Whether transporting us to Mars, sending us to school at Hogwarts or putting us in a dystopian future where we must fight for our lives, a story is only limited by how far the writer’s imagination can take them. However, in the filmmaking world, there is a limitation that exists for all films, studio blockbusters and indies alike: The Budget.

Now, a budget isn’t just saying, “I have this amount of money… let’s go make a film!” On its most basic level, a budget outlines every element that goes into the film and determines how the money is going to be divided amongst those different elements.

When creating a budget the Producer, Line Producer and/or Filmmaker will sit down with the script and literally go through every line (hence the name Line Producer) and calculate how much money each element of the script will cost. How many locations, what kind of costumes and art direction is needed? Are you going to spend more on a location that needs little dressing but is going to need more shooting days OR are you going to rent a studio and build the location in-house? These are creative questions that are dependent on your budget.

It’s important to remember that the size of the budget directly corresponds to the expectations for the film. Simply put – a higher budgeted movie needs to make more money.

Story before budget or budget before story? It’s the chicken or the egg, but for filmmakers who plan on producing the story they write, being aware of your budget, as you are writing the script is important. You have an idea of what your budget will be and what you are capable of producing with that budget. Also, when you begin looking for financing, your budget and script will act as a package that will help convince investors to invest. They can read your script and know exactly how much you need and why.

When drafting your film’s budget you need to go through every stage: pre-production, production and post-production, as well as marketing and distribution. Think of it this way: The budget allows you to see the lifecycle of your film before it’s even been made.

Do not let the thought of having a small budget make you think that you can’t come up with an interesting story. In fact, budget constraints can fuel the imagination.

Take a look at the trailer for this movie that was made for only $60,000 and was one of the biggest hits of 1999 (the same year The Matrix came out)

So now that we know what a budget is and why it’s important, let’s go into some of the ways that you, the Filmmaker, can finance your film.

#1. Self Finance, aka put it on plastic (the Kevin Smith approach) – Every filmmaker knows this story. You take the money you were going to spend going to film school and instead put it into making a film, or perhaps you put it on credit cards and hope the movie makes enough money to pay them back.

As an example, take Clerks. Kevin Smith’s first film was made this way with a total budget just over $27,000 dollars. When the film went to Sundance, Miramax bought it.

There are benefits to this option – if it’s your money that’s financing the project then the film is completely in your hands. The negative is that there’s a higher risk of not making your money back.

If personal investment is the option you choose to pursue, I would highly recommend creating a Limited Liability Company (LLC) for the production. An LLC protects its investor(s) from any loss incurred during the making of the film – you’re only responsible for the money put into the LLC. LLCs also have tax benefits and are free from governed rules in regards to shareholder and company decisions. Basically, you’ll be able to have more control over the decisions taken in the creation of the film and be more protected should there be problems during production.

#2. Equity – Similar to self-investment, this is when you have a number of investors (be it friends, rich cousins or private investors) that also invest hard cash into the film. When they invest the hard cash, they are buying equity in the film.

It’s important to note that this option requires an LLC structure and that investors must be paid back their original investment plus 20% before profit can be calculated.

Want to know more about LLCs? Check out this article on why LLCs are good for filmmakers.

#3. Crowdfunding – This option differs from the Equity option because people aren’t buying into or investing in your film, they are donating to it. Yes, filmmakers can offer a tier structure a la donate $5 you get a thank you, $10 you get this and so on, but they are not required to pay that money back, like it is the case with equity financing.

The trick with crowdfunding becomes creating a campaign that garners attention and raises enough money. Remember, crowdfunding sites likes Kickstarter take a cut of the raised funds. It’s their payment for giving you a platform to collect donations. In addition, campaigns that don’t raise their goal amount do not keep the money they raised. These are important facts to realize when you are not only creating your budget, but also when you’re deciding your target crowdfunding goal.  Can you risk time and money creating a crowdfunding campaign when there’s no guarantee your film will end up getting financed? What will you do if the crowdfunding campaign doesn’t meet its goal?

#4. Pre-Sales – Pre-sales are related to distribution and they can be your best asset in both financing your film and finding private investors. Basically you are making an agreement for where and how the film with be distributed before it has even been made. The amount your film is sold for is based on the package you, the filmmaker, has created: your script, the talent attached and the marketability of your story. After the agreement for the pre-sale of the film has been made, the filmmaker can either use that as collateral for taking out a loan from a bank to complete the budget or lower the cost to private investors. It’s important to note that, like with equity, the filmmaker would have to payback the bank for the loan before a profit can be calculated.

Depending on the budget, if a distributor buys the film in the pre-sale state, the film may have actually already made money before it was produced.

These are the four basic ways for filmmakers to begin financing their projects. Join us next time when we’ll dive deeper into film financing, using The Storyteller as a case study.

Until then, here’s a trailer to a film that the writer/director funded by submitting himself to clinical drug testing.

We’d like to introduce you – as part of our ‘Do You know?’ series – to The Bureau of Creative Works.

Created by Erica Hampton and Mike Ambs, The Bureau is a film collective with the valiant goal of bridging a gap between audience and filmmaker by getting the audience involved in the process at the earliest possible stage – assuming responsibility, but also taking credit. According to their mission statement, the idea materialized after realizing how ‘more and more digital media outlets are pushing to acquire short-films in exchange for only credit and recognition’ – a promise of legitimization through association, leaving filmmakers in an increasingly difficult and unsustainable situation.

The Bureau is set up to function is a year-long film grant supporting 12 filmmakers each year with funds for producing original short films, backed by the very audience the short films are made for. A kickstarter campaign is currently raising the funds for the first year of films – 10 of which has already been selected, leaving two spots open for you to apply for.

Please visit The Bureau of Creative Works for more info on this great project – and, if you can, please support the campaign on kickstarter.

But it’s not necessarily so.

Published author and screenwriter, Erik V. Wolter, recently turned to Indiegogo to help him and his crew over the finish line, producing the feature film adaptation of one of his novels, Break The Stage. Spoiler alert: They didn’t reach their goal.

Now, Erik seems to be a very professional, analytical and talented man. Someone who would do his research – and then some. He consulted the experts. He did everything by the book. So why did his campaign fail? Below are his own reflections on the failed crowdfunding campaign, but first a few stats and thoughts on the current state of crowdfunding:

In the US, the two main crowdfunding platforms are Indiegogo and Kickstarter. Indiegogo is by far the biggest in terms of launched campaigns, perhaps because of their flexible funding option (allowing project creators to collect the pledged money even if the campaign goal is not reached), but Indiegogo is also far ahead in terms of failed campaigns; 277,776 unsuccessful campaigns compared to ‘just’ 101,127 on Kickstarter. In fact, even though Kickstarter has hosted far less campaigns overall than Indiegogo, it has the highest number of successful campaigns at 70,812. Looking specifically at the Film & Video category things get really interesting: 41% of the campaigns on Kickstarter reached their goal, whereas only 11% on Indiegogo made it to the finish line. And those numbers are not just so far apart because of the volume on Indiegogo vs Kickstarter. More than twice the number of Film & Video campaigns were successfully funded on Kickstarter vs Indiegogo.

From what I have gathered during my research on the subject, the filmmaker (and crowdfunding project creator) has a few choices to make when choosing which platform to use. If you can ONLY complete your project with the help of the crowdfunding community, Kickstarter seems to be the way to go. It’s the all or nothing approach. After all, it’s not just about collecting money, it’s also about fulfilling your commitment to your backers and the perks you promised them. If you go with Kickstarter’s all or nothing model, you are at least guaranteed that you will have the funds to finish and honor your commitments. If you go with Indiegogo’s flexible funding option, you may end up with a project that does not have the budget to be successfully completed, but you still have to make good on your promises to your backers. My conclusion is that the flexible funding option on Indiegogo is only a safe and suitable option for project creators who could use the help of the community, but are able to complete the project with other means, if need be. One might say that with Indiegogo’s flexible funding option (which you don’t have to use, by the way) you take a financial gamble. With Kickstarter (or Indiegogo’s fixed funding option) you take a creative gamble. It’s all or nothing.

And this is not even mentioning platforms like Rockethub, Tubestart or Pozible. And even beyond those, there are many ways to fund your project. Most of them have pitfalls you need to wary of. All of them offer an opportunity to create. Here’s Erik V. Wolter’s experience with Indiegogo’s flexible funding model:

Thirty days ago when we launched our crowd funding on Indiegogo expectations were high. After all, 80% of the film was done, and our goal was only $35,000. The concept of raising money without giving up equity, and the successes of present and past campaigns of films on Indiegogo made it so very enticing. We had a trailer to show our work and an extensive network of connections to give us that initial boost everyone says you need in the first week. Even the people at Indiegogo agreed that we followed their guidelines and suggestions on the wording for our email contacts, Facebook, and Twitter posts. We had a progressive set of attractive Perks for contributions ranging from $10 to $5,000. The feedback for our video pitch and trailer was extremely positive.

Books and blogs are available on crowd funding about what to do and not do. There is also an abundance of material out there that analyzes those funding campaigns that fail to meet their goal.  Allow me to put in my two cents and at the same time be as transparent as possible about the outcome. My brief analysis may be too simplistic and may or may not be meaningful for everyone, but I’m fairly confident that it was the primary factor in our inability to reach our goal, and is worth considering should anyone be thinking of taking the crowd funding plunge, be it Indiegogo or any other of the popular platforms out there.

“The best-laid schemes of mice and men…” – you probably know the rest.

At the end of our campaign, after 3300 visits to our campaign site and 220 referrals, we had 41 contributors and raised a grand total of $4200, meaning we achieved a mere 12% of our goal.

An interesting adventure, to be sure. A lesson learned, most definitely. A critique of human behavior, without a doubt.

Apparently, as the numbers seem to infer, sharing Facebook posts, tweets and re-tweets, emails, and follow up emails will bring the horse to water but not much else. Maybe people assumed if you let others know, others would contribute. But then those others let people know and then they assumed… Of course, some didn’t let others know at all, but assumed somebody else would.

Human nature is more often than not inexplicable, but perhaps there was something about our appeal that didn’t make it clear that asking for help to reach our goal didn’t mean just pass that message on. The link “click here to make a contribution” was intended for them, too. Of course, not contributing is a choice and that should be respected, but when friends, family, colleagues, and associates think enough of your efforts to promote your campaign, wish you the best, and say they can’t wait to see the movie, but won’t drop ten or twenty bucks in as a contribution, it is a definite head-shaker.

Some simple math: If 1200 of the 3172 who visited our site but didn’t contribute would have contributed $25, we would be at 98% of our goal. If 750 would have contributed $50, we would have exceeded our goal by $2500 (107% of goal). Interesting, indeed. However, as my father reminded me more than once, “If if’s and buts were candy and nuts, every day would be Christmas.”

Despite this setback, the team of Producers behind this project is committed for the long haul. To paraphrase, the late great film critic, Roger Ebert, we will see you at Break the Stage the Movie.