How to be profitable as a musician, and treat your art like a businessBe SMART and treat your ART like a small business

[This article was written by guest contributor Sean Kinney, an award-winning entertainer and filmmaker. His company 1 Stooge Entertainment offers creative consulting to companies and individuals looking to take their brand to the next level.]

Most people hear terms like “the Film business” or “the Music business,” and they only focus on the first part. To be successful in business, any business, you need to be business savvy. If you want to be a working artist, you need to be as smart as any business person in a meeting, or at least smart enough to hire the smartest person in the room.

If you started any other type of business without an accountant or an attorney to guide you, you would be looked at as crazy; however, in the world of art, you are looked at as crazy if you start with them. This is a big disconnect, and you should approach your artistic career from a more logical point of view. Many great artists have lost it all on bad business decisions. The most successful artists have their most successful ventures after they have worked out the business of their art, and put everything in place before their next opportunity. Unfortunately, most starting or “indie” artists try to make a push with only their art, and the business part can be a crushing blow, causing them to feel burned out.

Starting as an indie artist myself, I worked hard, had some luck, and my accomplishments led to me serving as a consultant to many successful entertainment artists and companies. While doing so, I found a lot of repetitive issues. Here are ten tips to help you handle your business properly. Follow them with the same passion as you followed your art, and you’ll be ahead of the game.

1. Start with a mission statement and a business plan

A passion project will be contagious for everyone that is exposed to that passion, but at some point, if you want to make a living doing your art, you must work it like a business. Start by writing down a mission statement that will remind you about the passion you want to share, and help others to align to your cause. Having a business plan in place will also help you to focus on your day-to-day operations and what you need to do to make money living that passion, and sustaining it.

2. Analyze what it will take to make a profit

Be able to calculate your expenses, know how much to sell to cover your costs, and make sure your mark-up is normal.

Many artists follow the average value when selling a product, while some are delusional about the product’s value. Others, especially road musicians and comics, start to take what they can get for a multiple item sale after a show. This is where knowing the limits from your business plan, which was well-researched, will help you to live under normal business conditions, and hence be able to sustain your art as a living.

Take an indie musician in the following example. To sell a CD after a show for $10 is normal, while asking for $30 makes it much less probable for point-of-purchase sales as your audience walks out the door. Setting up a profitable studio arrangement, or producing your music at home will allow you to keep costs low, hence passing on the savings. If someone wants to play “Let’s Make A Deal”, then be a great salesman: “I see you really are a fan and want some of my music to share, and I would love to help you out, so I can give you a digital download card for $5, and I’ll even sign it for you!” The last time we ordered download cards we got a great deal, which expanded our ability to make a profit at live shows. You can still meet your needed mark-up and please your fans; you just need to be smart about it.

Also, don’t forget when you make your expense sheets, it needs to be for everything, not just your business costs, but your life. If this is going to be your job, you need to pay for life as well. Factor in your day-to-day living expenses and savings so you know how much it will cost to be profitable from your business. Most indie artists look at what it will take to make their business work (or to just make a living as an artist), but in a normal job situation, you look at the paycheck. Look at your role as an employee of your own business. Are you getting paid enough to pay your bills, save money, and have a vacation? Just because your company is profitable does not mean it can support you; if you want to be supported by your art, make sure your salary and life is figured into the business plan. As my own CEO, I am guilty of underpaying myself a lot. If I was working for someone else and they started underpaying me, I would quit. Set yourself up so you love your business, and pay yourself a fair wage so you won’t want to quit.

3. Self-finance if possible

With modern technologies, most artists can start with little overhead. Most artists already have the basic equipment for our art. My wife produced an album in our living room that made the Grammy Consideration list; with the right equipment and a decent computer, art is getting much more accessible by the indie market.

Taking out a loan is a normal way to start a business, but paying back loans with interest can overload a small business, and is one of the top reasons small businesses fail. Set yourself up for success and also control your own destiny without investors trying to nudge into your art.

If you need to get additional money for studio time or a film, do it like a good business person. Get many quotes, from different sources. There are many types of investors and bank options available. I would suggest asking an investor for advice. They will be able to steer you in the right direction. Other artists that have had to get loans in the past are a great resource as well. If in doubt, ask someone you know and trust; there are plenty of people willing to give advice. I once asked an MBA student to help me with a business plan; he had to make a business plan for school, so it was work he had to do anyway, and we both gained from it. The Small Business Administration is a free resource of retired business owners that are funded by the government to advise small businesses at no cost, and are in all big cities.

4. Limit your risk

A new business is a risk, as is every new venture. Treat your new album, film, or art exhibit like a new business expansion. Never expand beyond your successful model and means. If you are doing well, don’t invest all your money and time into something else that had minimal or slow growth for you in the past. A scenario I have seen too often follows: A musician will have some success touring and selling their indie CD, then they go into the studio and invest all their money in a quality production, and their fans are claiming they have lost their edge and sound “over-produced,” and suddenly that artist is in debt over their means, and has no extra capital.

In small business, a lot of problems come from rapid over-expansion, or a company reaching too far. If your success comes from making a $2,000 CD at your house, selling CDs at $10, and driving to gigs, do not take your success and make a $20,000 CD, fly to some gigs, and try to sell CDs for $15; that will be enough to break your business model.

Incorporate every venture as an offshoot of your main business. Keep yourself and your business protected; remember a musician cannot play if their instruments are repossessed. Film studios make every film as its own venture, and then distribute it. It helps limit the businesses’ liability, and insures if one venture is not profitable, it will not take down their business as a whole. Grow logically, expand when there is room, and make sure your business is protected by being incorporated and insured. Never let your debt exceed the total value of your business, and you will be okay. A company like Apple does not go out and make 1 million iPhones unless they know they will sell them. Artists, especially my fellow filmmakers, like to go out and make a million dollar film, not knowing who their market is and which distributor will pay what for which markets (even that phrasing sounds complicated, but that is why you need a business person to do your business plan, and keep yourself protected).

5. Simple starts

This leads me to my next point: start small. Every artist would like to be an overnight success, but a fan base needs time to grow. If you spend everything on a project, you might get stuck with lots of boxes of product. Most of the time, artists need time to grow not only their style and art, but their business sense. Never overextend yourself beyond your means financially and emotionally. I have seen many comics in particular that get famous too fast and get crushed emotionally and quit. A business plan will help you to not over-reach your financial limits, and will emotionally help you to prepare for any success as you can see things as an expected outcome. If Apple’s new iPhone turns out to be the best selling phone, it was expected, and is not crushing. Likewise, if Janet Jackson has a wardrobe malfunction the day before her new album comes out, then it is not crushing, it is expected that she will be in the news and her album will be a “breast-seller” (like what I did there?). A plan lets you know what to expect, plain and simple.

6. Get everything in writing

Most mom and pop businesses have a personal feel, and it is the same with artists. Knowing a booker personally makes it seem logical to take a gig over the phone. But it only takes one bad gig to take out a lot of indie musicians and comics. A small discrepancy on who pays for travel can devastate an artist. Having clarity through something that is in writing will save you. A quote I used to have above my desk saved me many times: “A contract helps preserve the friendship that the relationship is based on.” My wife is one of the best Entertainment Attorneys out there, and it is unfortunately a daily occurrence for her to hear about a small misunderstanding that led to an expensive lawsuit. If you get nothing else from this, remember, one lawsuit will take down a small business or artist – so get everything in writing.

Also, if you are an artist of any type, the most important thing to get in writing is the ownership of your Intellectual Property. I personally know a musician who played a song live for years, and even sold his CD with that song, and even more, had that song in a movie, only to have it stolen, by the same producer who made the CD, who gave it to a famous artist where it went to the top of the charts – with not a penny or a credit to my friend’s name! Sadly, his copyright was never registered, and hence he had no legal grounds to stand on. Make sure you get all of your art protected in writing from the Library of Congress. It is easy to do online, and no other source will stand in a U.S. Court as well as a registered copyright.

The last point here: don’t just get it in writing — understand WHAT you’re getting in writing. TLC sold over 10 million records and yet they were over $200,000 in debt. They were amazing, breaking every record, barrier, and heart; but their contract broke their bank.

7. Stay competitive

Stay on the cutting edge of your business. Artists are blessed to have fresh creative ideas flow, and most businesses would kill for this talent. Many indie artists I meet stay creative, but don’t stay in the loop on the business side. Be aware of the latest technologies to streamline the production of your art, and even the day-to-day operations such as your accounting. Small things can make the biggest difference; for example, filmmaking technologies now allow for much smaller crews than 15 years ago. You can now use an accounting service for paying bills and payroll instead of having a full-time business manager. You can easily live in a cheaper location thanks to remote concerts with things like Stage-It. A friend of ours, Shannon Curtis, is making a lot more money playing house concerts instead of traditional venues in Los Angeles; the business shifted, and she sharply had her eye on how to capitalize on the trend, with her fan base and style of music in mind. Her competitiveness gave her an advantage, and now she even makes money teaching other musicians how to do it. The phrase “don’t quit your day job” applies in so many ways; if you get some success, keep going! Sitting around resting on some laurels of gained fame is not how you got famous in the first place; keep that competitive edge that got you there and keep working. Small businesses that don’t stay competitive in their markets go under.

8. Get the right team

Staying competitive means you will need to hire people. An upcoming musician will need a host of things, including a quality audio production, music videos, photos, album designs, press releases, and more. Hire the most qualified people you can afford, and make sure they align with your mission statement. Finding another artist that you click with will produce far better results than simply hiring a great technician. It might take a while but do not use the first person who offers you a great deal. If they are not a good fit, the final product will not match your mission statement, and soon, your artistic vision that defined you will be lost, and you will start losing your fan base as a result. A lot of artists take what they can get; this is not the way a business is run, and it will lead to your business failing. A small business does not take a commercial because a fan offers to do it for free. If you are serious about advertising and marketing, make sure it is done in exact alignment with your business plan and mission statement. You might get lucky with a free music video or film trailer from time to time, but a lot of small businesses do worse by having bad commercials and advertising. Your art and image need to be protected.

On the flip side, hire the correct manager, agent, accountant, and attorney. Make sure they have current clients that are similar and understand what you are doing. Don’t hire a lawyer that handles car wrecks, but a legitimate entertainment attorney who understands the business and the contracts you will need. An attorney and an accountant are two professional services that can not only save you money in the end, but save your business. Ask them to read your business plan and mission statement and tell you how they might be able to help with achieving your goals. If the budget is tight, look for fans who are experts in their field, and ask them for help. Find the best film student to do a video with you, or ask a professor to pair you with their top film student for their next round of projects. This will lead to better results than hiring the cheapest person in the yellow pages.

Whatever you need, get the best that you can get; taking your time to do so will insure business success. The artists on top got where they are by doing the same.

9. The right rules for the right team

In business, if someone works exclusively for you full-time, they are your employee. There are a lot of temporary jobs that are normally for independent contractors around the art world. These are meant for people to do specific jobs for a limited amount of time. Be careful. You don’t want to get in trouble with the IRS by claiming your business has no employees, when you have people working full-time hours exclusively for you and at your direction. Save yourself time, money, and a possible IRS fine by knowing that if someone works for you exclusively and full time, they may be considered your employee under the law. If you have an accountant or an attorney, they can help guide you in this case. Having a professional team or service manage your business correctly can save you a headache in the long run, and keep you focused on your art.

Trying to save money by hiring independent contractors might cost you more in the long-run if it is done incorrectly. Small businesses have to hire people and have to follow the rules; this is no different for artists. I see this as one of the main stumbling blocks for an artist’s business growth. It seems to me that this is the point where an artist realizes it is a business, and it freaks them out. As your business grows, so will the need to grow into a more traditional business model. Going from a solo gig, with only you getting paid, to a real business model with payroll, accounts receivable, 1099s and things of that nature will often freak out the average solo artist. This goes back to the business plan and expectations of what and how you’ll grow, and with the right team in place, they will make the transition from indie to empire easier. Remember, business has rules and laws, and the right team will know them.

10. Be professional

It might sound odd to even have to mention this, but it is paramount. When you go to a business, you expect a level of professionalism. If you go out to eat, you expect them to follow the laws of the Health Boards, treat you nicely, and give you a fair price for what you get. A lot of artists are eccentric and forget about being professional. Artists who have their business solid and play well with others get more gigs. Whatever circle you are in is small, and people will talk. Word of mouth can make or break you. I had a booker once tell me,

“I heard you always bring a small house and show up early.”

I replied “Always.”

He said, “I’ll book you anytime you want!”

I asked “Have you seen my act?”

“No,” he replied, “but I don’t think you realize what a booker’s job is.”

“What is it?” I asked.

“To book acts that are professional, that will help my business, nothing more, and nothing less.”

We had a great working relationship for years, and he even named a cheeseburger after one of my comic characters. If you ever visit HaHa Cafe in North Hollywood, order the Uncle Clyde’s Cheeseburger, and you’ll taste the sweet flavor of professionalism.

In short, a businesses’ reputation will make it or break it, so make sure your business pays its bills on time, shows up on time, and does what it needs to maintain a good reputation. That will outlast any spike in fame, and maybe if you’re lucky, you’ll even get a hamburger named after you.

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[Picture of guitarist from Shutterstock.]