Since it is so difficult to get a contract with a big label and
the competition for jobs at the big labels is brutal, you may be
better off starting your own record label. However, before you
even begin your career in the music business, you need to answer
several questions.
It doesn't matter if you are starting a band, are wanting to
start your own label or even just setting up a recording studio.
Define Your Business Goals
You need to sit down and write a formal business plan. I know
that sounds like total dullsville, but, believe me, you need to
do it. Without careful planning you will only be wasting both
your time and money. While the music business is glamorous, it is
also a cut-throat business and the more experienced players will
eat you alive and leave you bankrupt if you don't take the time
to properly set up and plan your business.
You need to determine what resources you already have and what
resources you are going to need to get the business off the
ground. List items such as: the people involved, equipment owned,
experience in music, experience in business, available working
capitol, a place to work from (it can be your basement or garage,
but you will need somewhere to work.), business contacts, music
gigs, available working capitol, etc.
No matter how musically talented you are, you cannot start your
own record label without working capital and some basic business
knowledge. If you don't have it, find a partner who does if you
want to be successful, or take a look at the financing guide
available along with the How to Start a Record Label course over
at www.TheUltimateRecordLabel.com
Products and Services
What are you going to produce and sell? Please don't answer
music. You need a more concrete plan then that to be successful.
Will you be making CDs of your live performances? Or will you be
writing and recording your own original compositions?
In either case, be specific. You will need enough material to
record an entire CD before you can sell it. Don't forget that
if you don't own the copyright to the lyrics and music, you
will need to get permission to use them or risk being sued for
copyright infringement. Trust me, if you are successful and using
someone else's copyrighted material, you will get sued. So, draw
up a royalty contract with the copyright owner before you record
the material.
Competition
I don't necessarily mean who is recording the same kind of
material. I assume you already know that. I mean who are the
other independent labels. These are some of the things you need
to find out:
* What is the going royalty fee?
* How much can you charge to rent out your studio? Or what
should you be willing to pay to rent someone else's studio?
* Who are the best people to distribute your CDs? What will it
cost you? Can you negotiate fees?
* What is your Unique Selling Proposition? In other words what
make you stand out from the pack? How are you better than all
of the others like you?
* Have you created a "brand" yet? By "brand" I mean a something
that makes you unique and different. KISS and Madonna certainly
have a unique brand. You need to develop your own "Brand"
You'll learn how to do this and everything else needed to start
a record label by visiting www.TheUltimateRecordLabel.com
Promotion
Who are you going to sell your music to... who is your target
segment? Teens in general, rap fans, jazz, country, hip hop fans,
etc? How do you plan to reach your target audience? Will you send
letters to the DJs, advertise in the local media, seek free
publicity by doing free concerts, make sales calls, use an
internet website, etc?
In other words, if you aren't familiar with marketing, you better
get familiar or find someone who already is to work with you.
In the competitive music business, you must shamelessly promote
yourself every chance you get. The public has a very short memory
for artists and unless you keep your name out there in front of
them, the will completely forget about you. Think about all of
the "one hit wonders".
Establish Your Business
Decide of a legal structure. Your choices are sole
proprietorship, partnership and corporation. Because of all of
the different skills needed to operate your independent record
label, partnerships are the most common form. Unless you already
have a lot of money or property, a sole proprietorship or
partnership should be sufficient. You can always upgrade to
a corporation when you have sufficient assets to need the
protection incorporating provides.
If you choose a partnership, draw up a partnership agreement that
lists in detail what each partner brought to the company, what
their duties and responsibilities are and how they will share
profits or losses. A partnership agreement is extremely important
to avoid future problems.
Next, go register the business with the proper legal
jurisdiction. Once you are registered, you can rent space, lease
equipment, open accounts with vendors and do all of the other
things necessary to operate a business. Join the professional
organizations both in and outside the music area. It never hurts
any business to join their local chamber of commerce. In fact
that can be an excellent source of referrals.
Working Capital
Now that you are a registered business, you need to start a
business checking account and get a credit or debit card so you
have a way to pay your business bills. You will also need to
set up books to record income and expenses to use for later tax
reporting. If you aren't familiar with the tax requirements for
small businesses go to your local small business development
center. Most states have them and they provide either free or
low cost assistance, advice or classes so you can learn what is
required by law. Alternately, you can hire an accountant to do
your bookkeeping for you.
I'm sure you heard the horror stories of a performer robbed blind
by their accountant or business manager. So, even if you can
afford to hire a business manager or an account, learn about
keeping books and the legal requirements so the people you hire
can't cheat you quite so easily.
Insurance
You will need some type of business insurance. Consult with the
small business development center to see what they recommend
you should get. You can ask an insurance professional but,
unfortunately, they will tell you that you need everything and
that really isn't true when you are first getting started in
business. When you become successful, then you will need all of
that.
Conclusion
Careful planning will get your independent record label off to a
good start. If you take all of the necessary legal precautions
you will save yourself a lot of trouble in the future.
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