Small Business

Lights! Camera! Overruns!


Vivek Wadhwa In any creative field, players will find a trade-off between perfection and cost. One of the smartest technologists I've ever known, Raj Modi, described this phenomenon as "creeping elegance." You can decide that what you have is good enough, or you can keep perfecting your product. In the software industry, for example, you can always create a version 2 or version 3.

But in my latest field, the film industry, you get only one chance, so the risk of not spending that little bit more carries greater consequences. How do you solve the problem of balancing "creeping elegance" with the inherent fiscal limitation of a small-budget film production? Well, I learned that the hard way.

OUTSOURCING EXPERIMENT. I signed up to help produce a Hollywood film called My Bollywood Bride more than a year ago. In this space, I've written about the many challenges we faced. First, we had to create a script that would transcend the cultural boundaries between East and West. Then we had to recruit top movie stars, including Sex and the City hunk Jason Lewis. We had to shoot in both India and the U.S. and navigate cultural differences between Bollywood and Hollywood. And finally, we had to locate the right guru for the post-production process, which, I learned, is where the real magic happens.

The management skills required at each level differ, but tension always exists between allowing creativity and maintaining control. For us, finding the right balance between the two proved difficult, yet essential.

This project started as an experiment to discover whether, by outsourcing production to India, a Hollywood-class film could indeed be produced at Bollywood prices. After consulting experienced producers on both continents, we believed that we could complete the project for much less than $1 million. The key: To run this like a tech venture and get all of the key players, including our film stars, to accept back-end payments, as well as some of the inherent risks.

SETS SURPRISE Being new to the film industry and taking the role of lead investor in this venture, I tried to learn as much as possible from those with experience. So I connected with legendary director and producer Shekhar Kapur. He told me to hire a line producer to act as chief operating officer of the production. Shekhar suggested I leave the creativity to the movie's producer but have the line producer reporting directly to me after getting the director to sign off on the budget and script. Nonetheless, considering our small budget and the film's shooting on two continents, Shekhar and I later decided that strictly adhering to these last measures would be overkill, so I loosened the reins a bit and improvised.

Our budget for the shoot totaled close to $500,000. With the help of my friends, I raised all the money we thought we needed (see BW Online, 4/7/04, "A Tight Focus on Financing"). Since most of the production would be completed in Bollywood, we decided to hire a Mumbai-based accounting firm to help us keep track of our finances. With more that 200 contractors to pay in India, we thought it made sense to do accounting and operational controls the Indian way.

During a visit to Mumbai in May of last year, I was blown away with the magnificent sets we had built and the amount of activity and energy being poured into the production. The sets included a waterfall, lanterns, huge pillars, and spectacular lighting. How could we do all this for such a small budget? I wondered.

RUPEE HEMORRHAGE. The answer came when the film's producer revealed that checks were bouncing and that, within the first four weeks of production, we had burned through $425,000. Oh, and by the way, we would need another $300,000 to complete the Indian filming. We suddenly had a major problem on our hands, with contractors refusing to work unless they received payment in cash immediately. Then the unions threatened to shut us down unless we resolved all their issues.

After some frantic phone calls, I got help from one of my friends, Dr. Daljit Buttar, who had co-invested in our project. Daljit had to make multiple trips to the Western Union offices between patients to get the emergency funding needed to keep the project going forward.

With a tidal wave of cash payments flowing out every week and the frantic pace of activity, reconciling the accounts and getting a firm handle on how much had been spent on what proved a challenge. We were at the next level of the game before we even had a chance to add up the numbers. I still didn't know exactly where all the money went, but we had to move forward.

NUISANCE PAYOFFS. Things were not much different in Los Angeles. After our Indian experiences, our producers carefully scrutinized the budget to make sure we would not run out of money. This time, we budgeted $67,000 for a three-day shoot. Actual costs came in closer to $140,000.

Some of the overruns resulted from our decision to hire more extras and improve the production quality. Other costs came as a big surprise. We had to spend thousands of dollars paying off street vendors in Venice Beach. Otherwise, they might have, for example, created a nuisance by playing loud music or posting signs. We actually spent less making such payoffs in India than in California.

By the time we finish, the film will have cost us about $1.7 million, in large part because we became more ambitious and made few compromises on the production values. But a similar movie would have cost us close to $10 million had we shot it in Hollywood.

TRANSCENDING NUMBERS. With our huge cost advantage and the interest we were getting from distributors, it simply made sense to spend more to improve the production quality. As we progressed, we knew we had a potential box office darling on our hands, so the investors decided to take the hit and raise more money.

So what's the message for small business owners? If you're in a creative field -- be it filmmaking or furniture building, it's hard to play solely by the numbers. There's a balance between delivering a great product and letting spending get out of control. As we learned, however, without the right financial controls in place from the onset, the temptation to keep spending only increases once the cat gets out of the bag. If you're not careful, little projects can quickly become big projects. Wadhwa is the founder of Relativity Technologies in Raleigh, N.C. When not producing movies or battling venture capitalists, he mentors fledgling entrepreneurs


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