BFC EP #012 - How to Handle Not Getting Paid with Den Lennie

You're listening to the Business for Creators podcast, where each week we uncover the secrets to balancing creativity and business all in the one place. With your host, me, Dan Lenny.

Well, g' day folks. It's Den Lenny here, host of the Business for Creatives podcast. We are going to mix things up a little bit. You will notice if you've been watching the videos that this is not a video. We've been running, I think about 11 shows now. And what we've discovered is while some people enjoy the videos, we're just not getting anywhere near the reach that Audio Only is getting. And so rather than invest money in editing the video, we're going to go largely audio only. Very occasionally we'll do a video podcast, but I want to focus on getting more episodes out. So my goal in the next three months is to go up to one episode a week. We might get there quicker, but I always prefer to under promise. And if we can get to a point where we can do that quicker, then great. So welcome to this first of these solo episodes. I have been listening to a lot of feedback. I've been chatting to a lot of people, and we did a survey recently where we asked a number of questions about some of the challenges that you have around running a business. And so we're going to start doing individual episodes that tackle specific challenges or specific areas around getting clients, you know, how to get referrals, how to get more reviews happening. And I want to take a different topic each episode and dig into them. And then when we feel it's appropriate, we'll bring a guest on to dig into that deeper. Because what I want to really do is be sure to be giving you value in this series. But today I wanted to talk about something that just popped up in my feed this morning. And you may or may not have seen this, but basically there's a company in the US who made a production for a rapper and didn't get paid. And so in this episode I want to talk about how a production company not getting paid could have been avoided and how you can systemize so you avoid this situation for yourself. Now, I don't know the production company involved. I've only read the article, which was on a website, but from what I understand. Well, let me tell you the backstory and we'll have a bit of a chat about it. So here's the backstory. A US Based production company made a video for a rapper and they didn't get paid by the record company, allegedly. So rather than. Well, I don't know how far they went to get paid. But clearly there'd been some challenges around getting payment for the video. So the production company took matters into their own hands and created their own version of the music video mocking the rapper for not paying. Now this was an article that originally appeared on a website. I forget what it was called, but here's the thing that I find challenging around this whole thing is that if they'd had the deal set up correctly from the outset, this simply wouldn't have happened. So this company, I think the Ridge Productions, I mean, they seem to have a lot of people on their books. I'm kind of surprised that a company that looks as established as they are working with the brands that they are would find themselves in this position. Because I've always been an advocate of no matter what the production, you should always have a solid process for when you go from agreeing a job in principle to actually it becoming reality that there's some sort of, you know, confirmation via email, some sort of agreement that's sent out and then a follow up that just says, you know, we're going to have to bill you 50% up front or 30%, whatever you feel comfortable with so that you're not going to be out of pocket with those hard expenses that you will experience.

On something like a music video. We have done productions for Sony where we had like a crew of 18. It was like $10,000 a day in crew costs and locations and vehicles and all that sort of thing. So, you know, you don't really want to be taking that on the chin. And I've had a few comments online where people say, well, if, you know, if you can't, you know, stomach that kind of cost, you shouldn't be in the game. And I call bullshit on that, to be honest, because it's just not good business. You shouldn't be funding a production for a company, no matter who they are.

You know, you want to be in a position where you've got production money up front and I've always used the approach which is to get the 50% up front so all of your hard costs are covered and then you can go through post production and you can wait for the profit and the other costs that are generally done post production costs which you can handle in house. But I think it raises a really interesting issue around how comfortable people feel about asking for money. And honestly, this production company should have avoided this. They shouldn't be in a position where they're waiting on money and then resorting to kind of a revenge tactic. I actually don't think this will do them any good whatsoever.

My own personal opinion, I say I don't know who they are and I've no interest in kind of, you know, bagging them like that. They're doing whatever they feel is right. But, you know, all of their other clients are now going to see this happening and say, well, hang on a second. If there's ever a delay with payment or some issue, you know, are we going to be faced with you taking the piss out of us? And I don't think that's healthy at all. I don't think it's professional. I don't think it's a way to conduct business.

And I'm going to call this, you know, if this company didn't get paid, it's because they didn't set up the deal correctly from the outset. It's entirely their fault for being too casual in the arrangement. And, you know, you just shouldn't hand over final edits without payment. I mean, it just seems to me it's crazy. And yet I hear of this happening a lot. So be interested to know what you think in the comments about this. You know, do you charge up front? Do you hold back content before you've been paid? I know there can be a very relaxed, casual approach in the film industry where in some cases people will like, you know, deliver the final goods and wait to be paid. And perhaps if you have a great relationship with a company and, you know, they're good for the money, maybe there's a part of the process where sometimes the bigger the company, you are in some ways, you know, handcuffed to their processes. But I just thought it was really interesting that they should find themselves in this position. So this, this rapper is called Sheck. Wes allegedly decided not to pay for a music video for his song gmo and the production company Ridge Productions decided to get even.

So in a saved Instagram highlights on Pat Ridge's account, it appears as though the production team took things into their own hands when they released a video they shot for him. Now, what's interesting, let me just move on to this. So they did this, but it wasn't long before Ridge Productions, this is from this website.

That they said they were served with a cease and desist letter along with a series of very angry DMs from the rapper. So it goes on to quote Ridge Productions as saying, so we got a cease and desist from Universal And Sheck was DMing me last night, Pat Ridge says, and in quotes it says, if he would just have asked me nicely and been like, oh, you guys didn't get paid. Let me figure that out. I'm guessing this is the rapper. I would have just taken the videos down, but instead Ridge decided to record their own version. Now, because the production company technically owns the footage, they decided to have a little fun with the situation. Now I'm no lawyer, but this to me I think is a very, very thin eyes. Because while they may have recorded the footage, the artist who owns the song and the rights, you know, if you film someone doing something, you don't automatically own that footage. You, you might own the material it's filmed on, but you don't have the rights to do what you like with it. So I find this a very, very odd situation.

And it's titled Sheck. Wes didn't like our music video, so he made this. And it takes the footage used in the Gmail video and layers hilarious dubbed dial the production team's serious shots. With weird mouth sounds and ridiculous verbatim, the video definitely paints Wes as the fool. Now I, I find this quite, quite odd and quite peculiar. Why an established production company would go down to these tactics. I think it's very, in very poor taste. I think it's very unprofessional. And I believe that, you know, well that the fundamental problem here is, is that the problem actually lies with the production company for my money, because they didn't set up the deal correctly. They didn't present their process in a way that was clear and articulated. And the fact is they handed over the rushes before getting payment, which is just absolutely nuts. And you know, we, we use in our creative business accelerator program, which is my kind of high level mastermind group, we have systems that are pre design, pre built for our members. And one of those is a client onboarding system. Now this client onboarding system is the process that is executed once the deal is agreed. So once the client has discussed in principle what they want and they want to go ahead, this is once the, I guess the sale has been agreed and the next step takes the client from the contract, the invoicing to the pre production to the shoot.

And so what we're looking to do here is set up a precedent with the client that protects you in event of something going wrong. So I'll just describe this system to you. Basically once the deal is agreed, the sale gets handed over to accounts. So this is stage one, which is the finance element. Now I accept that maybe you're in a smaller company, you're doing all this yourself. But it's important to understand the details, the derivations between the different stages. So we've got stage one finance. So the sales handover to accounts and accounts set up an invoice for the 50% and set expectations.

To the client and then they send a terms of agreement and a 50% upfront invoice. And it's very clear on that that work won't begin until payment has been received. So you actually don't do any work on the production until that money's been received. And the reason that's important is it gives the client a sense of investment in the project. You've got some money in the company and everyone can carry on with the next stage, which is development, which is we start to look at the, you know, the pre production, the discovery calls and you're creating a draft production outline, production brief and then you're presenting that back to climb in a music video case. It would be storyboards and development of the creative idea. Then it would be a number of follow up stages with discovery calls, gathering assets, script concept, storyboard approval, maybe presenting to a client and then getting ultimate client sign off on the storyboard and the script. Then you move to stage three, which is production, where you confirm the shoot details, you confirm the crew production call sheets, crew locations, confirm everything, get the contracts and terms for crew and locations and talent out, then you move to the shooting. That is the process that we like to help people understand. Now I'm just going to talk about an element of this which I think is not often discussed. And that can be, you know, the aspect around payment and asking for payment and framing that correctly up front. And the main reason that I see people challenged around getting paid is they're not actually comfortable or clear enough upfront about what's going to happen. So if you explain to a client before you've been engaged and literally you get on the phone or face to face, you say, hey, hey Bob, you know, we're really excited to be doing this project with you and we'll do a great job. I absolutely guarantee that we'll give you and this product everything we've got. We'll make a great film for you and we'll do it in the time frame we've discussed and that you require and within the budget we've discussed. And if there are any changes to that, we'll be sure to discuss with you before we agree to modify the. Now, Bob, I just wanted to ask one thing if that's okay. You know, we're a Small business. We're not a bank, we're nimble, we're small, we're creative. But we have had challenges in the past where some clients can take a while to pay us, and in the past we've delivered the project and then we end up waiting for our money and that puts us in a difficult position. We've got to pay crew and locations and, you know, we're just not in a position to be able to bankroll big productions, you know. So Bob, can I just ask that if we deliver everything we promise and that we're going to do, that you can actually pay us on time? Because that would really help us. You know, we have a policy of requesting 50% up front to cover our costs and get things moving. If that's just too much, we can maybe discuss 30%, but really 50% is what we need to be able to bankroll everything. And that means we're both invested. You know, I'm sure that makes sense. So once we build that 50% and it's been received, we will begin production and from that point we'll be absolutely committed to giving you everything we've got. Now Bob, once we finish shooting and delivered the final edits and your company and the decision makers are happy with the output, would you think it's fair and reasonable that we submit the final invoice, that you can pay it promptly and then we can deliver you the final masters? How does that sound?

And then you say nothing and you let Bob speak. And hopefully Bob will say, well, that seems very reasonable. And if there's any to and fro you can say, okay, if they're saying we just can't do that, like here's the thing, I've done projects for Sony that are in excess of $100,000 and they pay 50% up front, it's always possible and it's a leverage point for you. So I would say that's great, Bob. Look, I appreciate that so much. That really helps us out and I know we'll have a great working relationship and we can just focus on the creative. Now, by saying that and having the conversation prior to starting the project, you'll be setting a strong precedent that you are a professional business owner who understands the exchange of value, but is also setting clearly out that you need to be paid on time in order for you to do your work properly. Now this is one of a number of systems. We actually got a three part process to this inside the Creative Business Accelerator. And, but you know, regardless how big or small your business is these will really help enormously. So let's just go back to that first part of the client onboarding process. That part where your salesperson, the person who's done the deal, hands over to accounts. By creating a system for following a procedure, you'll make sure that no matter how many jobs you've got, you're always going to be in a good position and following process. And it helps clients to have certainty.

You know, certainty is something that all clients enjoy. And by systemizing this, by creating a process of handing over to accounts, accounts send an invoice and expectations. You've already pre framed the discussion with Bob. So when Bob and his team get the invoice, he's like, oh yeah, we had a conversation about that. So it's really about educating the client. It's about being up front and being firm and polite but fair. No one's really going to be able to argue with the fact that if you're laying out $20,000 or £20,000 worth of production costs, you shouldn't be able, you shouldn't have to bankroll that. I mean, that's a crazy situation.

So once you get the terms signed off, you know, you've pre framed the conversation, the terms get sent, nothing's a surprise, there's nothing that's hidden. You receive payment, then they're invested. And then the really powerful thing is that then you can just focus on the creative so you get the money out of the way, then you can simply focus on the creative.

So you know, the fact is, I know that, you know, you may be a smaller business and that salesperson may be you. What we're doing here is we're building systems that can be followed repeatedly in your business and ultimately will allow you to scale and perhaps outsource some of this to a production coordinator or a production manager, maybe a stay at home mom or someone who wants to work part time who can be running it for you while you're on location. Now the best bit is that this process requires no or very little filmmaking knowledge. The system does the heavy lifting. And what I'll understand after speaking to many of you is that most of you still want to have a hand in the physical creation of the video, the creative aspect. And so this enables you to systemize some of the other processes and allow those processes to be repeated and take the thinking and the challenge of remembering what you did last time off your plate. Now what I want to say here is following a systemized approach in your business will absolutely allow you to be More creative, it will create more space, structure and discipline actually sets you free and doesn't turn you into a sausage factory, as someone's asked me recently. So, you know, you hand everything over and it's good to go. So I want to move now to. I'm not going to talk about production today, but the post production process. Again, we've got a breakdown here of eight stages of post production and they go anywhere from, you know, the post shoot email to the client confirming the next step. So we're always laying out what's going to happen next.

And then that can be a templated email that can just sit inside. I use System Hub and it's all there so that they can just cut and paste the email and it's the same email that goes out every time. Then stage two, an assistant could ingest the rushes and create a second physical backup. Then at stage three, the editor comes in, creates the first cut offline, perhaps as an internal review before you send it to the client. And in stage four is where the client gets the first delivery of the first cut. You request consolidated feedback, that again can be a templated email. And then the feedback comes back to producer. You modify the first draft changes, you then send that for the second draft sign off again requesting consolidated feedback from the client. That again can be a templated email. And then stage six, as you're doing perhaps the online and you're doing the final changes, then you wait for written sign off from the client and then the producer confirms written sign off. And at that point, because the client has been briefed that one sign off has been achieved, the accounts will send the balance of the payment. And up to this point all of the deliverables have been watermarked. It's very important that you watermark your work saying it's, you know, draft two, draft three offline, you know, not finalized, working copy, whatever you want to see over it. And you can do that at like even 30% opacity and make it quite big. And if the client asks about it, you can just say, look, this is just our process. Again, if you, if you frame everything up front correctly, people will expect it. What we don't do is create any surprises. And then accounts will send the balance of the invoice. And once they confirm receipt of the payment, then they'll release the authorization for the editor or the producer to release the final masters. And what you can do is you can upload them to Dropbox or Vimeo or, you know, Google Drive and just put a password on them so they can all be ready uploaded. So as soon as that invoice is paid, you simply send the password with the link and they can download. And that's really the most important process. And what's really cool is that it's super easy, you know, because it's a repeatable process. And if you've got multiple productions happening simultaneously, you'll have different productions at different steps. But you can glance at the board and see that production one's at stage six, production two is at stage one, and production three is at stage eight. So you can actually start to predict when you know when money's going to come in. And that, of course, you know, money is. That's your oxygen for your business. Your cash flow is your oxygen.

And so, you know, what I want to just start to wrap up here with is you simply mustn't ever hand over final masters until cleared funds have been received. And this is something I know can create a bit of debate with filmmakers, but you have no leverage once you hand over the goods. Imagine going into a TV shop and buying a 44 inch television from a store and just taking it out and saying, oh, look, send me an invoice and I'll. And I'll pay it. And yeah, we don't pay until 60 days, so I want to take the TV now. You send me an invoice and I'll pay you in 60 days time. I mean, it's just unheard of. And yet we allow this to happen in our video production businesses. And I really feel quite strongly that, you know, we allow this to happen. Going back to the guys who'd made the music video and didn't get paid. Like, if you're not getting paid, it's because you allowed that to happen. And there was a great. I did a great podcast with Matt Jepsen. I think it was episode two of the podcast or episode three. Check it out on iTunes or SoundCloud. And Matt said, you know, if you're not getting paid, it's because you didn't set up the deal correctly. And I certainly wouldn't ever suggest as a video production service, you make a mockery of your client over whatever decision it was. I mean, I don't know the details, I don't know how long they were waiting to get paid, if they tried to get paid and they hadn't. But to make a parody video with your client I think is very foolish and very childish and something that I just could never condone. Because whatever the situation, you've got to Learn from it. Like, if you're not being paid, it's because you're not setting the deal up correctly. And if you're laying out money on production and personnel and you're not being paid, then, then it's foolish, you know, So I just want to make this. This point. It's a kind of unusual topic, but I just felt quite strongly that we should discuss it on the podcast because it is something that can happen. And, you know, there's a great book called Extreme Ownership by Jocko Willink and Leif by bin and. And Joko and Leif were Navy SEALs. And this book is all about the fact that you've got to own your shit. You know, if something goes wrong in your life, it's your f. You allowed it to happen. And the more you can.

Accept that, the more you can start to own everything. You'll find a new level of inner peace and inner freedom. And I'll just leave you with this. You know.

There'S only two things that happen in any given day or any given week. You're either winning or you're learning. So if something doesn't go your way, look at the lessons, look at the things you can take away and learn and be able to apply the next time and change your systems and really look to just think about everything you do on a daily basis. What tasks are you repeating regularly? And I would ask you to think about starting to record some screen videos of anything you're doing more than once because they'll become a really useful asset for you when you start to systemize your business. So start thinking about recording anything you do more than once. And yeah, just, you know, I think, you know, don't ever, in my view, take the piss or mock your client. I think this production company's done something really foolish. I think it will damage their business. Now, they've had a million and a half views on YouTube. So maybe the whole thing was just a scam and maybe it's all kind of strategic, but I think probably not. And. And if it was, then was it a great marketing tool? I don't know. I'm not sure. I think. I think it's foolish. I mean, I'm going to leave it there for this week, folks. I am. Excuse me. My voice is going a little bit. Let me know what you think in the comments. I'd love to start a conversation about this. Do you think this company did the right thing or do you think it was unprofessional? Anyway, talk soon. See you later. Bye. Bye. You've been listening to the Business for Creatives podcast with your host, me Dan Lenny. If you're a creative business owner who is struggling to your business performing at the level you want, then head on over to businessforcreatorspodcast.com to take a free business evaluation survey and discover where you can plug the holes in your business. You can also access a range of free training to help you build your business faster. Also, don't forget to rate the show over on itunes so we can get the message out there to more creators who need to hear it. Thanks for listening.