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, you’re in a band, or maybe you’re a solo artist. You spend a lot of time writing (hopefully) quality music, finding gigs, playing shows, networking with fans and other artists, working in the studio, and promoting the heck out of it all. You spend a lot of money on recording, printing, distribution, equipment, travel … seeing a pattern here? You have a lot invested in your work. In fact, you’ve got just as much invested in your work as do a good number of small business entrepreneurs. “An entrepreneur?” you may ask. “That’s not me. I’m just in a band.” Wrong!Many independent musicians never consider the fact that they may be in business. If one of your primary goals as a musician is making a profit, then more often than not, you’re in business, plain and simple.

    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’ve got three bands throughout the country, all calling themselves Band X – #1 is from NYC, #2 is from LA, and #3 is from Houston. (Let’s assume these are the only three with that name to simplify things.)
  • Band #1 has been together for 3 years, and only plays venues in NYC and the surrounding area. They took the initiative to register a federal trademark for the name when the band started. Band #2 has been together for 4 years, and has built a strong name for themselves on the indie circuit. They’re being scouting by several labels, have built themselves a national fan base, and are in NYC to play a major show. Band #3 has been together for 5 years, doesn’t have much hype built about them (in fact, they suck), and they self-financed a small tour, including a stop in NYC.
  • Let’s assume all three bands are playing shows in NYC the same night. They all come across promotional material for each others’ shows. It leads to a legal battle over the name. Who do you think has the best chance of winning the rights to the name? (The band who had the name the longest? The band that built a reputation for themselves with that name? or … The band that paid to register the name as a trademark?)
  • You may be surprised, but the answer is Band #3. The band that had the name first is the band that would generally win, if a lawsuit arose. (As long as they could adequately prove that they had the name first, of course.) Having your reputation based on that name pretty much means squat in a trademark dispute. And registering a trademark doesn’t mean it’s really yours under all circumstances.Why doesn’t registering your name as a trademark guarantee your exclusive use? Quite simply because it’s not the government’s job to make sure you’re the first one using the name. And whoever uses it first owns what’s referred to as a common law trademark. Common law trademarks don’t have to be registered or published anywhere specific. It’s your job to find out if there’s a problem before you register. And if you lose the dispute, do you think you’ll get your registration fees back? Ha! Not a chance sucker. That’s why you should never try to register a trademark without first having an attorney do a thorough nationwide search for you.Are trademarks your only naming concern? Nope! Depending on what state you live in, you’ll need to also register your name with your state or local government, with fictitious name or DBA (doing business as) registration requirements.

    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 for more information. It’s a great resource all-around, covering these issues and many more. I, nor AudioXposure.com, have any affiliation with the book, author, or publisher. Yet, I have to say it’s the best band business resource I’ve come across, and no band should be without it. You can purchase a copy through the link on this page, via our affiliate Amazon.com, or simply pick up a copy at your local library.

    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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