A lot of musicians don't think of themselves as entrepreneurs, but in fact they are exactly that. They are owners, or co-owners of a collaborative effort to sell a brand (i.e. their band) to the general public. However, a lot of musicians refuse to recognize the fact that they are in fact owners of a small business. So let's very briefly take a look at what contitutes a business before we move on.
1. Does your band try to get paid for gigs? If your band is compensated through any means in any amount for playing your music publicly, then you have been paid for your gig. The payment is determined by the deal struck between the band and the venue, and I've seen bands walk away with a cut of the bar sales or of the door cover charge, or even something as meager as free beers all night! However you get compensaged for your live performances, you're getting paid for playing. So if you play and get paid for it..........you're a business.
2. Do you try to sell merchandise? If your band is selling and distributing CD's, T-shirts, stickers, lighters, posters, ect.........even if you don't sell as many as other local retailers you are in the retail business. Whether or not you're turning a profit, breaking even, or losing money on the deal, you're still operating a retail business.
3. Do you try to expose your music to as many people as will listen? You're now in the marketing business! Your band is a brand, and when you try to promote your shows or CD's or even the fact that you HAVE a band, you're trying to promote your brand. Promoting a brand is part of the marketing business! (Metallica, Mtv, Ford, McDonalds, and Fender Guitars are all not only companies, but market their brands to generate a specific image about themselves).
I could go on, but my point isn't whether or not your band is a business. My point is to try to get you to consider how to best operate that business. So let's look at a few things.
I recently posted an article discussing why Ohio bands should go on mini-tours. This sparked a short discussion on facebook about why Columbus Ohio bands can't generally afford to do this because most band members are living paycheck to paycheck and can't afford to put money into a mini tour. While I understood the person's point, this indicates to me that if this is true, most bands in Columbus are bad at running their mini enterprises. The purpose of this article is to address those issues so that bands will realize a few key ways in which they can generate an income from their business that can not only be profitable, but will also allow their business to grow!
According to Economic Theory, the goal of any business is to maximize profits. According to the average guy doing open mic nights at the local bar, the goal of his performances is to enjoy playing his art for people! The person I've described isn't pushing a product or a brand, he just wants to perform. But what if your involvement in the local music scene includes more than the weekly open mic night? What if you've got a band together and are peforming regularly trying to build a fan base and sell CD's? If this is you, you're a business.
So let's take stock and see how well your business is doing! What are you doing with any money that your band brings in? In some bands, the money is split up between the individual members of the band. If this is the case, what is each member doing with it? If they are paying bills, or buying drinks, then the money that they are being paid is individual income. There's nothing wrong with this kind of set up, but it has limited potential for helping the business grow! The reason for this is that even though the business is generating a revenue, the revenue isn't going to help the business grow. It's going to the personal needs of the members, and thus turns into nothing bu payroll. This business structure isn't self sustaining. What happens when equipment gets damaged or stolen and the band as a whole doesn't have enough money to replace that equipment? This is a scenario that can break up a band because there's no way they can function without that equipment, but there's no way they can replace the equipment. Congratulations......you're out of business!
In other scenarios, any revenue brought into the band is set aside for the band's use. It's set aside either into a bank account, or in a secure location, this way it can be accumulated to pay for things that the band may need such as recording costs, merchandise, or touring costs (which is a reference to the discussion I had on facebook after my last blog). Let's apply the busted or stolen equipment scenario to a band that operates in this manner. If the band has money set aside for the replacement of the equipment, then they are more apt to survive a blow to their bottom line that could've closed the doors of their business once and for all! But there are other benifits to this as well. When it comes time to plan a tour, the band can look at its available resources and determine whether or not they can afford a tour, or how long of a tour to go on!
There is a lot to learn about running a business, especially in the entertainment industry. This isn't meant to be a lesson in how to run a business, but more of a way to plant the idea that if you want your band to grow, you may need to change your mindset about how to treat any revenues the band generates. And as a footnote, this isn't intended to be a lesson to the person I was in a discussion with, but rather a brief overview for everyone about the benifits of operating your band like a business.
Good luck to you all. I hope to see you grow and grow.