How much does it cost to run a magic company?

Ever wanted to own your own magic company?

Today I'll be telling you how much this company costs to run. 

But before I do, I want to be clear to anyone who was thinking of starting a magic company. 

You can't sell magic unless you love it. That's a fact. 

Magic is not an easy business to be in. You have to live and breathe it. 

I've heard this criticism before: 

Firstly. No private business can operate without making money. And the opposite of a profit is a loss.

Nobody wants a loss.

Ironically, the people saying those things don't work for free. Their day jobs are profit driven too. They exchange their time & labor for as much money as their employer is willing to pay them. 

But they say it because they think running a magic company is easy. 

The idea of making something for $1 and netting $1million is a fallacy perpetuated by those who don't operate businesses. 

I've told friends and other magic shop owners, we'd all be financially better off if we just sold mayonnaise. 

1. People buy mayo because they want it. They don't need selling on its merits. 
2. They buy it over and over again.
3. There are no skill requirements to eat mayo.
4. No practice required.
5. You don't have to sell a customer on taking on a new hobby of eating mayo.
6. You don't need to produce high quality videos for how to eat mayonnaise. 
7. You don't have to worry about people exposing your recipe online for social cachet. Thus reducing your sales. 

So if it were solely about the money - we wouldn't be in magic. We'd be in skill-free consumables. 

Now that's put to bed, let's get into costs...

Ellusionist 2022 Operating Costs Snapshot 

To give you every cost would bore you to tears, so I'm going to summarize it for you. So that you have an idea of what it costs to run a magic business. 

Maybe one day you'll own one - so you'll need to know these things. 

Staffing

Ellusionist has 9 members of staff total. People think we're a huge, moral-less conglomerate - but that's not true. 

It's a relatively small, tight operation. We do a lot by picking super talented people. 

If you wanted to run your own magic company, you'd need: 

• Video production 
• Website management 
• A finance team to pay invoices, bills, payroll etc. 
• A marketing expert 
• A graphic designer 
• Probably someone to oversee all operations or manufacturing. 
• A customer service expert who can connect with/take the customer's side. 
• At least one person to manage shipping out your orders in the beginning. 

Could you do all of that on your own? Definitely not. 

That level of expertise & efficiency comes at a cost. 

Our staffing cost in 2022 was over $1million. 

Plus, Ellusionist offers medical benefits to our US staff, we pay worker's comp payments & we cover payroll fees for the US, Canada & our UK contractors. 

Sometimes we need extra help, freelance editors, a specific software expert, an extra cameraman for a big shoot. That's all extra cost. 

Production

This is everything that goes into just making products. 

In 2022, it was roughly $1.5million in cost of goods.

This includes: 

• Raw inventory costs (the cost to make the product itself)
• Research & development costs 
• Inbound shipping (from the manufacturer to our California warehouse)
• Import duties & taxes. 
• etc, etc. 

Did you expect it to be that much? 

 

Video Production 

Internally we'd worked out that it costs a minimum of about $4,000 to produce a project. Minimum. The bigger projects cost way more. 

We rent studios, put people up in airbnb's and travel around the world to work with incredibly talented artists. 

Travel alone was $70,000+ in 2022. That's planes, trains & ubers. 

Wining & dining artists and crew is an expense Ellusionist takes on, unlike some other companies, we don't charge that to the artist. 

That cost us another $21,000. In just meals, coffees & water on set. This year will be way more as we've done a lot of travelling. 

On top of that is camera equipment, new lenses, new mic packs, lighting, memory cards, hard drives & much, much more. 

 

Website & Marketing 

We spent $281,949.31 in advertising & marketing in 2022. Which may seem like a lot, but just to send emails and texts is $24,000 per year.

Our official Ellusionist app (which you can download for iPhone or Android) costs us nearly the same. 

We manage a separate domain for our magicstream.com service - but the main Ellusionist website costs us an average of $4,000 per month to keep it operational. 

On top of that you have to add data fees to allow customers to download & stream the explanation videos of tricks. Which is more expensive than you think - and the longer the instructions, the more you'll have to pay. 

So when you see a download that's 7 hours, you know that we think the knowledge being shared is worth the cost. It's cheaper to cut it. 

 

Royalties

Most of what we make as a business are products produced by our staff, or giving up-front buyouts to artists to 'ghost create' or 'consult' on product ideas.

But we also produce items that payout royalties. In 2022, we paid over $100,000 in royalties to artists on Ellusionist. 

Some artists make a lot, some - not so much.

However, we pay out each artist from sale #1. We don't recoup costs first. They start earning roylaties from the first to last sale. 

It's morally correct - but financially stupid, because not every product is a winner. Some don't sell well and we absorb the loss. 

Which I think is an important lesson for you if you were thinking about starting your own magic company. You have to work in the cost of a product 'not selling'. 

You can't just assume it'll sell because you've made it. 

 

And then there's things that cost money, but you can never sell...

Someone from a big magic company once emailed me and mentioned that they were deep into development of something similar to one of our latest releases. We beat them to market on the same idea.

They wanted to know what they should do now to not lose money. 

My response:

"Well at E we try to live and die by the same rule. First to market. 

Warehouse costs

It costs $55,000 per year to just rent our warehouse. Add on another $7,000 for light, heating, internet at the warehouse.

Not to mention the various insurances like liability, fire, flood insurance. That'll be another $23,381.59

You have to update shelving sometimes. Label printers. Packing slip printers, etc. 

Maybe you have to package certain gimmicks. So you'll need little plastic bags, envelopes, tape, stickers.

It's easily over $100,000 each year (before you even staff or stock it). 

Then there's other annoying costs that you don't think about:

• Licenses & permits
• Office supplies.
• Reships for things that get damaged in transit. 
• Buying in cardboard boxes, tape, bubble-wrap. That's not free - and shipping fees (that the customer pays) don't cover it. 
• Inventory management software is $31,000 alone. 
• Lawyers fees set us back $22,358.43 last year - and that's in a year where only 1 person stole from us. It can be much higher. 
• Credit card processing fees & wire fees (sending artists or vendors money) cost us $87,818. 

There are so many other little costs that add up too - but hopefully this gives you a taste of the reality of how much it costs to keep the lights on at a magic company. 

What can you learn from this? 

I hope there's a few things you take away from this. 

Mostly, that running ANY business, not just magic - is harder than you think... and a lot more costly. 

When I had to get flood insurance on the warehouse as a legal requirement, despite California being famous for droughts and fires - I thought it was a joke. 

Operational costs spiral out of control the bigger you get. 

Like a swan on a lake, it may look easy on the surface, but below they're paddling like f***. Same goes for running a business. 

If you knew the level of costs that go into things, you'd be blown-away by how cheap we sell certain items. 

Instead of...

"$30, that's a ripoff"

you'd be thinking...

"$30, how can they make it so affordable and still be alive?" 

Because the total cost of the product is always far more than what it costs to make the item you hold in your hand. 

With this transparency, maybe it'll also stop those 'exposing' the secret on a forum for a laugh, or to make themselves look good - because they can now appreciate the thousands (if not tens of thousands) in investment any magic company spends to bring a single product to market. 

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Thanks for reading, please leave any questions or comments below. We'd love to hear your thoughts.