How it's calculated
Overhead is usually a percentage of a defined base. The base matters as much as the rate. For a feature with these totals:
| Line | Amount |
|---|---|
| Above-the-line | $300,000 |
| Below-the-line | $1,100,000 |
| Contingency, 10% of BTL | $110,000 |
| Completion bond fee | $38,000 |
A 5% overhead on above plus below: ($300,000 + $1,100,000) x 0.05 = $70,000.
A 5% overhead on everything including contingency and bond: ($300,000 + $1,100,000 + $110,000 + $38,000) x 0.05 = $77,400.
That's $7,400 more for the same stated rate. Financiers generally want overhead excluded from its own base and from contingency, and they'll ask what happens to overhead on contingency that isn't spent. The 5% here is an example; the rate is negotiated.
Why investors push back
Overhead is a soft cost. On a studio picture, overhead charges on the negative cost are part of why net profit participations rarely pay. On an indie, an overhead fee paid to the producer's company in addition to a producer fee can look like being paid twice. Typical investor positions:
- A flat dollar amount instead of a percentage.
- Overhead only on hard costs.
- Part of it deferred until investors recoup.
- A requirement that it reimburse actual, documented office costs.
Budgeting it honestly
If your company really does carry rent, an assistant, and development costs across several projects, an overhead line is legitimate. Show it clearly on the top sheet, state the base, and don't bury office costs in both an overhead fee and a production office account. The film budget template keeps overhead in its own line so the production accountant can report it separately.
Also decide when it's paid. An overhead fee drawn in full at the start of prep takes cash out of the cash flow when the production needs it most, so many deals spread it over the shoot or pay part on delivery.