Fundamentals of Music Business: Drafting a Music Business Plan

Ah! The ever so important Business Plan! In our last post we delved into the importance of a Business Plan for Music Professionals, and provided you with a template—compliments the recently held Music Business Seminar in Barbados by ACCS, COSCAP and CDB—which you can utilize as you create your very own business plan.

Without doubt a business plan is vital to your music success and proves an essential tool which will assist you propel your music career and business further. It’ll come in super handy when you approach lenders and investors in your attempts to seek to build the capital needed for various business ventures. It’ll help you outline to any employees you may hire, the vision and goal of the company, and what’s needed from them to ensure your business continues to thrive.

But more so, a business plan is for you, says Barbados Investment & Development Corporation (BIDC), noting that; “Going through the process of planning, researching and laying out all aspects of the business gives you a much clearer idea of the business itself and your role and responsibility as owner. It also allows you to determine if the business in its current form can work and if it will be profitable in the short or long run.”

Yes creating a business allows you to gain necessary insight, economically, practically and otherwise, which will allow you to make carefully selected and informed decisions. After all without an understanding of the music business and the market which you plan on targeting, you’ll pretty much be making decisions and spending your limited resources (financial and otherwise) BLINDLY!—with hit or miss results. Can you really afford that? Or would it not be better to take the time out to create a business plan for your music career; which you can of course tailor as the months and years roll on, to ensure continued success?

So let’s jump right in! First click HERE to review the previously provided template which outlines what you should include in your business plan.

Now while all of these areas area, dependent on your overall goal, you should more on certain aspects. As a guide, please see below excerpt from BIDC’s Business Plan workbook.

What to include in your business plan.jpg

Let us now zone in, in more detail, on a few of the areas which should be included in your business plan.

The Executive Summary

BIDC explains that the executive summary of your business plan should essentially be a “bite-sized version” of your entire business plan, which provides the reader with an overview of who you are, what you plan on doing, how you plan on doing it and why.

If you’re looking to raise money, BIDC says your executive summary should indicate how much money you’re seeking.

The executive summary should be short no longer than a page, and should seek to intrigue your reader. Remember that in most cases investors first review the summary to determine whether it’s worth reading the rest of the plan. So you want to have an engaging, informative and appealing summary.

According to BIDC, your summary should cover key points and issues relating to:

  • The business and its product
  • B) The market factors and opportunities
  • C) The financial needs and projections
  • D) Any special research results or technology considerations associated with the venture.

It’s important to note that although you will place your executive summary at the start of the business plan, considering that it is meant to provide an overview of the entire plan, you’ll want to write it last, using information from the other areas of your plan.

Company Summary/Business Data

As noted in our previous post, the company summary or business data section of your plan will discuss how your company was formed—for example whether it is a sole proprietorship or a partnership—as well as provide details of profit sharing.

Of uttermost importance in this section will be inclusion of the business’ goals and objectives.

BIDC explains that your goals will state what you plan to achieve, while your objectives will outline how you plan to achieve them. Your company objectives should therefore be SMART–specific, measurable, achievable, realistic and time bound, advises BIDC. This will help you to determine if they are working.

BIDC recommends breaking your objectives down into short term objectives which will be achieved within 1-3 years; medium term objectives, achievable within 3-5 years; and longer term goals, beyond the next five years.

Market /Industry Analysis

Conducting an Industry/Market Analysis for your business will definitely provide eye-opening for you.

BusinessDictionary.com explains that a market assessment is designed to provide you with an idea of the complexities of your industry. It involves reviewing the economic, political and market factors which will influence the way the industry develops.

When you conduct your music industry analysis BIDC notes that you should seek to gain an understanding of, and describe the business environment in which you operate.

For example you may want to consider factors such as; is the music market expanding? Are music professionals earning more? What are the new music business trends which are emerging?

Based on information from BIDC we believe you should consider factoring some of the following In your market analysis:

  • How is the music industry structured;
  • Is it currently easy to get into and succeed in the music industry
  • Who is the market leader?
  • What makes him/her/them the market leader?

Additionally BIDC says your market analysis should include a competitor study. Here you will want to identify your three primary competitors and state what makes you stand out from your competitors.

We also came across an extremely helpful article from investopedia.com which gives more insight into conducting and writing the industry analysis. As per Investopedia.com, in your industry analysis you should include, an industry overview; profit opportunities; technology; legal, economic and political factors of this industry; logistics and opportunities. Access the investopedia.com article HERE

Financial Plan

In this section BIDC says you should clearly describe the financial requirements of your business and yout plan to use any acquired funds. The following should be detailed:

  • How much money to you need to start your business and achieve your goals o
  • How much money will you need to borrow from external sources? (Friends and family, credit union or bank)
  • If you need a loan do you own any assets that could be used as collateral? (Such as property, vehicles or equipment)
  • How soon would the loan be needed?
  • How long would it take for your business to repay the loan?

Additionally BIDC notes that your financial plan should include a forecast which shows where your business intends to be financially in the near future.

“It should demonstrate the potential viability of your business. These projections should be based on your market research findings and are crucial in helping you to decide how much funding your business really needs. If you’re looking to secure a loan, projections also help lending agencies to determine whether to invest in your business or not.” says BIDC.

Your Income Statement, Cash Flow and Balance Sheet will assist in providing a financial forecast.

So it now time to get started on your music plan! Click HERE to download the full Business Plan Workbook from the Barbados Investment & Development Corporation (BIDC); a very detailed guide which will assist you in putting together an well-written, thorough business plan.

References:

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

http://www.businessdictionary.com/definition/industry-analysis.html

http://www.investopedia.com/university/business-plan/business-plan4.asp#ixzz4FtvRIMrQ

—Post Written by Christine “Chrycee” Charlemagne

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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