How to Start a Record Label

Planning Your Venture

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   Define your venture. For the most effective startup, focus on a particular genre to build your reputation. This focus will be determined in large part by what you wish to accomplish. If your goal is to make a lot of money, then you'll focus on popular music. If your goal is to be the go-to label for 21st century post avant jazzcore^[1], your focus and approach will be much different.
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   Write a business plan. This is needed on many levels. First and foremost, you will build the framework of your label: how you plan on finding and developing talent, your marketing and promotion avenues, how you understand the market and the competition, how you plan on financing your venture, and how you intend on making this a profitable business.

   1. If you're independently wealthy, then you may not need investors, at least for the monetary backing. However, you may wish to attract investors who can help you build credibility in your market. For example, if you started a pop music label with your own cash, but were able to convince Sir Paul McCartney to invest in your label, that would be a huge win for your label. To do that, though, you will need a credible plan that shows Sir Paul, or any other investor, that you know what you are doing.
   2. Should you need financial backing, having a plan that shows that you understand both the rewards and the risks, and that you have been able to determine a way forward, will go a long way in convincing an investor to risk his capital on your venture.
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   Detail all the costs associated with your startup. That will include everything from staples to electricity to recording and production costs. Be very thorough when you do this: people who might consider becoming involved in your label will certainly be, when they read your plan! Here are some things to take into account:

   1. Administrative costs: rent, utilities, taxes, and licenses are right up front and can be significant. Don't forget to include phone, internet, printers, paper, computers, business cards, and office supplies in this list. You will also need a website, as well as somebody to both create and maintain it. Some of these costs will be weekly, some monthly, and some that only happen every year or two. It may seem like a lot at first, but if you create a five-year plan, you should be able to chart out how these costs will eventually become a small percentage of the overall financial picture.
   2. Recording costs: as a record label, you're going to be producing acts. That means you need to account for the recording chain, including studio time, the fees for the engineer and producer (which may be you, but you need to get paid too), mixing engineers, and studio musicians.
   3. Marketing budget: a great recording is nothing until it's actually in the market. To do that, you're going to need to promote your label through online ads, magazine ads, press releases, and your website. You will also need to work with artists and designers to create your logo, packaging standards, and overall design plan.
   4. Professional services: while you're busy making beautiful music, somebody needs to take care of writing clear, effective legal contracts both for your talent, and for your business deals. For that, you will want the services of a qualified attorney who specializes in the music business. You'll also want an accountant to make sure that you friendly tax collector doesn't come to call. You need people that you can trust and rely on.
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   Prepare a cash flow forecast. Planning a cash flow forecast for one, three, and five years out requires some skill, some savvy, and some educated guesswork. The first year should be a very solid plan: you will have a good idea of your startup costs already, and you will likely have in mind (and made contact with) a few bands who will be the first on your roster. Using this information, determine how much you'll be spending, and a projection about how much these acts will bring in.

   1. For example, you can base this on how the bands are doing currently: Do they pack clubs? Their music has a good track record, and will probably perform well. If you also have bands that are brand new, and don't have a fan base to work from, you'll have to do significantly more promotion to get the word out.
   2. As you add more bands to your roster, your income potential will continue to grow. As you plan for years three to 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 prediction gets a little more complicated: a great band on your roster may make it much easier for you to promote all the bands on your roster. Similarly, a poorly-performing band will be a cash drain that can lead to financial struggles.
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   Create your team. Unless you're supremely talented in sales, marketing, music, business, art, conversation, and moonlight as a lawyer, you're going to want to develop a team. Here are some key skill sets that will enable your success:

   1. Marketing and sales: somebody who can get 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 persons will be key to your success: they're responsible for bringing talent in, and getting the word out. The better they perform, the more successful you'll be.
   2. Production. You'll need somebody who understands the recording process inside and out, who can find or develop good engineers, mixers, and producers, and who can run a recording session.
   3. Contract help. To keep costs down, at least at first, consider hiring other staff on a per-job basis. This would include logo and graphic design, legal, accounting, engineering, and other needs that only occur from time to time.