How To Run A Profitable Video Business & Make Money. EP #298 - Den Lennie

I'm going to show you how to run a profitable video business that makes you money. Today, I want to share my journey over the last 13 years running a video production business and share with you the highs and lows, the pitfalls and the lessons I've learned to run a video company that makes money and that allows you the life you choose. I've decanted those highs and lows into some core lessons I'm going to share with you now. So if you're ready to take your business to the next level, just jump in and let's go. If you're new here, I'm Den Lenny and I've been in the video industry for 26 years, 13 of which I've run my own company. I've been the director of photography, I've been a producer. I've worked with great celebrities like Robbie Williams, Duran Duran and Ronaldo and done a heap of projects for Sony and a lot of other corporate work that's made enormously profitable income for me and my family. And so I'm going to decant my experience of in the trenches experience to share with you the secrets and the insights that I've learned along the way to hopefully help you accelerate that process and avoid some of the pitfalls. If you've not done so yet, please make sure you like and subscribe to this video. And let's go and get started. I want to begin by talking about the client. If you can give the client what they actually want, they will in turn make you very, very healthily wealthy. In return, if you can provide enormous value to your market, they will reward you with all the money you could possibly want. But most filmmakers don't spend enough time digging deep enough into their target market. They often spend a lot of time thinking about what they want to do and what's going to work best for their show. Reo that's not actually the way to riches from video. The more time you spend really understanding your client, the better understanding you'll have of their pain points and the more accurately you'll be able to diagnose and solve their problems. And the more problems you solve, the more money you will make. Now the first place to start with this is to do a very in depth client avatar study. And you do this by asking questions. We actually have something we call the Ask Framework, which is a series of questions you ask your best clients in an interview that you record and transcribe. And when you ask those questions, you're getting to the heart of what really those questions Are actually quite simple. Why do you use us.

And let them speak? And if you've used someone in the past who's not given you a great experience, what was that like? And tell me, how do we make you feel when we work with you? Those three simple questions asked in the right way will give you a lot of insight in their words as to how you help them solve their problems. You then simply transcribe that and then you extract from that the copy you can then use to talk to that market. Now, doing an in depth client avatar is a lengthy process. We're not just looking at age and demographic, but also psychographics and other things like nomenclature, which is the specific language that industry uses in order to communicate within itself. So in filmmaking, we use phrases like dopamine gaffer. We don't call clothes pegs clothes pegs, we call them C47s. There's a language that we use in filmmaking. And whatever industry you're targeting with your video work, they too will have their own language. If you're in healthcare, they'll talk about client stories and quality of care and compliance. If you're in building, they'll talk about struts and structures and sparkies and plumbers. Each industry has its own language. If you're going to communicate with an industry as a filmmaker, you need to tap into that language and understand what's important to them. Now, the client avatar process is a deep dive into your specific client. And a key tip is to think about your best client and talk to one person. Don't try and talk to a market. Talk to one person, because people, after all, buy from people. Make sure you choose a market that has deep enough pockets to spend appropriately on video. If you want to make more money, you need to make sure the companies you're targeting have deep enough pockets to be able to afford video. That means they're selling products and services that are high value. Therefore, the percentage they might spend on marketing will be directly proportional to the cost of their product or service. You need to make sure that market can afford to spend with you. I've done a lot of work with Sony over the years and generally speaking, they spend about $30,000 per video on a launch. Now, within a launch, we might make three or four or five videos so the budget scales appropriately. Whatever sector you are working in, make sure they have enough cash to invest in video. You don't want to be the guy who has to convince them of the value of video. You want to be the guy who goes in and convinces them of why they should choose you to make their video and all their other videos because that is where the money is. I'll often speak to videographers who want to create very creative work, very artistic work, artisanal work. And the problem with that work is those markets are generally small mom and pop businesses and they don't have a lot of money. And when you're dealing with a mom and pop business that is spending their own money, every single cent is counts. Whereas when you're working with a large organization with huge budgets, it's just a line item and a spreadsheet and it's not their money they're spending. So always choose a company that is not spending their own money as opposed to someone who is spending their own money. It's a huge difference. It's subtle, but it makes a massive difference to where the money is. Every company has a budget and don't think that because the company's biggest they're going to spend excessive amounts. The way you can identify how much budget they have is to get in front of them, have a discovery meeting and get to the real heart of what is important to them. In fact, you can actually ask the question at a meeting, hey guys, what is important to you in the outcome of this video project? If we deliver a project that is perfect for you, what does done look like? You add value to a corporation or a business by identifying a true value result for them based on their interpretation of value. And it's not always bottom line profits. You want to add value by solving their business problem in their terms. I have a client who gave us an example of working with a farming client. This client made huge silos. And when Caleb, my client, had a meeting with them, he said, hey guys, you know, you've mentioned that you want to spend five to ten thousand dollars on this video. But as he dug deeper into the problem, these silos sold for 50 or $60,000 and there was a decent amount of profit in each one. And when Caleb dug into the real guts of the problem, he said, you know what guys, this doesn't sound like a five or ten thousand dollar problem. It sounds more like a twenty to twenty five thousand dollars problem. And you know what, the client turned around and said, you're absolutely right, let's find more money and do this properly. So when you spend time with a client truly diagnosing the problem, you can get to the guts of what really matters. And oftentimes that will mean them opening their purse strings wider than first they let on. The Bigger the problem you solve, the more you will get paid. But bigger companies don't always have bigger budgets. And there's a caveat to bigger budget work, and that is the larger the company, the stricter their payment terms are. And you might wait 60 or 90 or 120 days end of month to be paid. So that means that you put your invoice in on the first of the month, they won't count the first day until the end of the month, and then they'll take 120 days after that point. So if you are going to work with bigger, bigger budget clients, you need to make sure that you can stomach the terms of payment, Pricing, value or Time There are two distinct schools of thought when it comes to pricing. Do you price per day and per hour for each service you offer, or do you produce a price that is based on all of the above and includes your margin and is based on the value you bring to a client? The simplest solution here is if you're doing a volume based type of video work, then I would charge based on time because you can have a high volume of pass through without needing to redesign each project individually. So if you have a certain amount of consistency in the work you do, let's say you work in real estate for example, then there's a certain price that market will stomach. But you can produce your profits by being high volume. However, if you're making something more bespoke and more of a partnership, I'd be more inclined to look at pricing based on value because your overall value will stretch over a multiple of weeks or months and you need to make sure you're factoring in your time. And for a larger client, oftentimes a value based price will work just as well as breaking down into line items and charging per day or per hour for services. Now, if you'd like a bit more insight into pricing, click on the link above or below, click and grab a free copy of my book the Filmmaker's Guides to Budgets and Quotes. Get to know your numbers. This is a critical step in growing a profitable video business, and a lot of filmmakers don't really know the numbers. Now the most important thing to understand is the difference between revenue and profit. Revenue is the price you're charging to a client, the money that comes into your account. Profit is what is left that gets taxed and after you've paid all of your expenses. And too many filmmakers think that the revenue is the number they get to keep. And it's definitely not the case if you don't Track your numbers carefully. You'd be surprised at how little of that revenue you might end up keeping if you're not careful. One of the key lessons that I learned to save money and become more profitable and have better cash flow is not making impulse purchases because a project needs a certain piece of gear. We've all done it, you think a big project comes in, you think, well, I could hire that bit of gear or I could buy it and pay it off with this job. Now, the problem with that is that you end up burning your cash and leaving yourself short. I know that it's cool to own equipment, but sometimes that equipment sits and does nothing in a cupboard for months on end. Renting gear, when often, makes a lot more financial sense in the short term. And the rule of thumb that I would use is if you're using a piece of gear repeatedly every single week for three months and it's costing you more to rent than it would be to buy, then, yes, go and buy that piece of gear, but don't necessarily use your cash flow to do it. A big mistake filmmakers make is they see a big job come in for, let's say, 20 or $30,000, and they go and spend 5 to 10 on equipment, not factoring in the cost of crew, not factoring in all the hidden costs of running a business, and end up at the end forgetting about tax. Use some software like Xero or QuickBooks to track your profit and loss and your operating expenses on a monthly basis. And make sure you reconcile your invoices and your expenses by the 8th, or at the very latest, the 15th of the following month, so you know your cash position and you know your tax liability. Better still, get a bookkeeper. Not having a good handle on your finances is often the reason more filmmakers end up broke and not making more money. Aim for a 30 to 50% gross profit on your projects. So what is gross profit? Gross profit is the total amount of profit after your direct cost for a project. So, for example, if you have a job, let's say $1,000, and your camera operator is $350, and your kit is 150, and then your gross profit on that is the thousand minus those expenses, which is $500, which means you have $500 of gross profit on that particular project. Sounds great, right? But what you're not factoring in is all of your hidden costs. Other costs might be office rent, your car, petrol, insurance, registration, power, Internet, accounting fees, heating, ventilation and ac, and then all those subscriptions you've got, so your net profit is the 500 minus those expenses. So let's just imagine you had $200 of combined expenses a month apportioned to this one job. That means that your net profit on that thousand dollars of revenue is actually only $300, and that needs to be taxed. So let's say you're paying 30% tax. You actually keep, after tax, $200 from that thousand. Now, $1,000 to 200 is a big difference. It's a five fold difference. And many filmmakers come unstuck because they see the thousand dollars and they think that's what they're keeping and then get a real shock when they got to pay tax and they haven't got enough money left over. So get to grips with gross profit, gross revenue, and net profit. When you price your projects, you should feel a little bit uncomfortable when you tell the client the price. That means you're actually probably spot on with your pricing. Look, we all have money stories. Remember your parents saying, money doesn't grow on trees, kids. And you know, we weren't born with money pouring out of our pockets. So I grew up in a family that was full of love, but short on cash. And so money ran out. There was a scarcity around money, and for many years I carried that scarcity, scarcity around into my business. Scarcity is a very destructive force. It was only working with coaches and being in masterminds that I recognized that my views on money were not the views shared by everyone. And when I started working with successful people and successful, financially successful people, I was able to kind of recognize that money was all about perspective and value was something that oftentimes you can constrain because of your own money stories. So you often undercharge for something based on what you think is a fair price, not necessarily what the market will sustain. The other thing is your family, your friends, may not be entrepreneurs, and they may not want you to be too successful. The herd mentality doesn't like tall poppies. They don't like people poking their head above the parapet and being more successful than them because it fundamentally reminds them that they may not be as successful as you. And that can create a lot of tension. So you need to make sure you're surrounding yourself with people who are going to push you up, not hold you back. You're an entrepreneur as a videographer, and you need to take some risks. And that means sometimes stepping away from your old tribe and finding a tribe that can support you in your growth goals. So if you want to make more money in your video business, there are multiple levels at which you need to improve your operating system.

You've been listening to the Video Business Accelerator podcast with your host Dan Lenny. If you are a video business owner who is tired of going it alone and would benefit from mentorship, support and weekly accountability, then mouse over to www.videobusinessaccelerator.com to learn more about how the accelerator program can help you today. Don't forget to subscribe and rate the show over on itunes, and we'd really appreciate you taking a few minutes to leave a review.