How Do You Build Wealth As a Filmmaker?

This is the question I’ve been focusing on for the last few months of this year. Once you start to understand what an assets is, as well as the differentiation between the different forms of income: It all becomes clearer and increasingly more interesting.

Building assets is how you grow wealth. It’s the method of understanding and using money in a way that school, especially film school, doesn’t teach you. Assets and business systems are the key point to to focus on, along the journey of building wealth as a filmmaker.

Today, we’re going to take a look at the Cashflow Quadrant. Finances and economics don’t immediately seem like something that goes hand-in-hand with filmmaking. Though as I’ve come to learn more and more on the subject of both, I’ve come to appreciate and value the importance of relating both to each other.

Starting to understand the idea of wealth-development as a filmmaker is crucial. I want to share some insight, perspective and learnings as far as growing wealth in order to achieve financial independence. For folks that are in the creative world, the entertainment world, and specifically, the film world, this is incredibly relevant. Understanding the cashflow quadrant, and generally how wealth can start to work in the movie-making world is huge. With it, you can start to better understand what it is you’re working towards. And in time, this can increase your wealth!

Coming From The World of Freelance Filmmaking

My name’s Chris K. Daniels. So I’ve been a filmmaker for about 5 years. And a general content-creator for about 8 years. Prior to 2020, my income, my small amount of income that is, came from freelance filmmaking. It ranged from gig to gig as far as what detail of work was involved and how much money was involved. But generally, freelance work is where roughly 90% of my money came from before 2020. Though, let me put it on the record: this year I have spent more time than ever before on my filmmaking career. BUT, most of that time was spent working on my own, long-term passion projects. No unwanted gigs. I have not taken on a single unwanted film gig this year entire year!

The More You Learn About Wealth, The More You Learn To Leverage Your Time

I’ve spent a remarkable amount of time learning about and building up a system of wealth. Not income, not salary, but wealth. And fortunately, this wealth-development journey is starting to create a life for me that I really love living. It’s heavily filled with filmmaking, but also heavily filled with investing, assets and building along my filmmaking foundation.

I want to make it clear, I am still on this journey. I have made incredible developments in 2020 and now 2021, but I am by no means done with this filmmaking, wealth-building journey. Though at the point I am at, I have a lot I’ve learned and achieved that I wish I knew years ago. And by sharing the knowledge as I progress, hopefully more likeminded people will see this value and connect.

The Financial Misconception

The first thing I want to touch on here is my initial misconception. And possibly a lot of you out there reading right now have this misconception too. The best way I’ve learned to explain this concept, is by looking at the Cashflow Quadrant. This is a breakdown originally coined by Robert Kiyosaki. Kiyosaki is a businessman and financial author, famous for his breakdown of different financial perspectives. The quadrant was initially designed to compare the American Business world, but as I’ve progressed, I’ve continuously found myself coming back and applying it to the world of filmmaking.

The Cashflow Quadrant

The cashflow quadrant is broken up into four sections. It’s showcasing the four main forms of income in society. It’s designed to better understand where the difference lies.

1. Quadrant 1: The employee. This is where most people lie. You work for an employer. The amount of time you actively put in determines the amount of money you make. It’s time in exchange for money. Classic, right?
2. Quadrant 2: The Self-Employed. This is where you own your job. This is definitely cool! And this is a very common spot for filmmakers these days. It’s freelance generally, meaning you set your own hours, and you’re in control of your work life for the most part. But still, the fact remains: Generally it is an exchange of hours worked for money earned. There’s freedom there, but you’re still confined to working time for pay.
3. Quadrant 3: The Business or Business System Owner. Now, this is where we start getting into the territory of real wealth-building. In this quadrant, you own a system that creates money for you. This system can be a direct, brick and mortar business. It can be a film production company. Or it can be a lens manufacturing company. Or it can be a streaming service. Whatever the case: the more money this business system earns, the more money you earn, based on your ownership. There’s leverage involved, there’s risk involved, and there’s capital involved. But, this no longer involves a direct exchange of time for money, in the traditional way.
4. Quadrant 4: The Investor. This is where money works for you. And let me tell you, this is a very cool place to be. The range here is certainly vast. But the basics: you put money in as an investment with an expectation of earning a return over a duration of time. This can be stocks, equity, loans, etc.

The Wealth Perspective

This cash quadrant idea gave me a lot of perspective. I mean, I understood those fundamentals, but not in such a clear way. This is a very business-minded way of looking at finances overall. And I personally love this. But it occurred to me, that this is also an incredibly relevant thing to understand in the world of filmmaking. Like I mentioned. I come from the world of freelance. So that would technically be in quadrant 2: The Self-employed. But really, it goes much deeper than that.

The Filmmaking Cashflow Quadrant

Quadrant 1:

The employee. Of course, this is the most obviously relatable. If your filmmaking career takes you into the studio system. Or perhaps to a production house. Or even a corporate videography position. These are all traditional, employee-salary jobs. There’s nothing wrong with this! But it’s the easiest to understand, so let’s move on.

Quadrant 2:

The Self-Employed. This, as stated, is hugely popular in the filmmaking world. Whether you’re a freelance editor, videographer, commercial-shooter, or Cinematographer. Really, this quadrant is where nearly every member of a film crew lies too. Sure, there are unions that make things mildly less self-employed-feeling. But you’re still in a freelance, undefined position, where hours vary and you can technically choose when to work and when not to work. So clearly, the self-employed position on the quadrant is very popular amongst filmmakers.

Quadrant 3:

The Business or Business System Owner. This is where things get very interesting. When you’re creating an independent film, you’re really just creating a small-scale company startup. I mean, a production plan is just a business plan. You raise money, or self-fund, with the expectation of building and growing it into more. And if you achieve scale, you own this “system” that creates wealth for you. I mean, think of any successful movie franchise. Those are quite literally just flawlessly executed business systems in the world of entertainment, that went on to achieve massive scale. This connection became clear to me, the more I learned about wealth-building.

Quadrant 4:

The Investor. Man, welcome to the world of producing. Amongst my filmmaking career, I’ve had the opportunity to executive produce quite a few really amazing projects. When I produce a project, I generally trade my experience, my work, my licenses, my insurances and my overall brand, for equity in a film. Just as well, I can invest my money in leu of that. So to hold my equity in a film, and secure my position as a producer, I can invest money to produce a film and get it made. With that, I have the expectation of owning a percentage of the net profit once the film is distributed. It’s the game of traditional investment and equity, adapted to the film market instead of the stock market. In fact, this is exactly what I do on a larger scale in the stock market these days. I exchange my money for outstanding shares of a company, in hopes that said company will grow in revenue, and I will get a return on my money. The same goal as when I invest (either my brand or my money) into a film.

The financial, wealth-development concepts within filmmaking are so important. I’m progressively building my understanding, and my position in the film industry as well as the financial world. The more I learn and the more I achieve, the more I’m going to share and breakdown. If fellow filmmakers out there learn and understand in this same way, I believe it’s going to lead to an incredibly interesting free market within the film world in the future. A bigger scope for independent films, and more growth outside of the traditional Hollywood system. It’s the basis of well-run supply and demand, and with proper education, I think filmmakers will take these concepts to the next level

Assets Are Wealth

Beyond this concept, what it all comes down to is the understanding of wealth-building assets. What’s an asset, you may say? Well, to quote the wise and almighty, Google:

In financial accounting, an asset is any resource owned by a business or an economic entity. It is anything that can be owned or controlled to produce value and that is held by an economic entity and that could produce positive economic value.

Though this broad description doesn’t do it justice. I plan on talking a lot more specifically about film-based assets in these articles overtime. But the big thing to take for now is this: Movies are assets. Film franchise licenses are assets. Movie soundtracks are assets. Movie art design merchandise are assets. VFX Elements are assets. If you’re a freelance filmmaking service or commercial-shooting person, there’s a good chance that YOU, in some way, are an asset. Understand this: Acquiring assets is how you build real wealth. This is what I’m doing. On the stock market, on the regular market, and in the filmmaking world. This idea of asset-building is one of the most fundamental aspects of building wealth as a filmmaker.

A Popular Real World Example

Let me give you a real world example, that’s rather popular in the YouTube space. The filmmaking niche on YouTube is HUGE right now. And I’m sure, if you’ve spent anytime in this space, you’ve experienced a Youtube-Filmmaker trying to sell you their LUT pack. “Right now I’m having a 50% off sale on my Cinematic LUT pack!! Click the link to go purchase it!!” The same thing holds true for people’s sound FX packs, template packs or even light transition packs. These are all sellable digital products. Creators will make an online store with an e-commerce function, and they will sell their digital products there.

It’s Genius, Really

The beauty of digital products is that they can sell endlessly without the seller having to deal with any form of inventory. In other worlds, there is no profit-cap. That’s an incredible value. But to take things back on subject here, these stores are digital assets. They are online website assets that generate income, and generally, progressively grow wealth. In fact, the products on these stores are digital assets too. But in terms of large-scale, financial assets: These digital product stores are the wealth-building, hugely profitable assets. And listen, these are great! As long as they’re not ripping you off with crappy products, everybody wins. I’ve purchased tons of LUT and FX packs online over the years. I rarely regret it. So in short, even though it’s a baseline-introduction to online assets: a ton of filmmaking YouTubers have realized the value of this form of income / wealth / asset-development

How Can I Start Building Wealth as a Filmmaker?

This is a subject I want to focus on a lot more in time, as it’s very complex and in-depth. But, let me go over some ideas initially, that will hopefully give you something to work towards starting today.

I think a good exercise to start this journey out: Figure out which quadrant you are in. Where does your money come from right now?

From here, come up with a plan to scale this. If you’re self-employed, can you hire someone that can handle marketing your skill and managing the leads? This immediately turns your one-person-operation into a more sustainable, early start of a production company. If you’re directing narrative short films, Can you create an information product alongside your productions? Teach what you’re doing as you’re doing it. Creating digital information products are hugely valuable assets, because the potential is uncapped. You could sell as many as there is demand. Or maybe you can work out a deal to implement brands, locations or clothing into your narrative work. This could be an opportunity to leverage your film as a promotional aspect for businesses. Another HUGE potential one is stock materials. Whether you have a film job, you own your film job, or you just own a camera, taking the brief time to film, record, capture and share stock materials can be a way to constantly be producing long-lasting assets. Being creative with this type of option can create very lucrative and interesting business opportunities, in turning your creative work into a portion of a financial asset.

Plan Out a List of Potential Wealth-Building Ideas

Hopefully these last few sections give you a bit more of an idea about the possibilities here. But beyond these, go make a master list. Plan out potential ways you could implement aspects into your filmmaking work, or potentially where you could pull assets out of your filmmaking work. Can you turn your skill into a business system? Can you leverage your job at a film rental house to start a product review blog? The possibilities of creatively turning areas of the industry into wealth-building ideas is endless. Go out there today and write down 10-20 possible ideas, no matter how stupid they may seem at first. You never know which strategies could be the most fun and/or most profitable.

In Conclusion

Learning to understand wealth, assets, and general basic fundamentals of finance can play a valuable role in building wealth as a filmmaker. The cashflow quadrant is a super streamlined system for understanding the different forms of income. And the relevance of this wealth-based system in the filmmaking world is amazing. Always remember, assets are the key to building real wealth. This is the lesson I find most common amongst all the finance books I read. So think about this in context to your filmmaking career. Is your film an asset? Or is your production company an asset? Maybe your blog where you sell your royalty free b-roll is an asset? Whatever the case, this knowledge is immensely important and exciting to apply to the world of filmmaking.

Building Wealth As a Filmmaker: The Video

I made a video version of this concept, to spread this idea even further. Go give it a watch if you’d like to! Or save it for later, to revisit these ideas in the future!