The Pursuit of Profit

April 25, 2012April 25, 2012Leave a comment

(originally published in Screen Magazine 4/25/12)

Profit. That’s the life-blood of any business. But how do you get there?

A client once asked me how to set aside money for marketing, small equipment purchases, and other incidentals. He complained that although he was busy, there never seemed to be any money left over to grow his business. “Sixty five thirty five” I said. “What’s that, your ATM pin number?” he responded. “Nope, that should be your per-project profit margin” I said.

Many small start-up companies live their business life from day to day. And that’s just fine if you ask me. Do what you have to do to survive your first couple of years in operation. But after that, the best way to set aside cash is to set some benchmarks. The best benchmark is obviously an annual budget. But as I’ve recently learned, very few creative companies put together annual budgets. So, the next best benchmark is a per-project profit margin.

My benchmark has always been a 65% profitability mark on a per-project basis. If a piece of music is going to cost me $4,200 to produce, I believe a fair estimate would look like $12,000. If a video project will take 10 days to edit, transfer, and finish at an average cost to me of $1,500 a day, I’d like to see the estimate at approximately $45,000. The same math can be used when looking at a project’s budget from the other side. If a producer tells me they have $100,000 for the entire production, I need to find a way to exceed their expectations without spending more than $35,000. And if you’re wondering, that $35,000 is a combined daily calculation of both freelance and full-time staff directly assigned to the project.

Of course 65/35 is just a benchmark, something to shoot for. I’ve spent 110% of a job’s budget in the hopes that the work could expand my company’s capabilities and future revenue. I’ve also seen profit margins as high as 90% on occasion. In both cases, I did everything I could to make sure the client was thrilled with the outcome.

So let’s say that you’re meeting your goal of 65% profitability, what does that mean? Well to me, it means that you have 25% of profit you can allocate towards paying your rent and utilities, 20% you can use to pay administrative staff, and 10% you can invest in marketing, small equipment purchases, and other incidentals. So technically, none of that is actually profit. Oh, and the final 10%? The actual profit? Put it in you pocket. You’ve earned it.

Redefining Job Responsibilities {slash} The Employee Hybrid

April 18, 2012April 18, 2012Leave a comment

(originally published in Screen Magazine 4/18/12)

Help Wanted:   I’m looking to hire a Director who also has mad editing skills.  This person should be very capable working in After Effects, Cinema 4D, and Photoshop. He or she must have experience writing and producing creative content. This individual should be able to manage the financial aspects of projects and prepare all necessary Quickbooks and Excel reports. A working knowledge of Pro-Tools would be appreciated, and of course you should be able to speak at least four languages, fluently.

Although this ad is completely made up, it’s not too far from the truth. There seems to be a shift in the creative industry where employees are expected to do more by expanding their individual capabilities, and help employers get through these rough economic times by adding a {slash} to their job title.

Yes, the {slash} has become the most important piece of punctuation in the creative industry. I think it can be both good news and bad news.

The good news is: 
• Employers might be able to save money by merging responsibilities.
• Clients can contract one creative person to perform two traditional services.
• It’s obviously easier to start a company with less upfront expense. If your Executive Producer can also be responsible for all things Quickbooks, you can hold off on that hire.

The bad news is: 
• Qualified candidates have less of an opportunity to get hired.
• Focusing on two jobs might water down the employees’ core strengths.
• Clients could get short-changed in an attempt to save money.

Recently, I responded to a client’s concerns about his company’s productivity by suggesting he follow this industry trend. Can your receptionist help the marketing department when she is not busy? Can you reduce your IT maintenance costs by giving a raise to an assistant who has shown interest in that area?

So, if you’re considering bringing on new staff members or want to increase productivity with your existing staff, think about the implementing the {slash}. The new employee hybrid is all the rage.

Jim Olen – Consultant/Executive Producer/Business Developer/Columnist/Neil Diamond Impersonator

The Day Space Invaders Saved My Company

April 11, 2012April 11, 2012Leave a comment

(originally published in Screen Magazine 4/11/12)

Several years ago on a Thursday afternoon, I walked through my music studio and noticed that my employees seemed to be distracted. By that I mean it was obvious that no one wanted to be at work that day. My receptionist was surfing the web, my composers were talking about upcoming gigs, and my sales representative seemed completely uninspired.

We were going through a slow period at the time, so there wasn’t much work they should have been doing. More important to me than keeping everyone busy was my desire to have everyone excited to be at work. I decided that afternoon that I needed to inject some much-needed enthusiasm into my business and staff. I announced that I was giving everyone Friday off, and planned to spend all day at the studio by myself to brainstorm a new direction for my business.

I showed up at 9 a.m. the next day with a sense of purpose. The empty studio allowed me to concentrate on the task at hand. The first thing I did was go to my upright video console to play a quick game of Space Invaders. I convinced myself that I would just play one game, and then get right to work.

Three hours later I was getting really good.

After realizing that I had wasted the whole morning, I yelled at myself and then sat down to order some lunch. I swore that after eating my Thai food, I’d focus on figuring out what was wrong with my employees’ enthusiasm.

After lunch, I went right back to Space Invaders. Every time I tried to walk away and think about business strategy, I found myself turning back around to play just one more game. The end of the day arrived, and nothing was accomplished. I was pissed. As I drove home, I continued to yell at myself for not getting anything done. I finally shouted out loud, “If I’m not excited to be at work, how can I expect my employees to be?”
And there was my answer. Right in the middle of the Eisenhower Expressway, I realized that the problem wasn’t with my employees’ productivity or enthusiasm, it was with my leadership. I needed to put my business on a course where my enthusiasm would lead by example. I worked through the weekend on a new business strategy, and on the following Monday morning outlined to my employees the changes they should expect to see at the office. In the weeks and months that followed, I saw new energy in the employees, improved sales numbers in the books, and a revitalized passion for the industry on my part. In retrospect, none of the positive changes would have occurred without Space Invaders. Eight relaxing hours of seemingly pointless video game playing not only saved my business, it taught me two valuable lessons all entrepreneurs need to know.

Sometimes the only way to fix something is to step away. Once your mind is clear, the answers will come to you.
When killing aliens, always shoot from left to right. It opens better firing lanes for attacking the spaceships.

The Creative Industry: People Skills Required

April 4, 2012Leave a comment

(originally published in Screen Magazine 4/4/12)

How important are people skills on your company’s priority list?

I know a guy working in the Chicago post-production community who is a fantastic salesman. He’s really an audio mixer by trade, but a fantastic salesman never the less. I’ve sat in on sessions with him and watched him work. In the middle of an edit he’ll turn around and explain to his clients what he’s doing and why. He not only engages his clients with his professional and likable personality, he includes them in on the process.

On the other hand, I’ve worked with another sound mixer who rarely turns his chair around during a session. The only time he expects to hear the client’s input is after he says (in a monotone voice)… “Here’s playback.” Both engineers have a fantastic set of ears. Both engineers have the resources and technical capabilities to make any commercial sound better than you ever thought possible, but whom would you rather work with?

I’ve been on a set with a director who thought that yelling at everyone might be the best way to optimize productivity. On the other hand, I’ve worked with a director that was so charming and approachable, I overheard the client say… “This hardly feels like work.”

Again, with which person would you rather work?

I think the competitive nature of the creative industry has forced companies and individuals to improve on their people skills, but they seem to have fewer opportunities to put those skills to the test. Far less edit, transfer, graphic, and audio sessions are being supervised these days.

Once more, young creative students aren’t being taught the value of people skills. I hired a freelance artist (fresh out of college) a few months ago, and told him that the clients were on their way to review the project and sit with him while he made changes. “I wouldn’t feel comfortable sitting with the clients. Is there any way I can avoid client interaction?” he asked.

I thought he was going to have a nervous breakdown. I really appreciate the fact that schools are teaching students how to use the latest technology and software, but can’t they take a one-day break from technology and teach them how to have a conversation with potential clients?

Well, I’ll get off of my high horse now. It’s not like the value of people skills is lost on everyone. Several creative shops haven’t seen the level of supervised sessions fall at all. In fact, they’re really busy and have a steady flow of clients in and out daily. I wonder what they’re doing right.