Fundamentals of Music Business: Elements of a Business Plan

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“The annoying business side of music is where the creative person often becomes an ostrich with his head in the sand.” While the visual of Patrick Hess’ comment may cause a chuckle, it is indeed a reality that many creatives are not versed in the business aspects of their crafts. This is certainly a leading factor behind why several extremely talented music creatives are never able to obtain noteworthy financial success in their careers. The indisputable fact is that music and business go hand-in-in.

As Patrick Hess sees it—and we certainly agree!—the balancing act of creative versus business should find its roots at the starter’s gate of a career in the music industry. “It’s something every wannabe artist needs to quickly understand before getting their heart and emotions wrapped up in the what-ifs the music industry sells every naively aspiring star,” says Patrick. It is imperative, he adds, that music creatives look at their potential careers through the eyes of an entrepreneur starting a business. After all, he states; “being savvy in the business is the only way a music professional can truly survive in the music industry.”

Gaining a better understanding of the Music Business is the key purpose of the seminar series recently launched by the Association of Caribbean Copyright Societies (ACCS) and the Caribbean Development Bank; piloted in Barbados through COSCAP. A key segment of the June 29th to July 1st hosting of the seminar focused on the development of a good music business plan. This was presented by the Barbados Investment & Development Corporation (BIDC).

Essentially a business plan is a written document which outlines a business’ goals and provides a detailed description of how the business will achieve those goals.

But why is a business plan important, anyway? Why should you as a music creatives even draft one?

According to BIDC, business plans are important because:

  • “Like a map it helps you to think through and plan the most effective route to get where you need to go by setting objectives and targets. It also allows you to monitor your performance, manage cash flow and keep the business on track once it has started.”
  • “It can convince potential lenders, investors and future employees that the business is worthy of their support. (Your business plan will help both you and your banker better understand your business. A knowledgeable and informed investor can be an invaluable asset to your business.)”
  • “It can show potential clients that your business is fully capable of supplying their needs, which is essential when bidding for contracts”

BIDC offers that a well drafted business plan will seek to answer the following common questions which are crucial to the success of any business:

  • What problem is your business solving and how?
  • Who is your ideal customer and how will they become aware of your business?
  • What tools or resources would your business need to operate effectively?
  • How much money would your business need to spend and make in order to be successful?

Meanwhile the following “Business Plan Template for Music Sector” was provided at the June 29th to July 1st Seminar in Barbados:

Company Summary – This section should discuss how your company is formed, is it a Sole Proprietorship? Partnership? The idea is to outline who is involved in your business and to identify how each of you will share in the profits.
Products and Services– Briefly describe what you plan to sell. In this climate certain things are close to impossible, but I’m sure your market research has taught you that. Typical products and services should include live streams, digital downloads, merchandise, live shows, song licensing and physical products (i.e. CD’s; etc.).
Marketing Analysis– As painful as it may seem, it will serve you well to put down on paper, the troubled state of the music industry. Be as frank as possible. Explain that the only way to survive this music biz recession is to come up with something new and improved. Your ultimate challenge is to turn this negative into a positive. Hopefully your band or music business is just the one to prove it.
Membership in A Collective Rights Society– Have you protected your intellectual property? Research shows that music businesses that benefit from the services of their local collective management organizations tend to do better in earning from those IP assets. Registration with your local collective management organization is an important part of operating your music business
Management Summary– This section is a perfect place to delegate responsibility to everyone on your team (do you have a team?). You may or may not have a personal or business manager and that is OK. Instead you should focus on your business relationships with any fellow musicians, band members, web designer, publicist and other parts of your team. It’s important to map out who does what before you launch your plan. It will be much easier to know who is responsible for what beforehand.
Financial Plan– Here is where you put your money where your music is.  Once you determine what you want to sell, you need to allocate money to marketing these products. You will also need to flesh out ways in which you will obtain this money. Will you put in money from your 9-5; request from family, friends or close relatives; or will you get a loan?

Additionally, crowdfunding—a financial funding avenue which has been gaining a lot of steam in today’s music industry—is another financing avenue to consider.

In our next blog post, we delve deeper into the elements of a Business Plan and what you should consider as you draft one. Click HERE for more on how to draft a music business plan.

References:

Hess, P. (2014). “Balancing Creativity Against Business in the Music Industry” Retrieved from: http://www.huffingtonpost.com/patrick-hess/the-struggle-of-balancing_b_5607865.html?mode=jqm

Barbados Investment & Development Corporation (BIDC) (n.d..) “Business Plan Workbook for Students.”

 

—Post Written by Christine “Chrycee” Charlemagne

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