| 8 Lessons Bands Can Teach Your Business CONSUMER ACTION by Sarah Morgan - Aug 4,2009 - www.smartmoney.com QUITTING YOUR DAY JOB — it's the amateur musician's dream. One day, your band gets out of the basement and on to the radio. Then, suddenly, you're a rock star, and it can be all about the music. Not quite. Bland as it may sound, the reality is that the music business is still a business — and musicians are essentially small-business owners who need to think about contracts, taxes, marketing and building a brand. "They're in the arts, but when they're playing professionally, they're in a business," says Frank Dusek, an accountant with the Chicago firm Weiss, Sugar, Dvorak & Dusek, Ltd., whose clients include musicians. "It's about supporting yourself, making a living, making your house payments." The American Federation of Musicians, an international union, has about 90,000 members in the U.S. and Canada, about 85% of whom are self-employed, independent contractors, according to Paul Sharpe, the union's director of freelance services and membership development. And whether they consider themselves business people or sing about the downfall of the financial industry, many of these independent artists have had to develop some of the same skills and mom-and-pop store owners in order to survive. "Historically, musicians have always been small entrepreneurs," Sharpe says. But with CD sales slipping thanks to widely available free music online, the industry's business model is changing. "The old model was: band goes in the basement, rehearses like heck, writes some songs, tries to get a demo heard by a record label," Sharpe says. As major labels have grown less comfortable taking risks on unproven acts, more bands have become their own producers, a role that requires a deeper understanding of marketing and other business concerns, Sharpe says. Of course, even a band working with a major record label could suffer from a lack of business savvy. Many well-known musicians may have been swindled "because they were only thinking creatively and they were just kind of signing anything," says Wesley Verhoeve, who runs Family Records, an independent artist management firm. Verhoeve says that changes in the music business haven't made business skills more important, but they have made more people aware of the need for artists to pay careful attention to business matters. From big-picture concerns like building a brand to nitty-gritty details like deducting the cost of a home office on a tax return, rock bands face many of the same challenges confronted by other small-business owners. Here are eight things small-business owners could learn from rock bands.
1) Even if you love your job, remember to value your work. "When a guitarist straps on his guitar he's going to work," says Sharpe. Many venues may require artists — particularly those just getting started — to pass a hat, or sell tickets themselves, in order to get paid — while the house sells drinks on the promise of live entertainment. "I would encourage young people to make sure that when they do perform that they're getting something tangible in return," Sharpe says. When your job is also your hobby, it can be difficult to make sound, business-building decisions about which projects to take on. Composer Rebecca Pellett, the sole proprietor of May I Music, says that, as a workaholic who loves her job, she does sometimes take jobs that pay less than her usual rate if they'll be personally enriching. She says she recently spent about $500 to work on a project collaborating with a couple of other young women composers. She didn't get paid, but she says she's generated more than $2,000 in income through the project by making new connections and using it as a sample of her work. "Having a long view is really important," Pellett says. She evaluates potential projects on three criteria: making money, building her career and "personal invigoration." If she can accomplish two out of three, the project is worth her time, she says.
2) Make sure you understand the fine print. Working with a reliable lawyer and accountant will help musicians negotiate these deals, but some basic skills are necessary. "The same stuff that you learned in elementary school is critical to being a successful musician," says Bernard Resnick, an entertainment, communications and sports lawyer based in Philadelphia. In other words, reading business papers carefully, writing concisely and doing basic math can go a long way toward building a viable business. Long before they get to the point of evaluating contracts for multifaceted business deals, up-and-coming bands often run into a problem that may be familiar to small-business owners: trying to collect on unpaid invoices. Many bands don't get paid by venues where they've performed. If a band has been hoodwinked by a club, persistence is probably the only solution, Dusek says. The amount of money a band might be owed could be recovered in small claims court, but the band would have to pay a fee, Dusek says. The better answer is to check out venues and other business partners ahead of time, vetting them before you sign a contract. "It's better to work for people you know and who have a track record of paying people," he says.
3) You might be able to make money giving things away for free. "Many bands report that the revenue from the merchandise is actually greater than the live fee for the music that's played," Sharpe says. If a small band is expanding its audience by giving its music away, the benefits may outweigh the costs. More-established artists can also profit by looking for revenue streams beyond the obvious. "Music used to be the destination, it used to be the engine that drove the train in entertainment," Resnick says. "Today music is not the engine, it's just a car in that train." Resnick encourages his clients to pursue deals licensing their work for use in movies, TV shows, videogames or cellphone ringtones. "Owning the intellectual property is the way of the future," Resnick says.
4) Build a fan base through social networking — and track your results. Thanks to social networking, reaching people is easier than ever before, says Lawrence Gelburd, an instructor at the Wharton Small Business Development School and a former record producer. "The good news is, it's cheap and everybody can do it — and the bad news is, it's cheap and everybody can do it," Gelburd says. Finding a niche to target within a larger market may be critical to standing out in a crowd, he says. Business owners who once dismissed social networking as a fleeting trend are changing their tunes, says Todd Klingel, the president of the Minneapolis Chamber of Commerce. "The ‘passing fad' thoughts are now changing to, ‘Oh, darn, there is something going on here,'" he says. Web-based tools help lower the tech barrier to entry and allow bands and businesses to track the results of their efforts. When Family Records artists Casey Shea and Wakey!Wakey! had their songs featured on the season finale of "One Tree Hill," the company watched the episode together to celebrate — but also to gather data on how the show impacted its bottom line. Verhoeve says he watched the episode with his laptop out, monitoring a Google alert set up to catch mentions of the bands online, tracking iTunes sales of the featured songs, and following the conversation on Twitter so he could quickly jump in and correct any misinformation.
5) Find mentors and local resources. An apprenticeship may not be right for everyone, but it still may be worthwhile to look for ways to partner with a more established band or business. "So many start-ups and bands want to do their own everything," Gelburd says, but "a lot of them would be a lot better off partnering with someone who's already farther down the line. Instead of trying to create your fan base from nothing, go out and find somebody who's already done it." Many of the American Federation of Musicians' 240 local chapters can set musicians up with mentors or offer sample contracts to musicians considering a variety of business arrangements. For other business owners, a local Chamber of Commerce or a nonprofit organization like SCORE could offer similar resources.
6) Work with your friends and family, but make it formal. Creating a legal framework also prepares a band for any potential personality conflicts down the road. Bands must create an agreement that "defines what happens if the bass player leaves, who owns what, who owns the band name," and so on, Sharpe says. "We often hear that after years of really working at it, it seems like it's harder to keep a band together once it becomes successful," Sharpe says. Any business owner working with a college roommate or family member should be protected in case personal conflicts impact the business, or vice versa. And the bottom line has to come first when making hiring decisions. "Hiring the smartest people you can find is key to running a successful business," Resnick says. "If your brother-in-law has no experience in professional management of a recording artist, [he's] the last person you should have on your team."
7) Know how each individual product or project helps to build your brand. "It doesn't really matter what he talks about in those videos; what you're getting is Casey," Verhoeve says. "It's just a way to extend the brand and try to get it in front of as many eyeballs as possible." As the face of a brand, a successful musician might consider creating a kind of character that becomes their public, branded persona. "You have to understand your market and create a character and an image that will react with the fans," Resnick says. He cites a female MC he works with, Steph Pockets, who he says has created a sweet, upbeat "character" that resonates well in Japan, her target market. "Those who spend the time to step back to understand not just what they're creating, but how they're going to sell it, are the ones that will have success in the future," Resnick says.
8) There's no such thing as overnight success. Much like building a small business, building a band is a risky venture with a high risk of failure. It's typical for a band just starting out to lose money at first, Alan says. "It's going to operate at negative cash flow until you get a certain critical mass," he says. "That's why it's so important for people to have a vision for themselves." "Everyone - from the rock band to the largest business - does need to rethink their brand and their viability" in the current challenging economic environment, Klingel says. "Now, when its viability is being tested, is when you find out if it's a fun passion or something that is a real business." |
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