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Finding Funding For Your Music Business

January 31, 2012 by Leave a Comment

MONETIZE YOUR MOVEMENT: REVENUE STREAMS, FINANCE & ACCOUNTING

Written By Jesse Atkinson, CEO of Urban Threshold Inc. and Founder of The A&R Power Summitwww.TheARPowerSummit.com and The Underground Music Awards www.UndergroundMusicAwards.com

THE KEY IS TO TRANSFORM YOUR ARTISTIC VALUE INTO MARKET VALUE AND GENERATE RETURNS.

  • If you’re running an indie record label or production company and you can’t account for your income, expenses, assets and liabilities, then you’re playing yourself.
  • What is the projected revenue for your indie label or production company this year? This is what you should be asking yourself. Then formulate a plan to get there.
    A game plan or strategic plan can not be implemented without an adequate financial budget behind it.
  • If you can’t find a way to convert your huge buzz into a revenue stream, then you’re just a well known indie artist with diminished returns.
  • Monetize your thoughts and ideas. Convert your concepts into cash flow.
  • The key is to transform your artistic value into market value and generate returns.
  • It is very important that every artist and producer know and learn the multiple revenue streams in the music business. Some of the Music Biz Revenue Streams include: CD Sales, Digital Download Sales, Merchandising, Tour Income, Licensing Revenue, Publishing income, Ringtone Revenue, Endorsement Deals and Sponsorship Revenue.
  • You can finance your indie label or production company in a myriad of ways. Sources of business funding include: Borrowing from your 401K, Getting investments from angel investors like friends and family, taking out a second mortgage on your house, or using your tax refund. Additionally, try taking out a small business loan or personal loan at your bank. Learn from this site how to do it correctly. You can also have fund raisers, raffles or benefit concerts to finance a venture or project.
  • Look into getting a line of credit for your indie label or production company. Use the leverage of your assets to finance expansion and growth.
  • Equally important, have an executive summary or a full business plan ready to present to prospective investors. Gain their trust and demonstrate to them what their potential R.O.I (Return On investment) could be.
  • Your Business plan should show how you will do the following: 1) How You will Grow the business 2) How You will Achieve Profitability 3) How You will Repay any loans and 4) How You will Reward any investors
  • Most investors will want a very specific project to finance like an album, studio construction or a tour.
  • Also please Note that Most investors don’t like making out a check to an individual. They prefer to make a check payable to a company.
  • Set your budget and sales quota for the month. Tap into other revenue streams such as merchandising, Shows, ringtones , endorsements, licensing etc
  • A label owner or production company owner should know the valuation of his/her company. What is its value and net worth..etc
  • Every album release should have a Marketing strategy, Promotion implementation, Breakeven Analysis, ROI Assessment, weekly & monthly sales projections. Keep accurate book keeping and make sure you pay the taxes on earnings generated from your music endeavors.
  • Assets – Liabilities = Equity . That’s basic accounting and most upcoming entertainment companies don’t focus on basic accounting.
  • Get Quickbooks for basic accounting for your company. You can record new clients, sales info, expenses and Keep track of money coming in and going out.
***

Finding Funding For Your Music Business

Urban Threshold Enterprises Inc., The founders of The A&R Power Summitwww.TheARPowerSummit.com & The Underground Music Awardswww.UndergroundMusicAwards.com

Whether you’re releasing a single album or starting an actual music related business, more than likely you will find yourself looking for funding or capital to get your business venture started.

The obvious need is for recording and production costs, but as we just discussed, there is also a large cost for marketing and promotion which includes radio promotion, website development and maintenance, publicity, advertising, legal, small staff, promotional events, videos, shipping and the list goes on and on.

Some of the traditional means used to finance an endeavor have ranged from using personal credit cards to securing a bank loan to borrowing money from relatives.

In recent years new companies are springing up to help, by taking an old concept of fan funding and making it a whole lot easier

In this post, we will take a look at a couple of alternative funding sources available to get your music project or business going.
***

Fund Your Music Project Using KickStarter.com

Kickstarter targets those desiring to fund a creative project. Instead of investments or lending, the funding opportunity is donations based. This allows for 100% ownership and complete control over the projects by the creators. In return for their donations, donors receive perks or rewards such as products and experiences.

Kickstarter is rather open as to requirements and qualifications for obtaining financing. Funds can only be raised for creative projects and creators should offer rewards to their donors. The application process consists of a few quick questions. Kickstarter screens the applicants to make sure there are no violations of their guidelines (creative projects only and no financial incentives).

Kickstarter operates on an all or nothing funding model. This means that if the target funding amount is not met in a specific amount of time, Kickstarter cancels the funding campaign and no money changes hands. This protects the creators and the donors. Creators are not expected to complete a project with insufficient funds and donations are not given to projects that creators can’t complete.

The Kickstarter website provides a platform that allows potential donors to discover projects in need of funds. They also maintain a blog with information to assist creators and their projects.

KICKSTARTER
***

Fund Your Music Project Using Profoundercom

ProFounder targets those who are business owners. The financing opportunity is an investment model based on raising money for the business from those in the community. This is not a loan from investors, and business owners transfer no equity (ownership) to the investors. They employ a revenue sharing model where a percentage of revenues are paid to the investors.

Requirements and qualifications to obtain financing include filling out an online application and paying a $100 fee once ready to start raising funds. Business owners can only contact and present the investment opportunity to those people with whom they already have substantial pre-existing relationship with. As with Kickstarter, if the funding target is not met, ProFouner does not transfer the funds for use.

The ProFounder website includes resources to help with preparing for an investment, creating a pitch, and creating the offer terms. A support forum and blog are both available to offer assistance.

PROFOUNDER

Advantages and Disadvantages

The advantage to using the two before mentioned alternative financing services, known as crowdfunding, is that they allow a music creator or business owner to raise needed funds while remaining in control and keeping ownership of their project or business. The disadvantage to using those services is that if the person seeking funds does not have enough connections or is not able to connect with enough potential donors, funding is not possible.
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Why You REALLY Need a Business Plan These Days

As the name implies, a business plan is a plan for your business. If your business idea is one that requires some capital (money) to launch or grow, then any investor or bank will request to see your business plan. The purpose of any good business plan, therefore, is to communicate the capabilities and talents of the principals (that’s you and other owner/partners).

However, there’s a more important reason for you to write a business plan. Even if you are not seeking investors or a loan, the process of thinking through and composing your business plan helps you to declare your intention to yourself and the universe, focus on and commit to a specific outcome, verbalize and write down your goals, harness your innate creativity, activate the power of your subconscious mind, mobilize your Higher Self, and change your vibrational state, and the frequency of your thoughts to one of hope and the possibility of a desired future, thereby bringing to you, by the Law of Attraction, the people, events and circumstances which will work in concert on seen and unseen levels of reality to manifest your dream.

For that reason, even if you are already in business and making money, writing a business plan can help you. In addition, since market conditions are constantly changing, writing a plan (especially the marketing and financials sections) can help you get a firmer handle on what you are and can and should be doing to grow your business, where your money is actually going every month, and how to monitor and reduce expenses and operating costs.

Additionally, a good business informs sales personnel, suppliers, and others about your operations and goals and, in-effect serves as an operations manual for your employees.

A business plan is not a one-time-only endeavor. As it serves as guide, as well as gauge, many entrepreneurs tweak their business plans on a monthly, even weekly basis.

Written By Walt Goodridge

CLICK HERE TO SEE AN EXAMPLE OF AN INDEPENDENT LABEL BUSINESS PLAN

Business Plan Table of Contents

I. Executive Summary

II. Company Description

This section typically includes

A. Legal name & structure of business
B. Mission/objectives/vision
C. Management team
D. Location and Geography
E. Company development stage
F. Trademark, Copyrights, Patent,
Domain name & other legal holdings
G. Products and Services offered
H. Specialty business information
I. Financial status of company
J. Milestones achieved thus far

III. Industry Analysis and Trends

This section typically includes

A. Size and growth of industry
B. Maturity of industry
C. Impact of economic factors
D. Seasonal factors
E. Technological factors
F. Regulatory factors
G. Supply and distribution
H. Financial considerations
I. Anticipated changes and trends in industry

IV. Target Market

This section typically includes

A. Demographics/Geographics
B. Lifestyle and Psychographics
C. Purchasing patterns
D. Buying sensitivities
E. Size and trends of market

V. Competition

This section typically includes

A. Competitive Position
B. Market Share
C. Barriers to entry
D. Future competitors

VI. Strategic Position and Risk Assessment

This section typically includes

A. Company strengths
B. Market and Industry Opportunities
C. Risk Assessment
D. Definition of Strategic Position
E The Wow Factor

VII. Marketing Plan and Sales Strategy

This section typically includes

A. Company’s Message
B. Marketing Vehicles
C. Strategic Partnerships/Alliances
D. Other Marketing Tactics
E. Sales Force and Structure
F. Sales Assumptions

VIII. Operations

This section typically includes

A. Plant and Facilities
B. Manufacturing/Production Plan
C. Equipment & Technology
D. Variable Labor Requirements
E. Inventory Management
F. Supply and Distribution
G. Order Fulfillment and Customer Service
H. Research and Development
I. Capacity Utilization
J. Quality Control
K. Safety, Health & Environment
L. Shrinkage
M. Management Information Systems
N. Other Operational Concerns

IX. Technology Plan

This section typically includes

A. Technology Goals and Position
B. Internet Goals and Plans
C. Hardware Needs
D. Software needs
E. Telecommunication Needs
F. Technical Personell Needs

X. Management and Organization

This section typically includes

A. Principals and Key Employees
B. Board of Directors
C. Consultants and Specialists
D. Management and Personell to be added
E. Organization Chart
F. Management Style and Corporate Culture

XI. Community Involvement and Social Responsibility

This section typically includes

A. Social Responsibility Goals
B. Company Policies
C. Community Activities

XII. Development, Milestones and Exit Plan

This section typically includes

A. Long Term Company Goals
B. Growth Strategy
C. Milestones
D. Risk Evaluation
E. Exit Plan

XIII. Financials

This section typically includes

A. Income Statement
B. Cash Flow Statement
C. Balance Sheet
D. Break-even Analysis
E. Assumptions of this plan
F. How the Funds will be Used

XIV. Appendix
Filed Under: Artist Tips, Ask An Expert, Business Tools, Documents, Featured, Law, Monetize Music, Music Business, Paperwork/Contracts Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

7 GREAT SOLUTIONS FOR TURNING THE MUSIC INDUSTRY AROUND

April 10, 2011 by 2 Comments

The Music Industry is not dead! People just want to hear good music instead of the one dimensional form of music they’re being force fed..

Presently The American Real Estate industry is in dire straits. The Real estate industry has been flooded with an inferior product namely sub prime loans, which has resulted into a myriad of foreclosures and declining home values.

The phenomenon with in the Real Estate industry can be paralleled with the Music industry. The music industry is also in dire straits. This is especially the case for Rap music sales. Like the real estate industry, the music industry is being flooded with sub par product. Unfortunately for the music-buying public, the level of artistic quality inherent in the overall group of artists signed to major labels appears to be in a steep decline.

The major music companies have become publicly-owned mega-corporations that have abandoned artist development for bottom line, short-term financial results. The major labels are no longer in the business of producing music; Selling CDs is the primary mission. The hit driven majors have put quantity over quality. Nowadays, you don’t necessarily have to be a talented artist or musician to be successful. Hype or promotion can make a marginal artist appear to be talented. “The artist” has become a brand that is owned and operated by the label. The corporate labels have formulated a bland, one-dimensional form of Hip-hop to control and streamline their products and services.

The end result is consumer attrition or a declining consumer base. Music consumers have come to expect 1 or maybe 2 good songs on an album. Hence, they would rather illegally download a song or buy a bootleg of the album. In the past, rap music was something you heard and experienced – it was as much a social event as a purely musical one. Many Hip Hop fans are tired of the disposability of modern rap music . They want music with some substance and a product, which is free from the shackles of blind commercialism.The majority of today’s rap music lacks any social commentary.

(Moreover, If record sales continue to decline, the new paradigm will involve giving away music for free & revenue will be derived from sponsorships.)

In 2008, More than 115,000 albums were released, but only 110 sold more than 250,000 copies, a mere 1,500 topped 10,000 sales, and fewer than 6,000 cracked the 1,000 barrier -It increasingly appears that recordings will be more like advertisements for opportunities that actually do make money: live performances, merchandise, licensing to movies, commercials and video games, ring tones, etc.

What must be done to turn the music industry around:

1. Better Customer Service

In just about every other industry, the customer comes first. It is imperative that the major labels focus on customer service and give music consumers more options. In the case of urban music, there is a lot of quality Hip hop & R&B that is not being heard.The majors must let the consumers determine what is a “hit” song. This can be accomplished via contests, give aways, and marketing surveys. .The Music Industry is not dead! People just want to hear good music instead of the one dimensional form of music they’re being force fed..

2. Institute Creative Quality Control Measures as it relates to music releases.

There is a lost art of true musicianship and feeling for the music. The heart felt lyrics which were common place in the 50’s and 60’s are largely absent in today’s music market. Creative quality control is missing. There must be an emphasis on creating better crafted songs. The creative control must even extend to record stores and distributors. Record stores rarely listen to music placed there. They don’t care what the album sounds like; they only care if it sells.

3. Hire True Music Lovers:

Currently, the record labels are saturated with number crunchers who hide behind computers. The music industry is being ran by accountants and lawyers. The record labels must go back to hiring true music lovers and creative thinkers who are willing to take calculated risks.

4. Break the Radio Monopoly

The music industry is too radio driven. In the past radio stations were staffed with actual human DJs who played music they believed in. However, over the years the “true Dj’s” were replaced by personality jocks who push a button to start some Clear Channel playlist. The majors must abandon the payola system and work with grass roots organizations to bring diversity to the airwaves.

5. Embrace Technology

There is no doubt that the music industry must now embrace technology, because this is the only way that the existing industry leaders can stay competitive in the future. The rest of the world has changed and adapted – and the music industry must now step up and do the same.

6. Emphasize fair Dealing with Artists they Sign

The major record labels appear to be more interested in complete cost recoupment rather than fair dealing. And in an act of desperation, the majors have implemented 360 deals, whereby they will receive a cut of the artist’s merchandise, tours, CD sales, endorsements, etc.

The record company bankrolls the recording and handles the manufacturing, distribution, press, and promotion. The artist gets a royalty percentage after all those other costs are repaid. The label, in this scenario, owns the copyright to the recording.
Since artists share the costs of making the album, because these costs are recoupable from their royalties, they should also have joint ownership of the masters at some point.

7. Change Business Structure

The Record labels should move away from the CD format. The labels should move to an 80% digital distribution format, which will eliminate manufacturing costs. And as a result, they can pass the savings on to the consumers in terms of lower prices.

Obviously, the cost of these services, along with the record company’s overhead, accounts for a big part of CD prices. You, the buyer, are paying for all those trucks, those CD plants, those warehouses, and all that plastic. Theoretically, as many of these costs go away, they should no longer be charged to the consumer – or the artist.

The labels should only manufacture a limited number of special edition CD’s/DVD to be sold at concerts only. These special edition CD’s/DVD’s will contain bonus songs and behind the scenes footage of the artists. The price of the concert should include the cost of the CD/DVD, to ensure that each concert goer receives the special edition CD/DVD

Written By Jesse Atkinson. CEO of Urban Threshold Enterprises Inc. and Founder of The A&R Power Summit (www.TheARPowerSummit.com) and The Annual Underground Music Awards (www.UndergroundMusicAwards.com)

 

Filed Under: Artist Tips, Industry News Tagged With: , , , , , , , , , , , , ,