|Making a music business development plan|
Friday, 16 August 2013 00:00Written by E.D. Cameron
Whether you are a musician, start up record label, or other music business, having a plan in writing is a cost-effective, efficient way to map out your future, success and spot potential problems before they occur.
For starters, read up on general business plans. The best resource available is at the Small Business Administration website: www.sba.gov/smallbusinessplanner. Here you can find a wealth of resources to get you thinking about some basic business issues, costs and legal matters.
Although you may decide to start with a generic business plan to generate ideas, as you delve further into the music business there are some additional items you will need to consider.
First, sketch out your executive summary, company or entity description, market analysis, and management/organization description. For the music business, you want to pay particular attention to concepts like markets (regional, national, global). This will often depend not only on your budget but also where you think audiences can be found for your specific genre of music. This applies to musicians as well as music service business: companies specializing in publicity may want to expand their net while music engineers will want a stronger local focus. For ease and efficiencies, you will want to detail as much as possible your target markets throughout your business plan. From past experience, it will serve as a constant dynamic guide to expanding business.
For musicians, this may be more critical than any other component of your business plan. Realistically decide on the level of time and financial committment you can make to things like touring and promotion. If it is minimal, you may want to draft a one to two year plan that solely focuses on a regional market. Although the world wide web may seem like an easy way to access an international fan base, oversaturation makes this often unrealistic for poorly funded acts.
Once you have completed the initial portion of your business plan you need to spend some time getting down to the nuts and bolts. Marketing, sales, and products are where you calculate how much capital you have to invest and where that money is most wisely spent to increase profit.
While there is no blanket formula for calculating potential net profit, a good rule of thumb for the music business (especially in the digital age) is 1% conversion of total unique visitors to a website. This means that in order to sell 10 copies of an album, you need to at least reach 1,000 people. Merchandise sales at shows is typically significantly higher (an average of 10% per total audience).
In order not to take a dive, calculate the cost of promotions and advertising (don't forget to include consuming and potentially expensive mailing costs). Average indie publicists charge 3,000 per 200 mailers. To DIY, you are still looking at approximately 500-1000 dollars in mailing and phone expenses.
Coupled with the costs of production and manufacturing, thinking about promotions will give you a good idea of overhead. These concepts can be expanded to include not only musicians but also recording companies, record companies, and more.
Finally, weigh out all your options and be sure to prepare a one year, two year, and five year strategy. This will help avoid immediate expenditures which may not fit your budget or time. This will also help you better save those funds coming in (from performances, for instance) towards a goal rather than being tempted at pocketing the money.