We want to talk today about the costs of setting up a video company and how much money do you need to setup a video production company. It’s one of the main questions I get asked, so I’d like to cover it here.
With your talent of being able to be an all-around videographer, you can definitely take it to the next level, having your own video production business. With this, you will be able to provide a full service for your clients’ needs, and have enough flexibility to be able to grow your brand over time.
Even better, as a company (a brand), which could more easily be marketable rather than going as an individual in the video production scene.
The Costs of Starting a Video Production Company
When starting out in business, many people tend to initially think about the finances. ‘How much money do I need to be able to start my company?’, and as someone who is deciding to set up your own video production business, the question still remains the same.
You may have seen some other video production companies who have a fixed office in the city, have a lot of production equipment, and a lot of staff to do every part of the video production process. They may also be able to fly out to any location requested by their clients, things that seem like really high expenses, that you may not initially be able to have the capital for just yet.
Given that you haven’t yet been able to gain some revenue for your business, of course, you will have to think about the initial capital to put out. And, fortunately, I have been able to put a few things in here that will be able to help you calculate how much you will need for your video production company, and help identify what your priorities are for your company.
1. Incorporating your video business
Let us start with knowing how to incorporate your business. You can register yourself as a sole proprietor, be in a partnership, or set up a corporation. Each of these have their own benefits, and I have shared with you in the past about how to set up a business by yourself, or have a team or partner in your business.
In addition, setting up a corporation would also entail that you set up the legal documents necessary, and have the declared positions for your company.
Every location is going to be different, so it’s pointless me trying to advise on legal situations like this. For example, in some countries, you would have to have at least 5 shareholders, with a distribution of shares, totally up to 100%. And, frequently, the distribution of shares is also dependent on how much each shareholder contributes to the overall capital.
In whatever way you decide to legalize your company, there would be corresponding expenses for registration, licensing and permits, and insurance. These are non-negotiable expenses that need to be taken care of immediately.
Perhaps, this is the only non-negotiable kind of expense, because the next few things for consideration have a varying range, depending on what your priorities are. Much thought have to be put into these, as they become your basis for a lot of decision making.
Ultimately, remember that in most countries, you can just remain a sole proprietor (or the equivalent in your location) and this will keep most of your costs down for running a business. Of course, as you grow and the company scales up, you may need to become an LLC for legal reasons.
Just know that your initial costs in setting up a video production company don’t have to be astronomically high.
2. Where you choose to work
Mentioned in another article I have written, do you want to set up a home office, or have a physical location for your production company? My article provides a detailed list to consider when deciding between one and the other, and it is highly dependent on what kind of setup you would like to have.
There is not right or wrong answer, but whatever decision you make will also impact your initial capitalization for your company. The decision of renting a location would involve obvious initial upfront costs, which would be a whole lot more than just working from an office at your home (for example).
And you would also have to think about the monthly overhead expenses, later on when you continue with the business. These are fixed expenses, along with the utilities, that need to be paid for.
3. Your location – The Extras
When you start shop, and decide to have a physical location for your business, you will then have to also think about the office materials that are necessary for your business.
Some things to consider:
- Do you need to invest in renovation to fix up the location,
- Purchase some work tables for you and your crew to be working on,
- computers to be used in the course of work, and
- software to be purchased for editing and general business use
- Other office equipment costs like large TV monitors, printers, etc etc etc.
Many of these items can be purchased brand new or as second hand. It will also depend on your priorities on what to purchase initially, what to purchase eventually when you have met some milestones, and what to discard completely?
If you’re going to be expecting to have your clients frequently at your office for meetings or shoots, then you need to consider presenting a good impression by spending money on your surroundings.
4. Video equipment
Aside from setting up your office space, you have to think about your assets, and these are your video equipment.
- Video camera,
- laptops for working and editing,
- editing and production software,
- stabilization kit,
- hard drives & memory cards,
- Etc etc etc.
They may be a necessary expense because you need to be working with all of these to ensure that your business is able to produce something exceptional. Depending on your priorities, you can of course choose rent some of this equipment.
When you purchase this equipment, they don’t necessarily have to be a part of your initial investment. But, if you decide to rent, then you are adding expense onto the video project expenses of your clients. This has pros and cons, of course, and it’s worth looking into all your options before you make any firm decisions.
5. Hiring people: employees or freelancers?
Next up, how are you viewing the people you work with? Are they going to be considered freelancers that you hire, or are you willing to commit to having these people as a permanent part of the team?
These choices affect your initial expenses as well, because having permanent, in-house employees is a very, very different concept than having remote working freelancers.
Here are some of the key considerations here:
- You will have to think about your office size and setup with a view to accommodating employees physically,
- to the extent of how many tables you may potentially have to set up for them, and how big an office space is necessary for your entire pool of employees to work in.
- Employee benefits and health care that they will be entitled to.
When it comes to employee benefits, the minimum you have to address is that required by the government in your area, but some companies tend to think a little more outside the box because they want to ensure that they are able to retain the best talent they can get their hands-on.
Many companies have a game room for time outs, so having a video console and a comfortable space set up is necessary, or foosball machines may work as well. Naturally, this is something to consider further down the road as you get bigger and expand somewhat.
Other companies include having transportation benefits with an allowance of a certain amount, and company cellphones, to ensure that all employees are contactable during work hours.
6. Advertising and Branding
As mentioned earlier, you want to think about the kind of company you want to set up, and that would also entail some brand knowledge and management.
Some people decide to have external companies to help them create a good marketing plan and brand identification that sets them apart from the rest of the group.
7. Finding startup capital
Finally, where is the money going to be coming from?
A good practice in business is to be able to have at least 6 months’ worth of buffer for overhead expenses when you initially set up your company to be assured that you are not dangerously running close to going into debt in the first year of business.
This is because you are expecting to still be building up your business in the initial months, and may not be able to meet the revenue targets to say that your business is profitable. So, as listed here, you have to think about the rent, the office materials, and the employees and their salaries.
Do you already have enough capital to set up these things, or would you need to look into getting a loan? This is also necessary, because it contributes to your overall business plan. You have to be able to compute how much you need, and then also figure out how much additional capital may be needed to be set aside, to ensure you are able to pay the interest and principal loan amount that was borrowed.
How much money do you need to setup a video production company – In Conclusion
Given this checklist of things to consider, and knowing what your priorities will be, you will be able to zone in on how you would like to set up your business.
The investment may actually be very small, with only licenses needed to be paid for, as the other items are only project expenses.
Alternatively, if you have the startup capital required, you could go all-in on renting a fantastic space, purchasing all equipment necessary, hiring a great team of regular employees, and have expensive professional consultants to help out with your branding. This, naturally, on the more expensive side of the initial investment spectrum for your video business.
Whatever you choose, we wish you good luck! We hope this article has helped you understand how much money do you need to setup a video production company.
Have you started your video company already? What was your biggest expense? Let us know in the comments below.