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Finding Funding For Your Music Business

January 31, 2012 By Leave a Comment
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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. 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.
***

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: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Setting Up Your Record Label

August 1, 2011 By 5 Comments
Bob Celestin

Here’s the scenario: You’re an artist who feels he (or she) has some hot shit the industry and the world needs to hear. Problem is, you’ve been trying for years to get a record deal but these wack-ass A&R’s are showing you no love! Then it hits you—“I’m going to start my own record label and put my own shit out!” Congratulations! You’re about to become an entrepreneur and follow in the footsteps of Jay-Z, Cash Money Millionaires, and 50 Cent.

So what’s the first step?

Well, since this is the “music” “business,” you need to have two (2) things: (1) Hot Music! and (2) your “business” needs to be right!

Having hot music should speak for itself. It’s either hot or it’s not. Notice that the above-mentioned examples of music entrepreneurs all happen to be rappers. There is a reason for that. Hip hop is a music genre (along with dance/club music) that doesn’t necessarily need mainstream radio to create a “buzz” and sell records. The “street” (i.e., DJs, mixtapes, and the Internet) can help drive sales of your record without mainstream radio exposure. R&B artists have a bit more difficulty because radio airplay is needed to sell units, and hiring independent radio promoters to get an R&B record on the radio can be very costly.

Getting your business right is the next most important thing to consider. There are four (4) types of business entities that you can use to get your record label up and running. You can operate your record label as either a: 1) Sole Proprietorship, 2) Partnership, 3) Corporation, or 4) Limited Liability Company.

With a Sole Proprietorship, the business is run by one person who is also the owner. It is easy to create by going to the local county courthouse and filling out some simple forms such as a “DBA” (“doing business as”) with the fictitous name of your company. The big disadvantage with a Sole Proprietorship is that if you get sued and you lose, the judgment creditor can recover against both your business and personal assets (there goes that “Jacob” watch!), and that’s not a good look.

A Partnership is an association of two or more people conducting business on a continual basis for profit. There’s usually a written partnership agreement that outlines the duties and responsibilities of each partner. Big Disadvantage: each person in the Partnership is responsible and liable for the business obligations of the Partnership incurred by any of the partners.

So if your partner signs a contract to pay a record producer to produce a song and doesn’t, all of the partners are responsible for the payment. If the Partnership fails to pay the producer, he can sue all the partners and if he wins, the personal assets of the partners can be taken—but only after all the partnership assets, if any, have been taken (there goes the Maybach!). Again, not a good look, especially if your partners are irresponsible.

A Corporation is a better look. A Corporation is a separate legal entity with a life apart from the people who own and operate it. Using the earlier example, if a Corporation enters into an agreement to pay a record producer and doesn’t, the producer can sue the Corporation and if the producer wins, only the assets of the Corporation can be taken but not the personal assets of the individual owners of the Corporation (you get to keep your house!). There are also significant tax advantages to creating a Corporation.

You can incorporate a company by filing an “Article of Incorporation” with the Secretary of State Department in the state where you’ll be doing business (check the Internet for companies that can assist you) or you can retain the services of an attorney to incorporate the company for you.

Finally, a Limited Liability Company (“LLC”) is a business entity that has the elements of a Corporation and a Partnership. In an LLC, the owners (members) are parties to a contract known as the “Operating Agreement”, which outlines the rights, duties, and rules of the LLC. As with a Corporation, LLCs provide limited liability and protection of the member’s personal assets while allowing the members to be treated as a partnership for ownership and tax purposes.

I suggest that you set up either a Corporation or an LLC if you are serious about setting up a record label—and get the advice of an attorney or accountant to help you set one up properly.

For more information contact:

Robert A. Celestin, Esq.

c/o Law Offices of Robert A. Celestin

250 West 57th Street, Suite 2331

New York, New York 10107

(212) 262-1103

racinfo@nyct.net

www.raclawfirm.com

 

Filed Under: Artist Tips, Basics, Keys to Success, Paperwork/Contracts Tagged With: , , , , , , , , , , , ,

So You Got Your Major Feature…Now What?

July 24, 2010 By 2 Comments
gucci-mane

gucci-mane

In Urban music most new artists want that “Hot” feature on their record.  That is all well and fine, but let’s start with the basics of getting the single ready for the feature.  If you have taken the time to produce and write a hit song on your own, then a feature should only add to the single and not make the single.  Have you taken the time to edit and mix the record to the best of your abilities?  Do you have the pro-tool files of the session or track? (did you 2 track the song and think you can just do it that way?…that’s another column) If you do, then you have the right foundation and building blocks to create a great song with a great feature.  Always record with a tracked out beat verses an audio file. Trust me you will save time and headaches later.

I know that Lil Wayne, Gucci and OJ have done so many features and mixtape features that there was and is an anticipation of their records…not the indie artist, nor yours.  So think about that when you choose a feature. Yes you want someone who it hot, but you really want someone who will compliment your style, swag and song.  Remember they are already stars, you are the one that must stand out.  Make sure you shine positive and not negative.  But, if you are determined to have a feature, you need to protect yourself, money and future career.

Example:

So artist XYZ has laid his/her hot verse on your single.  You paid the money and they are on their way out of town. You think you are good because you have the session files and a phone number.  Hmmm … not at all.  What you have is noise recorded in a studio until you have the rights to put the song out.  Just because you paid for the verse does not mean you have the rights to it.  Most major artists have granted rights to all master recordings of them to whatever label holds the contract on them.  If you did not get paperwork in order prior to this then you have to get it taken care of before you can launch the single or album with artist XYZ on it.

What you will need:

To start with you will need a side artist agreement.  This is an agreement between you ( artist or company) and the featuring artist.  In this agreement you need to state what you expect from the artist regarding the song, rights, money, splits, marketing and promotion rights, and label clearances.  If you plan on shooting a video and want the artist in the video, you need to state that as well.

Next you want to make sure you do a song split sheet.  This should be stated in the agreement with the artists regarding how much of the publishing/ownership of the song they will want.  You will need this so that when you register the song from copyright purpose as well as with your PRO (Performance Rights Organization) you can have people paid properly.

Finally you will need a Record Company Wavier of Liability.  This is a document that the label will sign that gives you the final rights based on the agreement that the artist agreed to in the Side artist agreement.  This is a document even more important than the Side Artist.  This allows you to market, promote and earn revenues on the song you spent so much on.  If this document is not in place, you run the risk of the label sending you a Cease and Desist on your record.  That could mean all the money and work you put into the song would be down the drain.  Protect your assets.  Get your administration in order.

The person you should be focused on is the manager or the artist.  They are paid money from the artist to make sure all business is taken care of.  Enjoy your time with the artist, but make a good connection with the manager or assistant that is at the session with the artist. They are who you will be dealing with to finalize your paperwork and help get the label to finish what needs to be done.

Remember:   Black and White = Green!!!

Janie Jennings

jamies_pic-250x300

Read more from Janie at www.industryworks.org

Filed Under: Artist Tips, Ask An Expert, Documents, Featured, IndustryWorks, Keys to Success, Licensing, Monetize Music, Paperwork/Contracts, Publishing Tagged With: , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,
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