Tag Archive for: finance

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5 Finance Tips for Musicians: How to Make Money & Fund Your Projects

finance tips for musicians

There are many articles out there telling indie musicians about all the cool ways they can make money in today’s music industry.

However, all that money that you could potentially make probably won’t equate to very much if you don’t have an understanding of personal finance and budgeting.

Without a sense of finance you could see your hard-earned cash going down the drain as a result of impulse buys, unstructured saving, and over-spending for your projects and tours.

If you’re far enough along in your career, your manager or accountant may take care of budgeting and finance, but, especially in today’s industry, most musicians starting out may only have a friend or classmate acting as their manager.

With all the stuff you need to get done, something as mind numbing as finance tends to get pushed under the rug in favor of more glamorous activities like recording, writing, and talking with fans on social media. But the fact of the matter is, it’s not glamorous to throw money away. And that’s exactly what you could be doing with poor budgeting and finance.

So how can you get a better handle on your finances and get the most money out of your music? It’s actually a lot easier than you would think – no boring accounting lecture necessary!  With just 5 finance tips for musicians, you can be more organized and make more money.

Want more music career tips? Download this free ebook to learn how to find your place in today’s music industry:

1. You Are a Business – Act Like One

The indie musicians who are truly successful think of themselves as a business and act accordingly. That is the first finance tip for musicians.

I know, it’s really easy to just pocket the money or split it up with your band mates on the spot after a gig, especially if you’re paid in cash. This method is fine if you’re a hobby musician, but if you want this to become your career, you’ll want to get more organized.

A great option is to have a secure place to put the cash you get from live performances. Envelopes and small lock boxes are great options depending on how secure you want to be. The key is to make sure that everyone in the band knows where to put the money so it stays safe and accounted for. No one wants to be in the position of telling their band that they misplaced a couple hundred dollars!

Beyond the gig itself, you’ll want to set up a separate bank account for your music income and deposit any money you get from your music in there. This will allow you to resist spending all your music income before dealing with the band’s expenses. Have a set time to pay your band members or yourself. This could be once a week, every other week, or once a month. It’s important to remember that you are all part of the business and should be paid in an organized fashion.

2. SAVE!

We all want a big pay check, but saving is really important too. You need to pay for the band’s expenses, and pay your band members, but remember to leave something in the bank. Even better, take a little bit off the top and save it. If you’re just starting out and not making very much it can be a very small percentage. The key is to just get in the habit of saving something.

This will be really beneficial finance tip when you are looking to record a new song or album or go on tour. Instead of having to ask band members to fork over money for the recording studio costs, you’ll be able to pull some dough out of your business bank account.

3. Spreadsheets Are Your Best Friend

The next finance tip for musicians is to use spreadsheets. I know, a lot of musicians (actually a lot of people in general) hate spreadsheets and avoid them at all costs. But keeping track of your income and expenses is one of the smarter things you can do for your music career.

As an indie musician, you have an extremely irregular income stream. Meaning you don’t bring a set amount each month. Your income is entirely dependant on the time of year, how often you gig, when you release an album, and a huge list of other variables. If you keep track of everything on a spreadsheet, your income becomes a lot more predictable.

Set up a spreadsheet to track your income and expenses over a full year. Divide everything up into categories like touring, recording, and publishing (you could even get more specific) and separate everything into months. Have total income for each month and another for the full year. There’s no better feeling than being able to look back at your yearly income from a few years ago and see how much better off you are now.

Aside from that, spreadsheets let you notice other trends in your career. You may find out that your average monthly income is $2,000 but it peaks above this in the summer months when you tend to gig more often. With these kinds of insights you’ll be able to avoid over-spending on the good months to compensate for the slower times.

The important thing is to get organized. You can get a bunch of spreadsheet templates for keeping track of your income and expenses and budgeting projects in the New Artist Model online courses.

4. Bootstrap

Don’t wait for someone to come along and lay a big advance on you. Start making and distributing your music now with what you have. Just like entrepreneurs starting a business, musicians need to learn how to make money, even it it is just a little bit every month.  This is one of the good musician habits to get into.

This really goes along with the Lean Startup philosophy. Make your music as good as you can with the resources you have available, release it, get out and gig, make some money, and use the money you gained to create your next recording. It’s a slow process, but in the end it’s better than waiting for some advance that may never come or putting yourself into debt by taking out a big loan to record a full album. The important thing is to start your business by generating some income.

5. Budget

The last finance tip for musicians is to budget. When you’re looking to go into the studio to record some new tracks or hit the road for some gigs, take time to budget of all your expenses beforehand. Make a spreadsheet for each project that splits everything up into categories. For example, an album budget could include rehearsal studio and recording studio costs, equipment purchase or rentals, session musician fees, producer and engineer fees, album artwork and/or photography, and digital distribution costs.

By laying all these costs out before you even go into the studio, you’ll have a better idea of just how much money you’ll need. If you’re figuring out the expenses as you go, you’ll always end up spending a lot more than if you plan ahead. If it looks like you’re going to go over budget you can choose to cut out that track that would require you to buy or rent a banjo, you could even record some tracks at home on your computer to cut down the amount of days you have to be in the studio.  The important thing is to plan ahead and develop a strategy for success.

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The New Artist Model is an online music business school for independent musicians, performers, recording artists, producers, managers and songwriters. Our classes teach essential music business and marketing skills that will take you from creativity to commerce while maximizing your chances for success. We’re offering access to free lessons from the New Artist Model online courses to anyone who signs up for our mailing list.

 

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Crowdfunding the Right Way

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In the past, money was a huge barrier for musicians, and one of the main reasons many were forced to tie themselves to a record label. Today, many musicians are finding their own ways to creatively fund their albums and tours, with the most popular option being crowdfunding. Crowdfunding is a huge undertaking, but, if done correctly, you can come out of it with a whole lot more than just money. It also presents dedicated and creative artists a chance to connect with their fans in a whole new way.

Learn how to run a successful crowdfunding campaign with these 5 tips:

1. It takes a crowd.  

I think a lot of people mistake crowdfunding for an endless well of money, but, the sky is not the limit. The amount of money you can raise is entirely dependant on the size of your fan base – your crowd. Generally, the more fans you have the more money you will be able to raise, although there are other variables like fan dedication and income level. Amanda Palmer was able to raise upwards of a million because she has a huge, dedicated fanbase with spare cash to throw around. Pretty much the perfect scenario.

There’s no way to tell exactly how dedicated your fans are and how much money they would be willing to donate, but you can look at some figures to get a better idea. Look at how many people you have on your email list, how many people come to your shows, and how many people you have following you on social media. Don’t assume that every one of your fans will donate – even the most amazing musician in the world couldn’t accomplish that.

Think about how much your average fan would be willing to spend to help your cause. If your fanbase is generally high schoolers or college kids, they may not have as much spare cash as working adults in their 30’s. Think about what your super fans may be willing to spend. If you offer any higher-end products on your website – like VIP passes – look at how many of those typically sell to gage the amount of dedicated fans you have. Use all of this to set a reasonable goal. Setting a goal too high and not meeting it is a depressing thing no one wants to face. Not to mention it definitely has a negative effect on your brand.

2. Choose the right platform.

There are tons of crowdfunding platforms out there, each with it’s own unique features and benefits. Don’t just use Kickstarter because it worked for Amanda Palmer. Have a reason for your platform choice.

Pledge Music is a music-specific crowdfunding and fan engagement platform with options to set up a crowdfunding or pre-order campaign. They have connections with music companies that can help you with things like manufacturing, marketing, and distribution and may be the best choice overall for music projects. Kickstarter has a huge profile, with hundreds of thousands visiting the site each day. On the downside, you only get the money if you meet your goal and you could get lost in the crowd. Depending on what kind of campaign you set up, Indiegogo can allow you to keep the money you raise even if your goal isn’t met. However, Indiegogo takes a higher fee from these kinds of projects.

3. Make a budget.

Your budget isn’t just what you want to fund. If you ask for exactly what you need to fund your recording or tour, you’ll find yourself in debt. Each platform takes a percentage fee from successful projects.

Taxes are another issue. Technically, the money you raise from crowdfunding is income and needs to be reported. This probably won’t be hugely significant for smaller projects, but all these costs can add up and you should take it into account.

On top of that, rewards cost money as well. People are paying for that t-shirt or vinyl, but you still need to make it (and ship it to them). Figure out exactly what each reward will cost you and how much they will cost to ship. If you have international fans, look into international shipping costs. The worst situation you could be in is not being able to get the rewards to your fans who took the time and money to help you out.

4. Think about your rewards.

On top of just budgeting, you need to think about your rewards creatively. Make your rewards relevant to your project and your fans. Teenage girls may love magnets made from secret, Instagram photos of the recording process. A slightly older fan base may really appreciate vinyls and even some higher-end custom vinyls with artwork. Think about the project itself. Having a signed electric guitar as a rewards for an acoustic album doesn’t make much sense. Get creative with it.

Make sure you have rewards that take different levels of fans into account so as not to alienate anyone. Digital downloads, physical CDs, posters, magnets, and other little things like that are great lower end options. These are great for your more casual fans who may not be willing to or have the means to donate very much. Mid-priced rewards like vinyls, a t-shirt, or personal things like signed copies or special notes are great for your more serious fans and those that crave personal interaction. Have a few higher-end options. A private house concert or VIP pass is a great way to get your super fans involved.

Keeping all that in mind, make sure you don’t over-invest yourself in the reward process. You need to make sure you have the time to create the rewards. Handwritten lyrics may seem like a good idea, but keep in mind that you could be writing hundreds.

5. Continuous content.

Crowdfunding isn’t just a beginning and an end. Mass pushes at the beginning and end of the campaign won’t get you very far. You’ll be left with an unmet goal and a bunch of annoyed fans who had to block your hourly updates from their social media news feeds.

Statistically, most pledges to crowdfunding campaigns come in at the beginning and end. People are motivated by new content and a deadline. You can use this to your advantage to drive more pledges in the middle of your campaign. Release a new, special reward halfway through your campaign. Keep in mind that the entire process is an opportunity to engage your fans in a new way. Release update videos showing your fans the progress of the album they are helping you make. Release short teasers or rough drafts of songs. Ask your fans’ opinions on your lyrical work-in-progress. Try to make the content exciting and engaging. You want to keep awareness for your campaign up but you don’t want it to feel pitchy.

Crowdfunding is a huge undertaking. If you’re looking to start your first crowdfunding campaign or want your second one to be more successful, check out the New Artist Model online music business school.

Dave Kusek

The New Artist Model in an online music business school for independent musicians, performers, recording artists, producers, managers and songwriters. Our classes teach essential music business and marketing skills that will take you from creativity to commerce while maximizing your chances for success.

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