The music industry changes rapidly, so there is always a need for progressive-thinking record labels. A successful record label will seek out new talent, pay for album recording and mixing, organize tours, and offer promotional and marketing services to its artists. If that sounds like your dream job, this article will help you get started.
In all countries there are public organizations to help entrepreneurs. In the Additional Resources section you will find how to contact the organization corresponding to your country.
Steps
Method 1 of 3: Plan your business
Step 1. Define your company
For the most effective start, focus on a particular genre to establish your reputation. This approach will be largely determined by what you want to achieve. If your goal is to make a lot of money, then you will focus on popular music. If your goal is to be the trusted record label for 21st century post avant jazzcore, your approach and strategy will be very different.
Step 2. Write a business plan
This is necessary on many levels. First of all, you must develop the infrastructure of your label: how you plan to search and develop talents, your marketing and promotion scenarios, how you understand the market and the competition, how you plan to finance your company and how you plan to make this a profitable business.
- If you have a personal fortune, then you may not need investors, at least for monetary support. However, you may want to attract investors who can help you establish your credibility in your market. For example, if you started a pop music recording label with your own money, but you can convince Sir Paul McCartney to invest in your label, it could be a huge point for this one. However, to do so, you will need a credible plan that shows Sir Paul or any other investor that you know what you are doing.
- If you need financial support, having a plan that shows you understand both the benefits and the risks and that you've been able to determine a way forward will go a long way toward convincing an investor to risk their capital in your company.
Step 3. Detail all the costs associated with your startup
That would include everything from staples, electricity, to recording and production costs. Be detailed when you do, people who might consider participating in your label will certainly be when they read your plan! The following are some points to consider:
- Administrative costs: rent, services, taxes and licenses come first and can be significant. Don't forget to include phone, Internet, printers, paper, computers, business cards, and office supplies on this list. You will also need a website, as well as someone to create and maintain it. Some of these costs will be weekly, some will be monthly, and some will only be done every one or two years. It might seem like a lot at first, but if you create a five-year plan, you are supposed to eventually be able to plan for those costs at certain percentages of the overall financial picture.
- Recording costs: as a record label you will be producing acts, which means that you need to consider the recording chain, including studio time, fees for the engineer and producer (which could be you, but you also need to receive your payment), engineers from mixing and studio musicians.
- Marketing Budget: A great recording is nothing until it's on the market. To do this, you will need to promote your label through online advertisements, magazines, press releases, and your website. You will also have to work with artists, such as designers to create your logo, packaging guidelines, and general design plan.
- Professional Services: While you are busy making great music, someone will have to take care of writing the legal, clear and effective contracts, both for your talents and for your business dealings. To do this, you must hire the services of a qualified attorney who specializes in the music business, and you must also hire an accountant to make sure that your friendly tax collector does not come to require your payments.
Step 4. Prepare a cash flow forecast
Planning a one-, three-, and five-year cash flow forecast requires some skill, knowledge, and educated guesswork. The first year you should have a very solid plan: you will already have a good idea of your startup costs and it is likely that you have in mind (and make contact) a few bands that will be first on your label. With this information, determine how much you will be spending and project how much these artists will generate.
- For example, your basis for doing this could be the current performance of the bands: do they fill the clubs? His music is well received and will probably sell well. If you also have new bands that don't have a fan base to work with, you will have to do a lot more promotion to get them out there.
- As you add bands to your list, your earning potential will continue to grow. When planning for years three through five in your forecast, you will need to determine how and when you will add more talent and how you will promote them. This is where the predictions get more complicated: a great band on your list could make it much easier for you to promote all the bands. In the same way, a bad band will be a waste of money that could lead to financial problems.
Step 5. Build your team
Unless you are supremely talented in sales, marketing, music, business, art, conversation, and work nights as a lawyer, you should form a team. The following are some skill sets that will help you succeed:
- Marketing and Sales: Someone who can go out there and promote your label, who knows the industry and has a personal relationship with artists, promoters, and people who like to support the arts financially. This person or people will be the key to your success: they will be responsible for bringing in the talent and spreading the word. The better they perform, the more successful you will be.
- Production: You will need someone who understands the recording process backwards and forwards, who can find or develop good engineers, mixers, and who can lead a recording session.
- Hire help. To keep costs down, at least initially, consider hiring other people per project. This includes achievement and graphic design, legal, accounting, engineering, and other needs that only come up occasionally.
Method 2 of 3: Put your plan in motion
Step 1. Formalize your company
Establish the appropriate business entity for your label so that you can operate legally and also protect yourself. You have several options that could be called differently in different countries, but which are functionally the same:
- Sole proprietorship: this is the case where you do it all. A sole proprietorship is simple to start, simple to stop, and simple to maintain. You can have consultants and friends to help you with the many things that need to be done, but in the end everything will be yours, including all profits and all responsibilities. It offers little incentive for investors, very little protection for you, and if your business fails, any debt incurred will have to come out of your pocket. If you plan to make your label a real company or want to hire people as you grow, this will not be the best option.
- Limited Liability Company (SRL) - An LLC is great for small businesses. You have the ability to add people to the team as you grow and offer personal liability protection if the business fails. It also offers relatively simple and flexible control over financial, legal and tax matters, but if you plan to seek investors or want international reach, this will not be a good option.
- Sociedad Anónima (Música S. A.): if you plan to make this an important company, you should look for investors or if you want a formal structure, this will be the best option. As with LLCs, you will be protected from liability for company losses. You can issue shares that go public, raise investment capital, and have decades of legal precedent to draw on when necessary. There are strict rules of organization and your accountant, like your attorney, will be busy with taxes, fees, reports, and requests. If you're the laid-back, casual type, this won't be the best option for you, unless you're willing to pick up the pace!
Step 2. Bring in the talent
With your plan in place, your business in order, licenses, permits obtained, your production art created, approved, and (hopefully) your investment capital to get you started, it's time to get to work!
Step 3. Go outside and listen to live music, but listen with a critical ear
Watch the audience and see how they react to the band. If they're on their feet from the start and yelling for the band, you might have something!
- Get up close to the band and talk to the members. Find out who they are, how long they have been together, if they have recorded music, and what their plans are for the future.
- Most importantly, find out if they already have a record label deal. This might not be an impediment but, for a label that is starting you may have to choose a band that is not signed yet.
Step 4. Meet with the press
Your city is full of writers who will help you spread the word, but they have to get to know you. Look them up in local newspapers or local music blogs and get in touch with them. Invite them to lunch or to your studio (or the studio you like to use) and stay in touch with them.
Step 5. Meet with the engineers
Find the recording studios in your area and visit them. Some could be extravagant and luxurious, and many could be modest, one- or two-room with different types of equipment. While this is something you should definitely take into account, the most important thing will be the quality of the music coming out of your speakers.
- Meet with the engineers and talk to them about their recording philosophy, how they relate to the bands, and what annoys them. It will be good to know if, for example, you have a rap artist that you think will be a hit and the engineer absolutely hates rap. Ask them to put on some of their favorite tracks and listen carefully.
- To be really detailed, ask them for a CD with samples of their work so that you can also listen to it at home. Although rare, which sounds incredible at a million dollars, it might sound like it was recorded in the back seat of a Gremlin when you take it out of the studio environment.
Step 6. Visit music and record stores
Big or small, they are there to sell recordings. If you go, they might be very happy to sell your recordings too. It is a small portion of the grand scheme of things, but when one begins, there is no portion that is small enough-
Step 7. Meet the representatives
These are the people who have their fingers on the pulse of the local music industry. Bands that have a representative have passed a certain legitimacy barrier, simply by being professional enough to hire one.
If your services look good to the representatives and promoters, the next time one of their bands says "Juan, I think we're ready to record an album," Juan will respond, "Hey, I know just the place to do it!"
Method 3 of 3: Maintain Your Success
Step 1. Establish your brand
Once you have taken good care of the practical affairs of the company, cultivate and maintain the aesthetic layers of your record company. Create a logo and make sure to use both the logo and the general image of the company on the paper labels, on the website and on all materials such as t-shirts, mugs, etc. Hire the bands and groups that match the particular image you hope to forge.
Examples of brand management are successful home labels like Sub Pop and Matador, which maintain a fierce independent business model that is also quite diverse
Step 2. Advertise the brand creatively
In the last ten years, the Internet has dramatically changed the way music is bought, listened to and distributed. If you are going to use the traditional model of touring and rely on CD sales and radio play, you will likely have a hard time becoming successful. YouTube videos and voluntary payment models are becoming increasingly popular to maintain brand success.
Take into account promotional tricks like having t-shirts made with the download code on the label for a record company mixtape. The Goner garage and punk music label even offered 7-inch records to anyone who tattooed "Goner" on their body and displayed it in the store
Step 3. Grow your base
The Sub Pop label started out focusing on local grunge bands, but now has a wide range of popular sounds like Iron & Wine and Fleet Foxes. With their expansion of the genre of sounds they encompass, their success and their market share has grown considerably. Even if you're considering hiring teen pop stars now, consider crossovering and adopting other sounds and images to your brand.
In the early 1990s, the major record companies were much more willing to take their chances with unknown or "underground" groups. Sonic Youth, an independent New York band, stumbled upon a great opportunity upon receiving a great offer from Geffen and the contract was well received by company executives and music fans alike. If your record company makes you money, consider scoring a goal by pitching a project from midfield
Additional Resources
| Organization | Phone number | Electronic address |
|---|---|---|
| INADEM - National Institute of the Entrepreneur (Mexico) | (55) 5229-6100 | [email protected] |
| DGIPYME - General Directorate of Industry and Small and Medium Enterprises (Spain) | (34) 912 582 852 | http://www.ipyme.org/es-ES/DGIPYME/Paginas/correo-infopyme.aspx |
| CAME - Argentine Confederation of Medium Enterprises | (011) 5556-5556 | [email protected] |
| INNPULSA Colombia | (01) 8000 180098 | [email protected] |
| ASEP - Association of Entrepreneurs of Peru | (51) 4785764 | [email protected] |
| CORFO (Chile) | (600) 586 8000 | -- |
| INAPYMI - Institute for the Development of Small and Medium Enterprises (Venezuela) | (0800)-4627964 | [email protected] |
| U. S. Small Business Administration (E. E. U. U.) | (800) 827-5722 | [email protected] |
| Ministry of Industries and Productivity (Ecuador) | (593) 2 394 8760 | -- |
| Bolivia Undertakes | (591) 7877819 | [email protected] |
| Google Activate - Undertake (International) | -- | -- |
Advice
- Persevere. Like any beginning, starting a record label is hard work and will require constant effort and time on your part. If you work hard at it, search for the right talents, and effectively promote your label, you are well on your way!
- Never rest on your laurels! Stay one step ahead of your competition by protecting your rights and seeking out new and unique talents.
- Never say no to a talent. Stay in touch even if you can't hire him at that time!