Starting a Small Studio: Part One of a Two-Part Series
Issue: Volume: 29 Issue: 1 (January 2006)

Starting a Small Studio: Part One of a Two-Part Series

Starting your own studio-it’s an artist’s dream. Throw in the prospect of creative control, add the potential of a hefty owner’s draw on payday, and you’ve got a fantasy that is absolutely perfect for prime time. The reality is that new businesses face myriad challenges, and in a competitive, fast-paced industry like 3D animation and visual effects, the highs can be enormous and the failures costly.

George Lucas had to start somewhere, right? So, what about you? Where do you begin? What’s the best way to set up and run a professional production studio without losing your shirt? How do you fill your own shelf with Academy Awards? To help answer these questions, we’ve drawn on the real-world experience of artists who have succeeded at launching small studios.

Henk Dawson, co-owner and award-winning illustrator of Dawson 3D, a Seattle-area studio specializing in exquisite three-dimensional illustrations for clients such as Apple, Microsoft, Nintendo, and Pepsi, launched his career as an illustrator trapped in the role of graphic designer. On the day Dawson received his walking papers, Dawson 3D was formed. Instead of pondering his fate on the way to the unemployment line, Dawson hit the ground running, networking and talking to other designers and artists in need of a freelance illustrator. “Thanks to my [former] boss, my new business was off to a good start,” he says.

Soho VFX, a small to mid-size 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. Founded by Allan Magled, Michael Mombourquette, and Berj Bannayan, the studio’s recent credits include The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, Final Destination 3, and Fantastic Four. So how did the Soho VFX crew get their business off the ground? “Is ‘no one would hire us’ an acceptable answer?” jokes Magled. The reality is that the three entrepreneurs bought the visual effects division from a studio in Toronto, where they all previously worked. “The opportunity came along and we took it,” explains Magled.

© William Vaughan and Alejandro Parrilla.

Luminetik, founded in New York by Kevin Cahill and Akiko Ashley, began with a staff of four artists and a client list that sprang from relationships the founders developed throughout their careers. For five years Luminetek’s focus was commercials, industrial videos, architectural visualizations, and visual effects work for motion pictures. But that all changed when the company relocated to Santa Monica, California to develop Dis Konnected, a feature-length, CG-animated film. When asked how the move affected their business, Ashley remarks, “I would say the biggest change we made was going from a ‘work for hire’ studio to an ‘original intellectual property’ studio.”

So, what makes you think you’re ready to tackle the challenges of owning your own business? Without a clear idea of what’s in store, striking out on your own can be a one-way ticket to the poor house.

First of all, there’s a lot to be said for paying your dues at a major studio. You experience firsthand a streamlined production process, rub elbows with talented people, and broaden your technical and business skills. You build on the value of working as a team, and can experience a great deal of creative growth-all things you can easily carry with you to your own studio. Also realize that being a great artist with immense technical skills doesn’t necessarily make you a great business manager. Talent is only a starting point in this business.

Deuce Bennet, co-founder of Creative Imagineering, a full-service video, graphics design, and production facility near Dallas, believes you need to go into business with your eyes wide open. “Not everyone is cut out for running their own studio. Doing CGI work requires one skill set-running a business, doing public relations, marketing, budgeting, and interacting with clients demands a different expertise altogether,” explains Bennet. “Not everyone possesses the full group of skills required to run a studio. And, many people cannot function with the uncertainty of not having a steady paycheck.” Like it or not, you probably have to relinquish the steady paycheck privilege when you launch a studio. The work flow is hardly consistent-it can be feast or famine-especially while you’re getting established. And, realistically, it may take months before you get a paying gig.

“Make sure you’re ready to give up your health insurance, your paid vacation, your company-bought hardware and software, your retirement plan, and your ability to call in sick when you roll out of bed with a 102-degree fever,” warns Joe Zeff, founder of Joe Zeff Design in Montclair, New Jersey. Sick days really aren’t an option when deadlines are looming, clients are calling, and you are the production crew.

Seriously ask yourself if owning a studio is something you can be committed to for the long term. If starting a studio with a partner, it’s important to know who you are going into business with. It may sound trite, but having a partner is similar to getting married. Often, you will spend more time with your business partner than with your family. Stressful situations will arise that test your working relationship and, ultimately, your friendship. “You should always make sure there is good chemistry and a shared vision among the people you work with,” warns Ashley. “These are people you are going to be working with for a long time.”

Business partners aren’t the only members of your crew whom you should choose carefully. The smaller the studio, the more important it is to have a skilled, versatile staff. Many start-ups are staffed with acquaintances already in the business, or people who were highly recommended. “One wrong hire can wreck a studio,” explains Kurt Larsen, co-founder of Six Foot Studios in Houston.

Launched in 2000, Six Foot Studios started with a staff of three people focused on interactive presentations for Compaq, Halliburton, and NewLine Cinema; the staff quickly grew to 16 within the first year. “Some of our early hiring decisions were rushed and turned out to be bad hires, which slowed down our growth,” adds Larsen.

Before you rush out and staff up, make sure you can afford everyone you are hiring. The CG industry is a tightly knit community, and rumors travel quickly. A studio can easily get a bad reputation as a company that lets go of employees every time cash flow gets low. Instead, consider contracting workers until you have a steady work flow, and as the business grows, offer full-time positions to your best contract employees. This approach also gives you a chance to work with people on select projects, to see if they are a good fit for your studio.

“Companies have to expand to survive. Adding new people can be very tricky and dangerous. Incorporating them into the way things function, how your studios process works from the beginning to the end, and assessing their potential is crucial for project success,” explains Admir Elezovic, co-founder and art director at Croteam, an interactive entertainment development company located in Zagreb, Croatia.

Sometimes adding staff isn’t the best solution. Often, many people at small studios wear several hats. “I’m not just an illustrator. I’m the accounting department. I’m the marketing department. I’m the purchasing department. I’m the tech-support department. I’m the secretarial staff. I’m the mail room. I’m the payroll department. I’m the gofer,” explains Zeff, who remains nimble at his ability to multitask. “Not only do I need to create top-quality illustrations, I need to make sure my files are backed up, my electric bill is covered, my taxes are up to date, and my invoices have all been paid.”

Zeff’s business has steadily grown, but he resists the temptation to increase his staff. Zeff admits he could work less and potentially make more money if he filled his studio with entry-level hires and took on a steady stream of contract work. For example, he turned down four months worth of editorial work last year to focus on a major project for Unisys. “With a larger staff, I might have been able to manage both the Unisys project and the editorial work,” says Zeff. “One might think, at first glance, that the logical business decision would be to grow. But in the long term, splintered focus could result in diminished quality, which, in turn, could undermine the reputation of my studio. And the increased overhead would certainly cut into the operating budget, curtailing my ability to purchase up-to-the-minute hardware and software to stay ahead of my competitors.”

Whether you go into your new studio alone or with a partner and a small staff, make your decisions wisely.

Since you are creating the framework for your studio’s success, determine beforehand whether or not you will need additional staff to manage operations and bring in new business. Unfortunately, many studios fail to adequately promote and attract new business. One way to increase your business, and revenue, is to contract a commissioned salesperson whose sole purpose is to bring in new clients.

Whether you’re creating a new entity, or starting a new division within an established company, don’t do anything until you have a business plan and take the necessary steps to bring the plan to fruition. The old adage “no one plans to fail, but many fail to plan” certainly applies here.

A business plan is a document that maps a company’s mission by detailing objectives and outlining budgets. It acts as a compass when determining which direction to go. “When creating a business plan, you want to build a clear focus and foundation for the company,” states Ashley. “There should be real planning, and a really clear focus early on.”

When writing a business plan, ask yourself: What are the skills you and your partners possess? What services do you intend to offer? How much revenue will you need each month to pay the bills? What type of workload and profitability targets are you shooting for in the coming years? What types of projects will you take on, and which ones will you turn down? Set your limits and clearly define your direction.

A business plan should describe the type of business, target market, and the services offered, and include marketing, financial, and human resources information. Also consider that once a business is under way, a business plan can quickly become outdated. Regularly revise and update your business plan as the studio evolves. If you don’t understand business planning and investing, cash-flow statements, financial projections, contracts, and marketing, consider hiring a consultant to help lessen the confusion.

You will also need to determine the structure of ownership. Will your studio be a partnership, sole proprietorship, LLC, corporation, etc.? Don’t jump in blindly. Find a good, local small-business consultant or tax lawyer to help determine the best solution for your needs.

Next month, we will discuss choosing the best location for your needs, financing equipment, distinguishing yourself from the competition, pricing your services, and more.

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 email at