Ten Steps to Quitting Your Day Job
January 7, 2008
It’s every musician’s dream to be able to quit working 9 to 5, quit answering to someone else, and to finally make some “real” money with their music. Most of these musicians tend to think of themselves as artists first and professionals second. With that mentality, it’s no wonder most never make it in the music business – key word being “business.”
Before you can start out on your own, you need to know what you’re getting into. Musicians could well take a lesson from writers, designers, and other professionals that have been working in freelance-friendly fields, since you will in fact be a freelancer. For starters, they’re rarely looking to sign their lives away like musicians are with a major label. Instead, most freelancers work directly with clients on a per project basis, in your case the venues you play for, and writers sell their work one piece at a time, and never lose their rights to it. Before you think the only way you’ll make money in music is to get “discovered” by a label, follow these 10 steps to help you get on your way to making a living as an independent musician.
Do Your Research – Take time to really understand the music industry, familiarize yourself with legal issues, and decide if you think label backing is really worth selling your soul. And don’t just research music! Research other freelance fields. Research ways to start a small business in general. (Check out www.entrepreneur.com, www.ideacafe.com, and www.allfreelancework.com.)
Save Your Money – This should go without saying! Before you quit your day job, you need to know that you can pay your bills while you’re starting out. A bare minimum is to save 3 months’ pay. It may sound like a lot, and you may think it’s impossible, and it’s certainly not going to happen overnight. But look at it this way: Is complete freedom worth a few sacrifices and putting up with your boss another year? Or would you rather keep spending now, and be stuck in your same rut a year from now?
Create a Financial Plan – It’s not enough to have some money saved up. You need to know exactly what bills you’re going to have to pay, any added expenses (like getting your own insurance when you leave your job – so don’t forget to get your last medical and dental exams), and figure out what you’ll need to be bringing in. Add the totals together for all band members, and you now know how much money the band needs to make every month. Don’t forget to factor in at least 10% more than your total expenses to cover anything unexpected. Although now you know how much you need to make, you’re not finished until you can outline a realistic plan to achieve it. Don’t forget to add show revenue, CD sales, and merch sales. Also, don’t exaggerate your potential earnings. Keep them conservative, as you’re more likely to be realistic. Never look for gigs and ask a venue what they’re willing to pay you. You know what you need to make. Be realistic, but set a rate that you can live with, and never work for less, unless it’s for a charity show or something that you’ll get good publicity from. You’ll be in business. You’ll be supplying the talent that keeps these places open. Don’t allow yourself to get suckered by cheap venue managers. If they still offer you too little? Figure out what their suggested pay amounts to, hourly, for each band member, and ask the manager if they could live off of that! If they say other bands would be happy for that pay, let them have it! You’ll never get anywhere in this business by de-valuing yourselves. Then, find someone who appreciates what you’re worth, and build a good relationship with that venue so you can try to get regular sets. Also, try to think of other, less common, income sources for your band. Maybe band members could give music lessons. Maybe the band members can form a partnership with another form of music business, such as an indie label, promotion company, or doing graphic and web design work exclusively for other musicians. The possibilities are really endless!
Network! – The key to most businesses is knowing the “right” people. Start building your contact lists with members of the media, promoters, managers, other musicians, venue managers, or even small record store owners. Anyone that can potentially help you in your music career is worth getting to know. Do it before you quit your day job.
Act Like You’re in Business – Like it or not, when you’re on your own, you really will be in business! You’ll need to pay your own taxes, because they won’t be held out from your paychecks. You’ll need to take care of your own insurance for your health, your family, your equipment … everything. Start taking care of the legalities of going into business for yourselves before you quit your jobs. Contact an entertainment lawyer. Draw up a partnership agreement between band members. Look into any permits you may need (some states require general business permits), and make sure that wherever you’re running your band’s business is zoned accordingly. You don’t want to start off with legal hassles. Get them out of the way early!
Have Shows Line Up – Here’s a simple step. Don’t quit your day job thinking you’ll then have time to set up shows. If you don’t have at least 2-3 months of shows lined up, you’re asking for trouble. Book your show dates as early as possible. And remember, you can’t afford to just work weekends. Start booking shows at least 3 nights a week, preferably 4 or 5. Being a musician isn’t a slacker’s job. It’s hard as hell, and you have to be willing to put in the time, even if it means pulling late nights to get on that show schedule before you actually have the opportunity to quit your day job.
Be Ready for 24/7 – Speaking of hard work and late nights … you’ll need to spend enormously more time working on your music career than you are in your 9 to 5. Don’t think for a second that quitting to focus on the band is going to leave you loads of free time. If it does, you’re not doing something right. Playing shows will only amount to 10-20% of your time working. Your main focuses will be on promotion or “selling yourselves” to the fans, maintaining your image, pushing CD and merch sales, writing new material, recording, meeting with store owners about distribution deals, designing and creating merch, album art, and any other creative elements you’ll need, practicing, maintaining your band website which should be updated at least several times a week, and very importantly, you’ll be spending at least a third of your time working on the “business” – dealing with paperwork, managing your finances, taking care of the band’s vehicle, taking care of your equipment, paying your taxes, reviewing contracts, and planning out the rest of your show dates and your career in general. Just like with any other business owner, in the beginning, it really will be 24/7.
Work on Your Music EVERY Day! – Even while you’re still working full-time for someone else, you better be prepared to spend at least an hour or two every single day working on your music career. If you can’t stick with it, or if you can’t find enough to do, then you really don’t know what it takes, and you’ll never make it on your own, so get comfy where you are.
Always Think About Your NEXT Project – You can’t spend your time thinking about the here and now. If you’re not thinking about what you’ve got going on a week from now, a month from now, or even just a day from now, then you obviously don’t have anything important going on! Successful people don’t watch their feet, they keep their eye on their goals and every step they still need to take to reach those goals. While you’re playing one show, think about how you can make the next one better. While you’re in the studio, be thinking about how you’re going to promote the hell out of this album so sales skyrocket. If you’re not completely focused on the goals you’ve set, maybe you need to rethink them, and make sure you’re focusing on something you’re truly passionate about.
Have Fun! – As simple as this sounds, it’s probably the most important thing you can do. You certainly have to take yourself seriously. But that doesn’t mean you have to be serious all of the time. You’re doing this because you love it, and the moment you forget that, you’ve lost everything that you’ve worked for. If you’re not enjoying your music enough now, while you’re still working your day job, you’ll absolutely hate it when you’re eating, sleeping and breathing it later.
The most important thing you can do is to be prepared for anything. Not everyone will support your decision. You’ll probably struggle a little, or a lot, for a while. Just keep your head up, eyes on your goals, and you’ll eventually find your own way to make a living with your music without even thinking about label backing, big name promoters, or anything else that’ll take more from you than it’ll give. Good luck!
Band Business Plan Outline
January 7, 2008
Every serious band should take the time to put together a realistic business plan. You may want to create a plan simply to help the band get more organized, or you may intend to use it when scouting sponsors or other forms of financing. A solid and realistic plan can be an important tool in establishing your band’s legitimacy as a business when tax time comes around. And, if nothing else, the plan will help you in planning your goals realistically, based on facts and your financial calculations.
A business plan really can’t be hammered out in a day. It takes planning, evaluation, and a lot of thought, which can translate into time. Summer’s the perfect time to start planning your business activities for next year. Here’s a sample outline to get you started:
I. Executive Summary
a. This will include your business concept, current financial situation, your key factors for success, and other information regarding your current situation, such as location and a mention of any staff (band members, management, etc.).
b. Also give basic background on the company (the band or artist), and discuss the skills and strengths of your management team.
c. If you plan to obtain financing, here’s where you’ll discuss why you need it.
d. Talk about the band’s objectives.
e. The Executive Summary will be the first thing in your Business Plan, but it’s the last thing you should write!
II. Mission Statement
a. This is the overall philosophy of your business (in your case, your band). Everything you do should be in accordance to the goals you lay out in your mission statement. Talk about how you plan to make your customers (your fans) happy, what kind of quality and pricing strategies you plan to you (High quality and higher prices, economy quality and lower prices, high quality and lower prices – taking less profit, etc.).
III. Organizational Plan
a. Business Model – Is your band run as a sole proprietorship, partnership, corporation, etc.? Why? What are the benefits of doing it that way, and have you legally taken the steps to operate as that form of business?
b. Products and Services – Describe all products you plan to offer (such as your CDs, shirts, stickers, or other merch) and services (live events, etc.). Talk about your pricing strategy, future products and services you plan to offer, and your competitive edge over your competition’s products and services.
c. Copyrights/Trademarks – Make note of any trademarks such as your band name, and whether or not they’re registered or just common law trademarks. Keep in mind, you only have a common law trademark if no one else at all is using that name, so do searches online for other bands that may be using your name, and find out who was using it first before you claim trademark. Do the same for any copyrights you may own. Be sure to document all of your intellectual property here.
d. Management and Personnel – Here you can include more details about each band member and each member of your management team.
IV. Marketing
a. Market Analysis – Talk about your target market (include any demographics), your competition for all products and services you’re offering, market trends for the industry as a whole, and be sure to list your sources for any market research you complete.
b. Marketing Strategy – Discuss your plans for selling, such as advertising, publicity, and promotion. Make sure you touch on all of the “4 P’s of Marketing” here – Product, Pricing, Placement (distribution and packaging) and Promotion. Don’t just list generalities, list specific strategies here.
c. Responsibilities – Note whether the band as a whole is responsible for each strategy or if something is being outsourced. If the band is responsible, assign specific duties to each band member.
d. Evaluation – List the ways you plan to evaluate your marketing. You need to evaluate your efforts at least once a year, but preferably every quarter, so that you can adjust your marketing strategies for greater effect. (i.e. if you see that CD sales haven’t picked up at all with your current promotions, you can try something new instead of wasting more time.)
V. Financials
a. The financials may be the most important part of your business plan when tax time comes around, or when you find yourself looking for financing. The financial projections can range from 1-5 years.
b. If you plan to seek a loan, you need to tell how much you plan to need, and what exactly you plan to spend it on. You need supporting documents, such as official quotes from companies you plan to buy from. Scale down any loan requests to the bare minimum you would need to work with. Don’t add fluff.
c. Projected Cash Flow Statement – This is basically just your budget for the upcoming year.
d. Starting Balance Sheet – This will list the band’s starting assets, liabilities, and net worth.
e. 3-year projections – You need to project your income or losses over the next three years. (Don’t try to inflate what you hope to earn. You need to use the facts, and be realistic. Keep in mind, many small businesses don’t turn a profit for 3-5 years.) You can get these estimates by using your income and expense totals from your first year’s budget, and factoring in expected economic or industry trends that you should have mentioned in your Market Analysis.
f. Projected Balance Sheet – Project your assets, liabilities and net worth for the end of the following year.
g. Income Statement (Profit and Loss Statement) – This shows your monthly or yearly financial activity.
h. Break-even Analysis – This is the point where your expenses exactly match your income from products and services. You can think about this in terms of dollars, or in terms of the number of product units you need to sell at your given price. Pull your numbers from your three-year projection to help you figure out your break-even point.
i. Personal Financial Histories – If this is your first business plan, and the band hasn’t officially been “in business” before, with verifiable financial records, you need to include each member’s personal financial histories. If you look for financing, this is an absolute must.
j. Business Financial History – If your band has been in business for a while, and you have verifiable financial records, you need to include the financial history of the business, to explain any growth or downsizing.
Once your business plan is complete, you should add a table of contents and a cover page. The table of contents will simply point to where each section and supporting document can be found. The cover page should include your business or band name, full contact information, the date the plan was created, and the name of the person who wrote the plan. You should update your plan yearly.
Passive Revenue Streams for Musicians
January 7, 2008
If you work as an independent musician, chances are pretty good that you’re still trudging along in a full-time job as well. Very few indie musicians make enough money from their music to support themselves. It’s a bit of a catch-22. You want to earn a living from your music, but you have to earn a living to be able to afford making and selling your music.
Well, all hope isn’t lost. I’m going to give you some tips to increase your passive revenue. These aren’t going to bring you a fortune overnight, but with good forethought, they can lead to decent income in time, allowing you more time for your music, without being stuck in a 9-5 world.
First of all, what is passive revenue? – Passive revenue is an income stream that doesn’t require regular work from you. Sounds great, right? Think about your CD sales. You can record a CD, have them produced, and make them available for sale on your web site. Once the initial work is done, you can just sit back and earn income as the CDs sell. (Of course you’ll make more if you actively promote it, but this is just a theoretical example.) That’s passive revenue.
Here are five possible passive revenue streams for independent musicians:
1. Merch Sales – You can design and have your merch (shirts, stickers, buttons, or pretty much whatever you can imagine) for sale online, which won’t involve much work on a regular basis. To make it even easier, use a service like www.CafePress.com or www.PrintMojo.com to handle the storefront, orders, and shipping for you.
2. Old CDs or Show Videos – Use a service like www.Lulu.com to have your old albums printed on demand. You can do the same with DVDs. Just have a friend shoot some of your shows for you, and submit the files and artwork. They manage the storefront and orders for you. You can find out more about Lulu.com’s service and how to use it by reading Let Your Old Music Make Money for You.
3. Write and Publish – If you’re a decent writer, why not put together some music articles, or even a book or ebook? You can sell the book or ebook online (again with a POD publisher like www.Lulu.com or www.Cafepress.com), or create a group of articles that you can make available for reprints.
4. Affiliate / Ad-Based Websites – If you have a knack for web design, put it to use. Create an affiliate web site selling CDs or music industry books, or create your own informational site with a blog or articles, and earn some passive revenue by including advertising (such as Google Adsense ads). To do this successfully, target a general area of music that you know a lot about. Simply placing ads on your band’s site won’t do the trick. You need to talk about more than just yourself if you want people to care.
5. Create Online Courses – More likely than not, there’s someone out there who wishes they had your musical skill. So why not create some online courses or tutorials, and sell them online? You can do this through password-protected web sites, podcasts, or video. Teach someone how to start playing the bass or guitar. Show them how they can improve their vocal range. Just pick something that you’re an expert at, and teach it to someone who isn’t.
If you put the work in early on to build great products or services, you’ll increase your chances of earning the extra passive revenue to eventually let you quit your day job and focus on your music full-time.
Now You’re In Business – The Business of Your Band That Is!
January 5, 2008
So, why is this important?
For starters, if your band is legally a business, you need to take the appropriate steps to stay out of trouble. (Read: When you make it big, do you really want the “tax man” knocking down your door?) And then there are the benefits – tax deductions, security if problems arise between members of the band, and possibly the most important issue of name (not to mention other trademark and copyright) protections.
Did you know that most indie bands don’t even have a unique name? It’s quite possible that you might not either. Sometimes you can come across 5 or 6 bands throughout the country using the same name. Is it a problem if they’re all relatively unknown and only play in their respective areas? Probably not. But if one of those bands has the potential to make it big … well, let’s look at a possible scenario:
You can register your name as a trademark even if you don’t take care of the other necessities of being in business. But there are other important steps. First of all, if you’re a solo artist, you can form a sole proprietorship, the simplest business form. But, if you’re a band, you’ll need to form a partnership or other type of business model. Although there are numerous things you may need to do, only the most basic are going to be covered here. (There are lots of books you can read for more information on the topic.)
You may need to get a Federal EIN (employer identification number) if you hire employees, like a manager. It’s not a necessity for all business types, if you don’t have employees, but rules do vary. Even if you’re a solo artist, you may want to use an EIN for tax purposes rather than using your SSN. You’ll be responsible for paying your own taxes on money earned as a musician, since there won’t be an employer taking care of it for you with each paycheck. You’ll also need to pay estimated taxes on a quarterly basis, in addition to self-employment taxes under certain business forms.
In addition to an EIN, if your state charges sales tax, you will probably need to register for a sales tax ID number or sales and use license. What that means is that you’re required to charge sales tax on all merch, CDs and other products you might sell (you can always factor it into a nice round price ahead of time), and then you need to pay that sales tax to the state government, based on their tax calendar. What it also means is that you don’t have to pay sales tax when you purchase those products for re-sale. (i.e. you won’t pay sales tax when you buy the stickers you want to sell, but you’ll charge sales tax in your price. Same goes for CD printing and duplication, and other taxable merchandise, depending on your area.)
You should put together a Band Partnership Agreement. If you do nothing else, you probably won’t regret this one. Let’s say your band has a disagreement amongst yourselves, and it’s decided that someone needs to go. Let’s also say that the person leaving the group was responsible for writing the majority of your best songs. If you don’t have a band partnership agreement, you could be in trouble. The agreement can cover things like how many members have to agree to have someone removed, what happens to the property and band name if someone leaves, etc.
Look into samples and other resources about business and marketing plans. They are both excellent guides for growing your band. It’s something you can refer back to on a regular basis, and it’s an important piece of the puzzle when you’re figuring out exactly how much work being a “professional” band can take. On top of that, if the IRS tries to declare that you’re not a business, but a hobby, a well researched and carefully calculated business plan can be your best tool. While most businesses can be ruled a hobby if they show losses for 5 straight years, that ruling can be reversed in an appeal if your plan demonstrates that you can realistically expect to turn a profit in the future by following that plan. (Note: you should always consult an accountant about complicated tax issues. State tax laws can vary, so be sure to find out the rules in your own locality.)
Lots to think about, right? Maybe a little bit scary? It’s definitely a lot of work. So why do it?
Tax deductions. You probably spend a lot of money on equipment, recording and other aspects of making your music available to your fans. When you run your band as a business, with the express purpose of turning a profit, you can deduct a lot of these expenses from the taxes that you owe, and a business loss can sometimes be used to offset other income. (Please note: if you consistently show a loss every year, the IRS can rule that you’re not in business, but instead engaging in a hobby. Hobbies do have their own tax advantages, but you’ll be required to pay back money from deductions you’ve taken in the past. Be careful, and be sure that you really qualify to file as a business. You should consult an attorney or an accountant for advice, and we recommend reading Stephen Fishman’s “Deduct It!: Lower Your Small Business Taxes” for more information.)
Protection. By hiring the right professionals, or doing the legwork thoroughly yourself, you can make sure you protect your band’s name and work. The last thing any artist needs is a legal battle over rights when they’re finally making it on their own.
Professionalism. Filing the necessary paperwork, researching and preparing a comprehensive business plan, and dealing with the legalities early on can make you more attractive to labels and other professionals, because it’s arguably the best way you can show your band’s commitment and ability to handle all of the work involved in making it in the music industry.
These are all basics in running a small business. Each issue is much more complex, and you’re urged to do further research to find out what is most appropriate in your individual case. There’s a lot to running a business, and there’s a lot at stake if you don’t handle things correctly. I recommend reading Richard Stim’s Music Law: How To Run Your Band’s Business
You should not take this article as legal or accounting advice, as rules vary by state and local municipalities, so you should contact the appropriate professionals with specific questions or for more information.
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