Volume: 29 Issue: 2 (Feb 2006)
Starting a Small Studio, Part Two
|In Part One of this two-part series concerning starting a small studio, we covered making the commitment, finding the partners, and creating a business plan. The next course of action is finding a location.
It may seem straightforward, but picking a place to do business, without going bankrupt, is where many small companies fail to plan. You could easily rent the finest office space in town to impress your clients, but doing so could lock you into high overhead and devour your profits long before your business gets off the ground. The alternative is to keep it at home-many successful studios have been launched from a kitchen table or inside a garage. In the beginning, it’s about desire, not geography.
Kurt Larsen, co-founder of Six Foot Studios in Houston, Texas launched his company from a spare bedroom in his home, where he also landed the company’s first major account, Halliburton. Once the business was under way, Six Foot moved the production component to Austin, working out of an office attached to horse stables. As strange as the location may seem, Larsen says it got the company closer to new accounts in Austin, was rent- free, and clients actually seemed to enjoy making the trip through the Texas Hill Country. However, Six Foot Studios didn’t stay by the stables for long. Six months later, business was booming, and the production facility moved into an office space that fit within its budget. By carefully charting a course, and not getting buried with overhead, Larsen says no one on the staff missed a paycheck. “It was important to me that our staff could depend on us to cover their salaries even during slow months,” explains Larsen. “Not rushing into choosing an office space allowed us to take our time and find the perfect location.”
Soho VFX, a visual effects facility in Toronto, now in its fourth year of operation, has approximately 35 employees and a staff that fluctuates in size during peak production cycles. After acquiring the visual effects division from a studio in Toronto, where all the owners previously worked, the newcompany and its staff of four set up shop in a decommissioned elevator shaft. Now the team works in a hip loft-type studio, which is large enough to accommodate the additional freelancers and contractors during heavy workloads.
Yet, sometimes the most prominent addresses in the world aren’t enticing enough to keep you from starting your own business. Joe Zeff, of Joe Zeff Design in Montclair, New Jersey, spent the first decade of his career as a newspaperman, starting as a reporter in Surf City, New Jersey, and altering his career path to that of presentation editor at The New York Times. When he made the switch from words to graphics, he brought with him the storytelling craft that initially launched his career in journalism. Zeff made the switch in 1996, joining Time magazine as an art director, where he was eventually promoted to graphics director, supervising a staff of artists and researchers, and producing some of the best information graphics in the industry.
“As my own work became more dynamic, the phone began to ring with freelance assignments,” explains Zeff. “Before long, I was working 50 hours a week at Time and the entire weekend at home, creating cover illustrations for magazines like Sports Illustrated and Entertainment Weekly. I found the hands-on creativity of digital illustration more invigorating than the daily routines of managing a department.”
In 2000, Zeff traded his comfortable office in Rockefeller Center and his art director title at Time for the attic in his New Jersey home and a career as a freelance illustrator. Since then, not much has changed other than his work address. “I lasted six months in my attic before claustrophobia set in,” says Zeff. “So I moved the studio into Manhattan, squeezing several computers and cameras into a ‘shoe box’ near Central Park.”
Zeff agrees that being in Manhattan helped give his business credibility to potential clients. For two years, he kept the office space in New York City. However, once he had an established client list, Zeff said good-bye to the late nights in the city and two-hour commutes, and moved his business to a five-room studio less than a mile from his house.
Many studio owners warn of the major pitfalls that come with working out of your home. You have to be extremely disciplined and treat it like you are in an office, otherwise, you can easily get distracted. “Separating work from your home life becomes close to impossible at times,” warns Larsen. “One solution is to make sure you get dressed for work, drive down the road for coffee or juice, and then drive back ready to work.”
But what if you don’t have a spare room in your house, generous friends with horse stables, or inexpensive decommissioned elevator shafts in your area? Instead, try finding a company with spare office space that you could rent or sublease, a solution that may also provide access to a conference room, kitchen, and other large-office extras. It can also create the illusion that your company is larger and more established than it really is, which can be good for business.
Any location can become an office if you keep an open mind. By keeping your office costs and overhead to a minimum, your dream studio will be within reach much sooner. However, make sure that the location will not be a detrimental factor to the type of clients you are working with.
So now you’ve got partners, a business plan, and the kitchen table, but where do you find the cash to operate? Whether you plan to apply for a small business loan, borrow money from family, max out your credit cards, or pull from your own personal savings, be aware that money will need to change hands in the beginning-there are “hidden” costs.
Your staff/contractor salaries and overhead will be your number one priority each month. Bear in mind that most clients take 30 to 60 days to pay an invoice, and the occasional deadbeat doesn’t pay at all. “What if the phone just doesn’t ring?” prompts Zeff. “Opening your own studio is a gamble, plain and simple. Minimize the risks by getting assurances from prospective clients before leaving your job. Seek out contract work that ensures some guaranteed income. And make sure you have enough start-up capital to withstand several months of struggle.”
What about equipment? Something as simple as Adobe Photoshop on three systems can get costly. Before you race out and splurge on hardware and software, remember that your first big contract will pay for a lot of the equipment. Do as much as you can initially without spending money; hardware and software are constantly evolving, and you can find yourself perpetually upgrading your systems. Animation studios also need to factor in equipment expenses for rendering, and everyone will need high-speed Internet access to transfer files back and forth to clients. “You can’t do this type of work on a dial-up AOL account,” remarks Deuce Bennet, co-founder of Creative Imagineering, near Dallas, founded by a father-and-son team to create special effects for films in the late ’60s. Their shift to CGI happened slowly over two years-during the time they were doing physical effects on Walker, Texas Ranger. The CGI was “on-screen” graphics as well as a few CGI VFX shots. From there, legal graphics and some re-enactments for lawyer usage started. “We found that as our hardware and software needs grew, so did our electric bill,” comments Bennet. “This was something we didn’t plan for.”
Moreover, don’t forget about the ancillary expenses like business cards, stationery, pens, and so on. “When we started our studio, reality slapped us in the face when we started looking for a stapler, copy machine, or even when we had to send our first fax,” remarks Six Foot’s Larsen. “You grow accustomed to those items just being there when you work for someone else.” And, not all your clients will end up being “down the road,” so plan for FedEx and traveling expenses. Want to wine and dine potential clients? That can get very pricey, but at the same time, it is a very good way to keep clientele happy.
And, don’t forget about your good friend Uncle Sam. The government will be knocking on your door, wanting its share of the pie as you start making money. If you’re not working closely with an accountant, make sure you are saving enough for quarterly or yearly federal taxes. Also, keep all your receipts and research expenses-these may qualify as a business expenses.
Staying organized and spending wisely can help keep your studio alive. Thorough financial records are a necessity for any successful studio, and Uncle Sam likes them, too.
A studio needs a healthy client list to be successful. Therefore, it is wise to find and keep several clients in your pipeline on a consistent basis. “Don’t put all your eggs in one basket,” warns Larsen. “If you have one client who is keeping you afloat, the day may come when the person pulls out, and you’re left with no support to keep your doors open.”
So where are these “good clients?” It’s really hard to start a business without an existing network or previous work in your portfolio to show prospective clients. It truly is a mixture of luck, timing, karma, voodoo, and accident. “I remember lamenting several times, ‘if we could just get someone to give us a shot, we could show what we can do.’ It’s the ‘getting that chance to shine’ that is the hardest part about starting a studio,” adds Bennet.
Get out there and network, network, network. Joining local organizations such as the Chamber of Commerce, can open the door to numerous contacts, which could eventually lead to clients. Many studios do “pro-bono” work for high-profile, non profit organizations to help introduce their work to larger companies in the area. When starting out, be open to all types of work-yes, even flying logos and corporate presentations. These types of jobs may not be glamorous, but they could be the steady work your studio needs.
Remember, it’s imperative that you distinguish your studio from the competition. All studios have similar capabilities; you need to find a way to be different or more appealing to prospective clients. “Based on your strengths, define your niche in the marketplace. Know your competition, and determine how you differ. Identify your potential clients, and let them know how to find you,” explains Zeff.
You won’t always have to go looking for clients, however, if you make it easy for them to find you. “I get my work by advertising in as many places as possible,” says Henk Dawson, co-owner of Dawson 3D near Seattle. “A great Web presence, e-mail newsletters, and commercial portfolio sites are some of the things that I do to get work. It is an ongoing thing.”
Developing and maintaining a solid reputation is critical. Most companies don’t like to work with an unknown studio; it’s just too risky. “Word of mouth is very powerful, more so than the postcards and e-mails that I’ve sent out through the years,” comments Zeff. “Every completed assignment is a marketing opportunity-a major magazine cover lands on the desk of hundreds of art directors who could potentially call with your next assignment.”
Once you have a healthy list of clients, keep them satisfied, deliver on time and on budget, and chances are good you will have a repeat customer. Maintain contact with clients through periodic correspondence such as phone calls, e-mails, and mailings-the more creative, the better. “Earlier this year, I sent bobble- head dolls to many of my clients, just to keep my name fresh in their minds,” notes Zeff.
Allan Magled, co-founder of Soho VFX in Toronto, understands that going the extra mile pays off. “Take good care of your staff and clients. Everything else falls into place,” he advises.
Strangely, one of the biggest obstacles you will face in business is pricing your work. Learning how to estimate and price a project can be challenging. “We tried to find out what other studios and individuals charged for their work and found that it’s easier to get secrets out of the Pentagon than to have someone tell you what they charge,” explains Bennet. “And we’re not telling [how we found out] either.”
You really have to research the market, your customers, and your competition to determine your own pricing structure. Some clients will be open with their budgets; however, it is more common for them to keep their actual budget a mystery. If you price too high, you could quickly find yourself out of the running. But if you price the job too low, you stand to lose a lot of money. “It’s the hardest part of the job. But at times, it’s best to turn down a paying gig if it just doesn’t pay enough to cover your expenses,” explains Zeff. “When saying ‘no,’ explain your reasons in a straightforward way. Oftentimes, fees can be negotiated upward.”
Dawson suggests that you make two lists. The first list should have everything that you enjoy doing and are good at; the second should include all the profitable services that relate to your skills. In a perfect world, you would pursue things that are on both lists. The reality is that the lists will probably never cross over, but it is a good way to ensure that your passion for art and business remains profitable.
As mentioned earlier, starting your own studio can be a very challenging and rewarding endeavor. “When your name is on the door, your reputation rides on every job, and [when] you succeed, there is no sensation nearly as sweet,” notes Zeff.
Many successful studio owners suggest that you go work for someone else first-get a job in a working studio. This will provide you with experience, a body of work to serve as a portfolio, and a possible network of people and clients. Going into business armed with the knowledge and insight of others who have already made the journey can help prevent unnecessary worry about whether or not you made the right decision.
Remember don’t get hung up on the location of your studio-be open to alternative locations. Watch your budget, and offer your services at a competitive rate; it will keep you funded longer and your clients coming back for more. Most importantly, research the market and your competition. Determine how you will compete, and differentiate your studio from the others.
Thousands of studios are currently thriving and profitable, and they all had to start somewhere. Bookstores have an endless array of reference materials to help you start, market, and maintain a successful studio. But sometimes, it’s stepping into the shoes of the people who have walked down the path already that will offer the most valuable knowledge. Dawson says it best, “Aim high, and work hard. But don’t work too much. One of the biggest reasons for businesses going under is burnout.”
William “Proton” Vaughan inspires and motivates students at The DAVE School in Orlando, Fla., where he continues to push the limits of 3D art and animation. He can be reached by e-mail at firstname.lastname@example.org.
The epitome of a successful small studio, Out of Our Minds has created some terrific animated short films such as “Dear Sweet Emma,” “Joyride,” and “Fly Away.” I caught up with founder Danny Oakley to get his feedback on what it takes to start a small studio.
We began as a graphic design/ad agency consisting of six people. We were different from most agencies in that we did all our own illustration and photography. Before long, we started playing around with Topaz, an old 3D program that ran on DOS and one of the first versions of Animation Master, and we started doing more with these programs for illustration and animation. We eventually migrated to Newtek’s LightWave 3D back in the 5.0 days. Slowly, the animation work started taking hold over the print work.
In our arena, there are a lot of small ad and design agencies. In 2000, we dropped all the corporate clients we had and let everyone know that we were no longer their competition, but wanted to work with them. The agencies were hesitant at first to believe that we were no longer competing with them for business. But, eventually, many of the agencies we were competing with before started hiring us for their illustration and animation work. Sometimes their corporate clients would contact us directly, and we would just tell them we would work with them through their agency. That helped solidify the trust the others agencies had, and business really started to soar.
Setting yourself apart from the competition can be extremely challenging, but vital to success. Sell a client on your services. Help them understand that 3D modeling and animation, for example, is not limited to cartoons and movies. Always try to think of different solutions to help your clients. If they know you are going the extra mile, they will keep coming back.
We’ve been in business as Out of Our Minds Studio since 2000. Before that, our group operated as a design agency for 15 years. We found that, over time, we faced an ongoing problem-clients believing the tools make the project and not the talent. Turnaround times are also shrinking-clients need projects completed on tight timelines. I liked it back when you had to think about if a change in the project was actually worth making. Now you tend to see 20 versions of something just because you can, not because you should.
Look for your own path. Just because that’s how someone else did it doesn’t mean that’s how you should do it. Also, don’t pigeonhole yourself into one type of work. Offer a broad range of work-not all customers are going to want spaceships or hyper real spokesmodels. Finally, really listen to your clients-sometimes they actually have good ideas. It ultimately takes patience and knowing it’s definitely going to be a bumpy ride along the path to success.
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