners, broadcasters, games developers, etc. You might be asked to send this as a follow-up to an ‘elevator pitch’ chat at a networking or industry event. This is not something you will write in one sitting. You must revisit and revise this again and again during the development of your project and may need to adapt it depending on who you are sending it to.
The pitch presentation
The pitch presentation includes many of the same elements as the pitch document. It is a formal presentation often backed up with visual aides, proof of concept designs and perhaps a demonstration of your prototype. A pitch presentation is about telling the story of your product or business and why it is worth investing in. It is absolutely crucial that you tailor your presentation for your audience. If you are pitching your product to someone who commissions online programming, they may be more interested in the creative content, than for example a group of angel investors who are primarily focused on whether your product or business will earn them the desired return on investment. Tell the audience a story and make it engaging. Don’t simply read a pitch document! Lead with a hook – be it the opening line of your story, or a dramatic sequence from a game. Include the story of the user who is engaging with your product and make sure you end strongly leaving them wanting to hear more from you.
What’s in a pitch?
In new media it is rare for one pitch to fit all situations. Whether delivering your pitch as a presentation or in a document, remember that just like any paper you write or presentation you give, it must be tailored for the audience. Here are some elements which you may wish to include in your pitch document or presentation:
- The product name:an easy task for a writer one assumes, but be prepared for it to change many times as you go through the iterative development process.
- The one-liner:a neat and succinct description of the product (e.g. an interactive episodic novella for mobile phone).
- Product/project synopsis: a one paragraph synopsis (for written pitch)
- Format: how the product is structured and delivered: 13 x 160 character episodes, delivered via SMS to mobile.
- Problem solved: if your product fills a gap in the market or solves a problem you have identified then describe the ‘pain’ of the user and how you are going to fix it.
- The user experience: describes a user experience, how a user hears about your product and interacts with it.
- Design aesthetic: this will vary hugely depending on the project, media, device and user group, but nevertheless, describe the aesthetic of the design and if possible include a sample.
- Technology: the platform the product will be built and delivered on, the device it will be played/read on and acknowledgement that it may need to be developed differently for different devices (especially true for mobile projects).
- The business plan: you will adapt the elements of your business plan for your pitch.
- Market: the target market for the product (e.g. brand conscious, tech savvy, young adults aged 12–18 in English speaking markets with high mobile penetration).
- Unique selling point (USP): what differentiates it from others on the market (e.g. compelling narrative, interactive format, strong brand association).
- Competition: healthy as long as it is a known entity and the competitive advantage of your product is identified.
- Business model: the economic driver behind the product, how it can be commercialised (e.g. subscription premium content charged at so many cents per episode).
- Marketing and distribution strategy: will you use existing channels or develop new ones or both. This section should be tightly tailored for the pitch audience.
- User/audience testing: even if you have tested with a paper prototype or just asked a group of people questions, include any information you have about testing the concept on your audience, what percentage of them would pay for the product and how much. You may not have this ready for your first pitch but add it in when you do.
- Resources and timeframe: describe what is required to create the product or set up the new business and the expected timeframe.
- Return on investment (ROI): whether pitching for pro bono assistance or thousands of dollars, don’t ask for anything without stating what you offer in return, be it revenue, a new audience or a greater market share. Unless you include the ROI you are not pitching a new business opportunity.
- Team: at the end of the day most investment is in people not ideas. Present you and your team, your successes and achievements, your commitment to the project and why you are the best people to realise it, or what people you need to bring on board to help.
Pitching tips from Jackie Turnure
- Know your audience – who you are pitching to and what they are looking for so you can design the pitch specifically for them;
- Structure your pitch so it is a dramatic story which expands and deepens, pulling the audience in and taking them on a journey;
- Tease and entice – get them hooked but don’t reveal the entire experience, leave them wanting more;
- Know the weaknesses of the project and turn them into strengths, better that you acknowledge them than the audience does;
- Remember to have fun! If you are stressed or bored of your pitch then your pitch will be boring. If you are enjoying yourself, then the audience will be drawn in.
Rarely will an investor back you on the strength of one meeting, so get ready to jump through hoops again – sometimes the same ones, sometimes slightly different. Refine and practise as you go. If you’ve got over the line with one investor – even if they don’t fund you – this is a great place to move forward from. Don’t be afraid to ask the investor whom else they might recommend for you to talk to – the whole community know each other and know what their colleagues are looking for.
If you’re lucky enough to be funded – take a deep breath and ring both your lawyer and a good accountant. The critical things at this stage are to keep both hands on your project and carefully steer it forward. That means controlling your IP (lawyer), making sure your budgets are right (accountant) and starting to think carefully about who you might hire, what offices you need, and how you will get the whole thing off the ground. There are companies who specialise in providing short-term/focussed skill sets for start-ups. Skills they can supply range from CEOs to sales staff, through marketing, strategy or even IT managers – and their involvement can be one-off or ongoing. If they love your ideas, they will sometimes lower their fees for a small share of your company – but that takes you back to the equity issue and who has control.
More than anything, be realistic about your own strengths and weaknesses. Look to hire people who are strong where you are weak. A good business manager can let you be the creative genius – while still allowing you to build the business, content and products you were originally funded for – with a lot less headache than you trying to master spreadsheets if numbers aren’t your forte.
If you’ve got money, then you’ve got backing for your idea and you’ve got faith from other people that you can succeed. Continue to believe in yourself and follow the plan you laid out (you did write a business plan, remember).
Although presented here in a linear fashion, developing a new media project or product from concept to the point of securing commercial partners or investment is largely an iterative, non-linear process. Although you will be able to lock off certain elements such as your prototype and business case research, be prepared to revisit each step frequently as you progress.
Ultimately, your aim is to develop your concept into a defensible product; a product which is unique, has a definable audience and for which you and your team own the IP. This is the kind of product or business that will secure investment. In the meantime your other challenge is to ensure that the end product retains the creative integrity and emotional engagement that you as a writer would expect of your most prized manuscript. Otherwise, why begin the journey at all?
Study/professional development options
ArtsLaw (not dated) Sponsorship Agreements Guide,
Messenger, N. 2008, A Practical Guide for Artists and Arts Organisations,
GrantsLink is a federal and state government portal with information on a range of grants offered by category. All federal and state arts funding agencies, as well as a whole host of other government agencies that provide grants, can be found here: [http://www.grantslink.gov.au/].
Most state screen agencies offer some form of funding for new media and often run workshops and mentoring programs. Check their sites listed here: [http://www.afc.gov.au/filminginaustralia/govassist/state/fiapage_7.aspx].
Screen Australia (SA) is the new federal agency replacing the Australian Film Commission, Film Australia and the Film Finance Corporation, and has both a cultural and industry development role to play in the digital media arena. SA offers a range of cross-platform digital media development and production funding programs including:
Interactive Digital Media: This information guide is as a starting point for Australian interactive digital media practitioners to explore funding and support options from a range of organisations, industry bodies and government agencies
[http://www.screenaustralia.gov.au/filming_in_australia/GW_Filming-In-Australia.asp]. Underneath the ‘Industry Information Guides’ section, click on ‘Interactive Media; funding, info and advice’.
Cross-Platform Digital Media development funding seeks to provide experienced practitioners with the opportunity to create written and/or visual materials to ensure that digital media projects are as strong as possible when competing for production finance.
Production investment is principally designed to provide professional development opportunities to talented digital media directors, producers and writers. Production funding aims also to encourage the interaction of
digital media practitioners with film and television practitioners,
Ross Hill’s (Geelong RMIT student) ‘Hatch That’ weekly podcast interviews with entrepreneurs, [http://www.hatchthat.com/].
Ross Hill’s ‘The Hive’ networking for entrepreneurs in Melbourne, [http://www.thehive.org.au/].
Courses and industry development programs and networking
State-based entrepreneur meet-ups are a great informal way for newcomers to entrepreneurship to learn about the area. Meets are usually technical in focus, but you can find out who the guest speaker is beforehand and even recommend someone. The business models and marketing insights are valuable, [http://entrepreneur.meetup.com/cities/au/].
Short courses in business and financial planning and legal considerations are offered through TAFE and Workers Education Association. Universities also offer short courses.
Centre for Screen Business at the Australian Film, Television and Radio School runs a range of business courses that include digital media components. They regularly post business research and articles via their blog [http://www.aftrsmedia.com/CSB/]. Upcoming short courses include Introductionto financial modelling and Running your own creative business. A Graduate Certificate and Graduate Diploma in Screen Business are also offered.
Specific university and industry groups also offer courses and programs on pitching and entrepreneurship. A few are listed here:
Laboratory of Advanced Media Production (LAMP), a unit of the Australian Film, Television and Radio School, where teams develop concepts and pitch to industry experts for feedback [http://www.lamp.edu.au]
MEGA is a workshop lab where mobile content and applications concepts are developed with industry experts and pitched to a panel of investors. It is offered in South Australia, Victoria and New South Wales. In South Australia it is accredited as an elective in undergraduate and postgraduate qualifications in film, media and IT at the three universities [http://www.mega.org.au]
Digital Crossroads provides mentoring for young (or new) entrepreneurs, [http://www.digitalcrossroads.com.au/entrepeneur_mentoring.php]
Crossover labs is an international program, which works towards building pitches and early-stage concept prototypes, [http://www.crossoverlabs.com/]
RMIT University, Bachelor in Entrepreneurship, [http://www.rmit.edu.au/bbe]
Entrepreneurship, Commercialisation and Innovation Centre (ECIC), The University of Adelaide, Adelaide. The ECIC undertakes research and imparts knowledge about entrepreneurship, creativity and innovation; the successful development and management of projects; and the commercialisation of technology to facilitate improved performance in individuals, organisations, and communities
Entrepreneur Program - Ideas2Market is a small business program in Queensland that provides innovators and entrepreneurs with advice, ideas, hints and links that can assist them to take their ideas or products to market. [www.ausicom.com/01_cms/details.asp?ID=84].
QUT Creative Enterprise Australia is a specialist business incubator and business support organisation dedicated to meeting the needs of the Creative Industries (CI) Sector. [http://www.qut.creativeenterprise.com.au/]
Many mainstream advisory firms such as KPMG, Cap Gemini and Accenture have ‘Innovation’ divisions, which look to support and mentor new businesses. They will help with business planning, feasibility, and investment advice.
The writer's guide to making a digital living: choose your own adventure by Fingleton, T. Dena, C. & Wilson, J. for the Australia Council for the Arts is licensed under a Creative Commons Attribution-Non-Commercial-Share Alike 2.5 Australia License.
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