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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.

1. You Are a Business – Act Like One

The indie musicians who are truly successful think of themselves as a business and act accordingly.

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 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

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

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.

 

Here is a fantastic compilation of posts and articles from 2012 about managing startups from  Professor at Harvard Business School who studies lean startups, entrepreneurship, platforms, and network effects (Twitter: @teisenmann).  This is so much information and wisdom here for anyone starting a new venture or trying to make their startup successful.

As Tom says “The generosity of the startup community is amazing, and these insights are invaluable to those of us who teach and coach aspiring entrepreneurs.”  Dig in, there is a lot to digest:

Lean Startup

Business Models
Customer Discovery and Validation

Marketing: Demand Generation and Optimization

Sales and Sales Management
Viral Marketing
PR Strategy

Branding/Naming a Startup

Product Management/Product Design

Business Development

  • John O’Farrell of a16z describes how quality trumps quantity and clarity regarding mutual objectives is crucial in doing business development deals, using Opsware’s transformative distribution agreement with Cisco as a case study.
Scaling

Funding Strategy

Founding Process
  • My colleague Noam Wasserman published his book, The Founder’s Dilemmas, that describes tradeoffs that founders confront when deciding when/with whom to found, how to split equity, how to divide roles, etc.
  • Blake Masters’ summary of Peter Thiel’s Stanford CS183 lecture on the importance on early founding decisions.
  • Charlie O’Donnell of Brooklyn Bridge Ventures on questions that co-founders must address ASAP and the concept of the “minimum viable team,” i.e., the smallest set of skills needed to get traction in an early-stage startup.
Company Culture, Organizational Structure, Recruiting and Other HR Issues
Board Management

Startup Failure

Exiting By Selling Your Company

The Startup Mindset and Coping with Startup Pressures

Management Advice, Not Elsewhere Classified
Career Advice (Especially for MBAs)

Startup Hubs

  • Brad Feld of Foundry Group and TechStars has published the book Startup Communities, a guide to building an entrepreneurial ecosystem.

Tools for Entrepreneurs

  • Beyond Steve Blank’s Startup Owner’s Manual, a book he co-authored with Bob Dorf, here is a list of the fantastic resources Steve has made available to the startup community — mostly for free.
 Original post is here.  Thank’s for compiling and sharing this Tom.

Patronage of the arts is a time honored practice that is still alive and well in the music business.  Many examples of fan financing from Ellis Paul, to Jill Sobule and many others have been reported and detailed recently in this blog and others.  Now a group of musicians from California have put together a very interesting program to raise money for commissioning projects that I hope catches on.  We need more thinking like this in the music industry today.  Effective and creative methods of connecting music fans to artists, writers, composers and producers will help propel the next generation of music making.

Symphony of a Million

“Symphony of a Million” is a 6-month campaign, a commissioning project that brings together composers, performers, and the general public.

The goal is to sell 1 million notes. Purchased notes will be used in not just one single million note work, but rather many new works. Composers will work with performers and compose pieces of varying lengths. The first work to be written will be a 1000 note work for solo marimba composed by Music Academy Online founder, Dave Schwartz, and written for percussionist Nobue Matsuoka. The second work will be a 4000 note composition for saxophone and harp and it will be composed by Anthony Lanman who will be working with saxophonist Dr. Noah Getz and harpist Jacqueline Pollauf who perform together as the duo Pictures on Silence.

* Buy a note for $1

* Each note becomes part of a piece of music composed by award winning composers. Throughout the process we will be commissioning composers to write new works of varying lengths using the notes that you purchase.

* A special “Symphony of a Million” concert, sponsored by Music Academy Online and featuring world-class ensembles, will premier all of the works created using the notes you buy. The concert will be held May 18, 2011, the 100th anniversary of the death of Gustav Mahler, the man who composed the “Symphony of a Thousand.”

* Buy as many notes as you wish. Dedicate the notes to someone special. Help to shape entire sections of new music with the notes you select! Your name (and theirs) will forever be part of the final scores.

* Encourage your friends and family to buy notes.

Find out more here.

There is nothing new except what has been forgotten. Things have a way of cycling around, and if they are effective, becoming novel again when more recent methods of making progress fade away. Fan financing is picking up steam as a way of raising money to support artists in the face of falling label support. Like the patron model of old, artists are reaching out to their fans, offering incentives and various forms of access for fans that donate money in support of their artist’s work.

This model is not new, but is gaining steam once again. And why not, it works. In the 70’s Cris Williamson, who just spent a week in residence at Berklee used fan financing to raise money for her album projects which helped to start the women’s music movement. She started the first women’s music label, Olivia Records using fan financing as a strategy to fund numerous projects including the label itself. Now lots of artists are returning to this strategy to fund their careers. James Reed has a new story in the Boston Globe on the subject. Enjoy.

Lighters down, checkbooks up
A growing number of musicians are looking to fans, not record labels, to help fund their albums and tours. And giving has its perks.

By James Reed, Globe Staff | April 12, 2009

Ellis Paul, a veteran singer-songwriter who first made his name in New England’s folk clubs in the 1990s, found himself in a disconcerting position last year. He had decided not to renew his contract with Rounder Records, his longtime label, but wanted to make a new album.

With no immediate ideas for funding, Paul took a novel approach: He enlisted his fans, posting a letter on his website asking for donations. Since July they’ve surprised him by contributing more than $90,000 through a Framingham-based online service called Nimbit, along with checks sent in the mail.

“When you’re only selling 20,000 or 30,000 records, you don’t really need a label,” he says. “We figured we could do this in-house, but we just needed the money, and where was the money going to come from?”

In a growing trend reminiscent of the old-fashioned ways of artists and patrons, musicians around the country – including local singers Mieka Pauley, Mark Erelli, Kris Delmhorst, and former Throwing Muses singer-guitarist Kristin Hersh – are depending on their fans for unprecedented financial support. And it’s not just limited to American artists. In France, singer-songwriter Grégoire channeled fan funding through the website MyMajorCompany.com and released “Toi + Moi,” which peaked at No. 2 spot on the French album charts.

Even as the economy deflates and the record industry continues its downward spiral, indie artists are finding that their supporters are eager to help. In a sense, the fans are replacing – or at least augmenting – the traditional role of a label, which previously would have financed the album with a monetary advance and then taken care of the promotion and distribution.

Piano-playing songwriter Seth Glier, who lives in Western Massachusetts, is only 20 but has already built a fan base that supported him on a recent monthlong tour. Through online efforts, Glier raised $2,500, which came in handy as he and a bandmate zigzagged across the Northeast and had to pay for gas, tolls, and the occasional hotel room.

The initial goal was to raise $500, which Glier accomplished within two hours and then kept going. Glier admits it takes a certain caliber of artist to ask fans outright for money. “It was an idea I had a couple of years ago, but I have a really hard time asking for help,” he says. “When I was able to unclench my fist, it was great to realize how many people were there for me.”

The fans aren’t technically just giving money to these artists: They’re buying services.

To fund “The Day After Everything Changed,” his new album out in the fall, Paul allowed fans to buy different tiers of sponsorship, ranging from $100 (the “Antje Duvekot Level,” named after the local singer-songwriter) up to $10,000 (“the Woody Guthrie Level”).

The higher the contribution, the greater the goods. For $100, you got an advance copy of the album with a bonus disc of demos and outtakes, along with tickets to one of Paul’s shows. For the top-level contributions, of which Paul received a few, fans got several perks – everything from a one-year membership to Club Passim to a signed acoustic guitar to a credit as an executive producer of the album.

One $10,000 contributor, a Boston-based fan who wished to remain anonymous (“People are losing their jobs and homes right now. I don’t think it feels sensitive,” she explains), says she and her husband couldn’t pass up the opportunity to have him write a song for them, one of the perks at their donation level. They even visited Paul in the studio.

“We left feeling that our donation – as well as everybody else’s – is in very good hands,” she says. “In this day and age, to pull out your pocketbook, it’s got to be something pretty compelling.”

Karen Zundel, a librarian in Pennsylvania who’s been a devoted Ellis Paul fan for 12 years, says she even saved up for her contribution because it held more importance than your typical splurge. “The arts are what sustain us and bring individuals and communities together and help us to connect with our innermost beings,” Zundel says. “A new car won’t do that. When you buy a new car or a new outfit, you get that little thrill that lasts very temporarily, and then it’s gone. But I think art really sustains me. It lasts.”

But the way that art gets to the consumer is changing. Dave Kusek, vice president of Berklee College of Music who co-authored the book “The Future of Music: Manifesto for the Digital Music Revolution,” says the role of record labels is declining.

“I personally think unless you need massive radio airplay, there’s very little reason for record labels to engage with artists anymore,” he says. “It’s a relic of the past in that artists today can find other ways to get to the market, to get money, to distribute their product in a way where they have a lot more control.”

Kusek acknowledges there are pitfalls to blazing a new trail with fan funding, though. “I do think there’s some risk if you don’t deliver,” he says. “Essentially, you are relying on people’s trust in you. They’re effectively loaning you money in the hopes that they’ll get something in return. So if you don’t come through, you’re running the risk of alienating your fans and eliminating those relationships.”

Jill Sobule, who rose to fame in the mid-1990s with the ubiquitous hit “I Kissed a Girl” (long before Katy Perry swiped the topic), recorded “California Years,” set for release on Tuesday, with the help of $80,000 from fans after establishing a website, www.jillsnextrecord.com, specifically for the project.

“I know some people say that’s a lot to record a record,” she says, “but it’s also for everything a big label is supposed to do: publicists, marketing, promotions, distribution. I’ve pretty much used all of it.”

Like Paul, Sobule offered various services at different price points. For $10,000 one lucky contributor got to sing on a new song. Sobule says she vetted the idea with her fans first. “That’s really important: You leave out the middleman and go directly to the fans and talk to them,” she says.

The one thing she hadn’t counted on was the level of freedom fan funding brought her, both financially and creatively. “In the old model, you’d have to sell 150,000 albums for people to think you were successful,” she says, “and now you don’t have to.”

“It definitely is humbling,” she says of asking fans for money. “I feel like I better do the job for my fans. I better bow down to them more than a record label. They’re the ones in control now, in a way.”

James Reed can be reached at jreed@globe.com.