business class help

[Pie4Weebl]

I posted this on LN as well but I figured there are a few professionals users here who might be able to help out. (cough BillESC and len)
Hey all,
Along with working towards a BFA in theatre lighting which keeps me busy enough I am also presuming a certificate from my school's entrepreneurship program. For the big final project in that I am working on a feasibility plan for creating a rental/production house. I have a few questions and I figured I would be a good student for a change and get real opinions on the matter instead of just BSing. So here we go!
1. In the market these days is it better to specialize and just offer lighting or should I am to be turn key and offer sound as well.
2. For initial inventory, how much should I budget for purchasing this? If someone has time in the next few days I would love a breakout of how much I should spend in what categories. For instance, how many movers should I look to have in inventory and how much would it cost me. Also the thing I by far know the least about, rigging. What do I need to purchase as far as chain hoists and lifts go to start and how much would that cost me? Cable? Dimming? Hazers? Anything else huge I am missing?
3. Is cross renting financially viable solution for most of your gigs when you are starting out, or will doing this keep you from ever making any money?
4. Rental Rates: Is there a rule of thumb for picking rates, I have heard 3-5% of purchase cost before, is this too low?
5. Insurance: I know this is a big one, how much general liability do I want to have and rough ball park, what would it cost?
6. Market: So assuming when I graduate I am free from anything tieing me down and I was to head to any city to get settled and eventually start this enterprise up, what market has the most room for new competition at the moment?
7.Staff: How many full time employees should I try to have and filling what positions, or should I operate off a call list and hire people as needed per event.
If you have anything else that you think would be useful for me to know that would be great. Also if you wouldn't mind send your responses to me via e-mail so I can better document them for the appendix of my paper. (vzeiser /at/ gmail)
Thanks again for your help!
-Victor Zeiser

 

[JD]

Your largest cash outlay would be staff, than facility. True for most businesses. Staff is the big one! When you hire someone fulltime you have to put them on payroll. This means you will at the very least be paying them 7.5% above their salary (the matching FICA) and in most cases you will need to be supplying them with some form of health coverage. In addition, you will need to insure your payroll employees with Workers Comp insurance. You may also need to attract them with some form of 401k savings plan with some matching contributions. So, if you hire someone at 35k a year, you will probably be spending near 50k on that employee. (Really effects the business model!) The more you can work off a "call list" the better! Now comes the building! Since most residential areas do not allow businesses, you will be renting or buying commercial real estate. ($$$) Depending on your area, this can be all over the place! In addition to the rent, you will also be having to pay for utilities, maintenance, and many other building related expenses. Then there is insurance. A starter policy would be a one million dollar liability / fire / theft policy. Depending on the area, figure $4k to $12k per year. You will also need trucks and advertising ($$$), as well as insurance on those trucks. Depending on state and local requirements, you may end up with a few additional expenses that I did not cover. So, a good rule of thumb is that your inventory is only about 30 to 50% of your startup costs. Conversely, you may want to look at your inventory list (when completed) and add 100 to 150% to that figure to cover the costs above! Good luck with your proposal!

 

[Footer]

Well, I'll attack one, inventory. I'll use Oklahoma City as a good microcasim for this, in town there are two companies, one that is just starting out another that is well entrenched. The larger company was a full lighting production house, truss, motors, cable, movers, steel, whatever. The new company looked at the larger company and went "we can not compete with the same gear, so we will have different gear". They went out and bought a catalyst server, a grand MA console, a ton of 12" box truss (for some reason the larger company didn't have any), 6k lumen projectors, and a ton of sound gear. They had everything the larger company did not, and had good prices on it. You will take a loss at first, just to get your gear out there. The owner and his buddy were the crew, they delivered everything and picked up everything. They would not leave untill their gear was in the air and working, and even then they would stick around just to help out. Basicly, what they did was fill the gap with the larger company. They could not supply gear to an entire gig, but they could fill in what the other company did not have. After they got their foot into the door of the larger houses, they started to build up and inventory that could compete against the larger house. They then went from supply just a media server and some truss or a sound system to a venue to supply the entire rig.

So... moral of the story is... don't expect to get everything at once. Take is slow, see what people need that they can not get locally and go get that item. You could build an entire shop off of 10 showguns, and build up (as long as no one else has showguns). Buying 50 mac 2k's when the place down the street has 200 is a bit useless. The reason so many lighting companies start off of sound companies is very simple, you can put together a nice audio rig that is rentable every weekend for much less then a lighting rig. People make there bread in audio then buy lighting gear. Venues love "turnkey" companies, less things to deal with.

 

[avkid]

The real money is in staging.
Deck and drape never becomes obsolete.

 

[David Ashton]

avkid is dead right there,staging maybe hard work but it is steady and profitable and it puts you in contact with customers who want other stuff however in general I think you are approaching the situation backwards, firstly you find your town then you look for a niche and built your business to fill that niche while looking for opportunities to build on that base.I have seen many "grand plans" come to grief in my town.This market is cut-throat competitive so get to know the market before investing a lot of money.

 

[Footer]

The real money is in staging.
Deck and drape never becomes obsolete.

Very true, especially if you have an outdoor rig