So much talk about the success, or lack of, making it in the new music business industry. But it really comes down to treating your musician career as a business.
Let’s look at some statistics. History shows that 80% of all small businesses started in the US fail in their first five years of operation and only 20% go on to succeed. Why? The number one reason for business failure is not a bad product or poor management but rather it is a company that has been under-capitalized. Some can emerge from this under-capitalized starting point to success but very few. It takes time to get a product to market, to have the cash flow cycle catch up and pass the expense side of your business. The only way to bridge that gap is with money, by either debt or equity financing.
The reason most bands fail is the same, being under-capitalized. While some have goals to be “signed” by a record label, all that really is, is the capitalization of that business. When I hear someone say, “I want to get signed” what I hear is “please help me with my finances so I can do this music career full time”.
If you want to make enough money to sustain yourself, you will probably need to perform anywhere from 200 to 270 shows per year the first couple of years. You can’t do that many shows in your hometown. But, you say I don’t have the money to travel. Of course not, your company is under-capitalized to be able to cover the costs of your start up business plan. And if you fail to get capital, your business will most likely also fail.
Successful business owners today don’t look to work part time at their business idea or passion and then go to work at another job to pay the bills. No, they have a business plan that is capitalized by equity and/or debt financing which enables them to work on and in their business full-time.
That is what every career minded musician should be looking to accomplish. The best way to bring this about is to form a corporation where you can have an investor purchase stock or at the least a legal entity where debt can be leveraged by current and future assets.
There are some additional problems that emerge here especially as outside investors or banks look at your company structure. As the book “The E Myth” explains; the myth being that just because you are good at doing something it does not necessarily mean that you would be as good at running that as an entrepreneurial business. For example, just because you are a chef does not mean that you would be as good at running a restaurant or a good pressman able to properly run a printing company, and may I add being a good musician does not necessarily mean that you will be good at running a music business (i.e. band). So along with capital, you may also need a good management company that can help you run the business while you perform the tasks that you are good at, which is creating and performing music. Most sources of financing will take a hard look at your ability to manage, so if it is a weak link get a management company on your side.
So how hard is it to get capital? It’s ridiculously hard; for musicians as it is for any small business owner or entrepreneur. But, that doesn’t mean it’s impossible. How good are you? Or better yet, how bad do you want it? Look for help on forming your corporation and preparing a business plan. That will allow you to search for capital. There are many sources out there; the oldest one known for the music industry is called a record company. But in the new music industry there are many more emerging possibilites, they are taking on the form of management companies and investor groups such as Polyphonic and others.
So if you’re really serious about taking the long haul and making music as your career, then I suggest that you form a company and look for that capital. And don’t be afraid to ask for help. Even in a DIY business model, you need good people to help you along the way. But most of all ~ enjoy the journey!
Article written by Don Austin, founder of Launch Music Group, Inc. Chicago, IL www.launchmusicgroupinc.com