Many video production businesses are run year to year, client to client without any regard as to their eventual merge or sellable value. The question you should ask yourself is, how am I ever going to recapture the pent-up value stored in my company. Am I just working for a paycheck, or is my company really worth something?

If you run your company in a way that makes it valuable to others, then it will always be valuable to you. Ask yourself, "Am I just a video "artist" who has to keep "painting" to survive. Or am I building a business base that others will recognize as valuable and pay me good money to be part of?"

As you build and run your own video service business there are a few things that you should remember to do to create long-term value in your company:

· Keep a piece of the action. If you are producing for others and not retaining an ownership interest in the productions that you create, someday you will find that you own nothing but a great "demo reel" and while others have built true wealth from your talent, you have lost your annuity for the future. A production company that owns nothing but their equipment may have little future value.

· Niche business are worth more. Keep your focus and build upon a specialized niche that you can call your own. A niche producer or video distributor can hold a significant market share in their specialty with only modest revenues, whereas a general consumer marketer could not possibly impact the entire marketplace without enormous revenues. Think small, think about what you can control and what niche you can protect. That is where the high profits are. Also, niche market businesses are favorite targets for their larger competitors who often consider it easier to buy your company rather than squash you.

· Do not play financial games with the IRS. Make money and pay your taxes. The harder you try to hide your profits from the IRS the more work you will have proving to banks, investors or perhaps an acquirer that your company really makes as much as you say it does. Often I find businessmen who have out foxed themselves by trying to be clever with the IRS. Companies are principally valued on their profit making capability. And investors are not likely just to take your word on it. Make the highest profits, be proud of it and just pay the government its due.

· Keep track of where your money comes from. Keep scrupulous records on each production and project, by category and by subject. Someday someone else will want to know where your revenue is coming from. What are your top ten best films and which productions made the company the most money? Will you have the answers? Most producers and post-production studios keep terrible records of costs and revenues. They can tell you in rough terms, but they cannot pinpoint their income streams with any accuracy or confidence. Think of keeping excellent records as adding a ten percent premium to the value of your company.

Contrast that with Company B, that also generates $2 million in production work in a select niche market that they have cultivated for years. More than fifty percent of Company B's revenues come from tapes which they have an equity stake in or own outright. Company B makes 19.6% profits pre-tax and can prove it. And, if you ask them how much they made off of any one production in 1991, they can tell you!

If you were a looking for a successful acquisition to help expand and consolidate your market reach... which company would you be most interested in? Would you pay the same price for Company A as you would for Company B?

I don't think so.

As mergers and acquisitions counselors it is our job to help our clients maximize their company's value at the time of sale. We have no control over what you did to create that value before we came into the picture. The chances are that if you work hard and build up a successful production or post-production business, someday someone will want to acquire it.