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Author Topic: The Studio as a Business  (Read 8054 times)

jfrigo

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Re: The Studio as a Business
« Reply #15 on: December 29, 2005, 12:15:07 pm »

This is definitely the kind of thread that needs to show up more on these kinds of forums but seldom does. Even if it does, there is seldom a person willing to put it all out there for people to really learn from. Much respect, Steve.

Lots of people look at these boards and want to start a studio. It's easy to pick a lot of cool gear, spend all kinds of money on a space and a bunch of toys, but actually running a business is a different story. You need a plan and some projections. This could be in the traditional sense where you write it all down in a somewhat formal document, or it could just be chicken scratches on a sheet of paper to make sure you understand the nuts and bolts and the numbers balance. The writing of the more formal plan can be realy helpful, so don't discount its value. Once you start looking at all the expenses you'll have each month, from rent/mortgage, to utilities, to insurnace, to debt service on the equipment, you can compare that to reasonable (I said reasonable!) expactations of your income based on your market and your rates. It can become clear pretty quickly that you are overspending and can't make ends meet. That lets you tailor your plan and startup costs to allow your business to survive.

The other thing people sometimes forget when starting a studio business are the boring things you must do up front, or the yearly expenses as opposed to the monthlies. You will need to get your business license, you'll need office supplies, media, refreshments, and all that boring little stuff. You'll need to do some marketing coming out of the box because if nobody knows you're there, how will they be able to use your services? There will be business income taxes every year and license renewal, and probably a busines property tax as well. This is when they add up the value of everything in your space from the console to the paperclips and you pay a percentage of it to the government. All these little things need to be taken into account. They aren't free.

For those considering tackling a business plan, it will typically include these basic subjects:

1.Executive Summary (a brief introduction/summary of your business)
2.Nature of business (what services do you offer?)
3.The Market (who will your clients be?)
4.Competitive analysis (who is your competition and how will you compete?)
5. Marketing Plan (How will you attract business and get the word out?)
6. Operations (the daily nuts and bolts - where, when, how...)
7. Management (a bit about the owner and who will be running things)
8. Risk analysis (what could go wrong and how are you preparing for it?)
9. Conclusion (um...  I think this goes without saying)
10. Financial projections (out several years - show how both income and expenses will grow (more on the income hopefully) and demonstrate an understanding of running a business and all your financial responsibilities)

This is the kind of plan you can take to a bank, investor, or potential partner. Even if you aren't using the plan to secure startup or expansion capital, it still can be a very useful exercise that really will help you understand your business and develop strategies for success. You learn a lot about your business and are forced to think rationally about things you may have just been taking on faith previously. Writing the plan usually turns out to be modifiying the plan, but in the end you have a much better grasp on the whole thing and the numbers are more likely to work out. Give it a try!
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John Ivan

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Re: The Studio as a Business
« Reply #16 on: December 29, 2005, 02:09:28 pm »

Yep,, My very first room {very small} went down because I didn't look at any of this.. " Cool, I'm gona be a studio owner "   Well, the second time I tried, I wrote everything down and worked way harder. I made some money.. Not enough really, but I would gig 5 and 6 nights per week and do studio stuff all day or very very late at night.. I was trying to drop live gig's as I added more studio time. After a few years of this, I decided to move my rig home. I don't think I'll ever own another commercial room of any kind.. I just can't take the hours anymore because I have to play every night I can. The money is better..

Ivan..........
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rankus

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Re: The Studio as a Business
« Reply #17 on: December 29, 2005, 02:27:21 pm »

electrical wrote on Wed, 28 December 2005 10:28


Running a studio in such desperate conditions is only worth doing if you enjoy it for its own sake, and have a stable client base, low expenses and low expectations.


This is very refreshing to hear from someone at Steve's level!  A past studio of mine had a bumper sticker on the wall that read "If All Else Fails, Lower Your Expectations" ... I did and I am still here a decade later.... (Do it for love not money)

Also,:  Thank you Steve for your open replies in this thread.  A real inspiration to keep going.... I am planning to attempt to buy the next building I move to, and your comment on the long term goal of owning has confirmed my decision.

Thank you
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Rick Welin - Clark Drive Studios http://www.myspace.com/clarkdrivestudios

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Level

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Re: The Studio as a Business
« Reply #18 on: December 29, 2005, 02:31:38 pm »

First years as an indie usually go pretty good. You must rely on your repeat customer base or a contract to keep you going where you get some pre determined work by default. If I had no repeat business, it would be hell in a handbasket.

One thing to always note..when it gets really tough...at the 11th hour and you think things are very bleak with income...stiff it out a while longer and the floodgates open and the clients simply keep coming back for more AND bring their buddies along for the ride. You have to invest during your down time. With indie studios, you are a few months away from being broke.

Ask yourself:

How long can you survive with NO work at all..and pay your staff?
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Dave Martin

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Re: The Studio as a Business
« Reply #19 on: December 29, 2005, 02:37:46 pm »

jfrigo wrote on Thu, 29 December 2005 11:15

 
Even if you aren't using the plan to secure startup or expansion capital, it still can be a very useful exercise that really will help you understand your business and develop strategies for success. You learn a lot about your business and are forced to think rationally about things you may have just been taking on faith previously. Writing the plan usually turns out to be modifiying the plan, but in the end you have a much better grasp on the whole thing and the numbers are more likely to work out. Give it a try!



Jay's right; I did a business plan before I went for my first loan. Absolutely NOTHING worked out the way I thought it would, but I still recommend it. I should probably do another one.
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electrical

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Re: The Studio as a Business
« Reply #20 on: December 29, 2005, 03:06:37 pm »

Making a bsiness plan is important, and the outline above is a good one. Be careful that your business plan is not simply a list of pipe dreams though, as it can serve to cement your dreams into a kind of "but I had it all worked out..." kind of trap.

The biggest mistakes to be made in a business plan are:

jfrigo wrote on Thu, 29 December 2005 12:15


4.Competitive analysis (who is your competition and how will you compete?)...

Understand who has a lock on certain specialities in your area. You cannot do film scoring unless you are prepared for very demanding sessions with a lot of capital outlay. You cannot do jingle work without established contacts in the commercial/advertizing world. There are probably going concerns with happy client bases and decades-long relationships to confront here.

Quote:

8. Risk analysis (what could go wrong and how are you preparing for it?)...

There are worse things than not getting enough business, though that is the place most plans over-estimate their potential. You could get flooded. You could have to get a new roof. You could have a blown inspection (be especially wary of buldings without EPA certificates), leading to enormous compliance costs.

Quote:

10. Financial projections (out several years - show how both income and expenses will grow (more on the income hopefully) and demonstrate an understanding of running a business and all your financial responsibilities)

This is where most people get all pie-in-the-sky. Do not assume more than 50 percent occupancy in the first year. That's actually really good, if you can hit it, but not impossible. Thirty or forty percent is more realistic. Do not assume your business will grow more than a nominal amount, and do not assume you will be able to make rate adjustments in the current climate. You should set rates that allow you to operate, and be prepared to live with them indefinitely.

Quote:

This is the kind of plan you can take to a bank, investor, or potential partner.

I do not suggest you get a partner who isn't going to be part of the day-to-day running of the business. It seems attractive to use other people's money, and the first year may work out, but after that, when you are still not running at a profit, your relationship with a silent partner is likely to go straight into the shitter. I know of several studios that have become derelict hulks because they tried to use someone else's money, and then the sucker eventually wised-up.

A partner who is also an every-day participant in the studio is much less of a gamble, because he will see the way the studio operates and will feel he has some control over it.

Still, I am extremely happy that I've never had to answer to anyone regarding my sometimes-contrary business ideas. I have been right, and we've survived through very difficult times because of it, but I don't know that I could convince anyone else it would happen this way.
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steve albini
Electrical Audio
sa at electrical dot com
www.electrical.com

rankus

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Re: The Studio as a Business
« Reply #21 on: December 29, 2005, 07:20:02 pm »

electrical wrote on Thu, 29 December 2005 12:06



Still, I am extremely happy that I've never had to answer to anyone regarding my sometimes-contrary business ideas. I have been right, and we've survived through very difficult times because of it, but I don't know that I could convince anyone else it would happen this way.



Best thing I ever did was to dump my partners!  (This may be the most important statement to consider in this whole thread....)  Don't answer to anyone and you stand a much greater chance..  I feel in hindight that a studio really needs to be "one mans vision" kind of "entity" (Notice I didn't say "biz")
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Rick Welin - Clark Drive Studios http://www.myspace.com/clarkdrivestudios

Ive done stuff I'm not proud of.. and the stuff I am proud of is disgusting ~ Moe Sizlack

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Bmbch

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Re: The Studio as a Business
« Reply #22 on: December 29, 2005, 09:58:19 pm »

electrical wrote on Thu, 29 December 2005 15:06

Making a bsiness plan is important, and the outline above is a good one. Be careful that your business plan is not simply a list of pipe dreams though, as it can serve to cement your dreams into a kind of "but I had it all worked out..." kind of trap.


Good point. I am curious how your initial plans for Electrical compare with the experience. Did you estimate $2 million to build? Did you estimate earning $350,000 - $400,000 annually? What didn't you anticipate? What were you overly worried about? Were you right on the money with anything?

(If we were all huddled around a campfire in the woods instead our computers, I would ask (in my best Robert Bly/Barbara Walters voice) "Looking back, what would you say was your biggest mistake?")
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TheViking

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Re: The Studio as a Business
« Reply #23 on: December 30, 2005, 01:34:37 am »

Thanks again, Steve for being here and being so willing to share your information and wisdom.   I also am interested in knowing your opinion on the legal stuff.   At what point do you feel contracts and lawyers are helpful / needed?   I own my own facility and I have gotten by so far without much legality, but as I get busier my concern is that I will need to make budget for attorney fees, etc.   Any advice for those of us who are just getting started and any pitfalls and/or safeguards you might see in having legal representation / advice at certain stages of this crazy business?
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Jules

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Re: The Studio as a Business
« Reply #24 on: December 30, 2005, 09:22:40 am »

[/quote]

There's an analogy I've used before, and I like it, so I'm going to use it again:

I don't think it necessary (or appropriate) for a gynecologist to get turned-on by every vagina he is faced with. I think he needs to have a different relationship with the vagina. I think engineers need to have a similarly-distinct relationship with the music their clients bring to the studio.

[/quote]

So musicians collectivly seen as a bunch of vaginas? We would phrase that slightly differently here in the UK but point well taken..

Very Happy

Bob Olhsson

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Re: The Studio as a Business
« Reply #25 on: December 30, 2005, 11:50:05 am »

Over the years I've had numerous offers of partnerships to go into the studio business. A few things I learned along the way were:

1. don't include gear in your calculations. Gear can always be rented or leased. If this would be difficult because of your location, renting studio time to others is going to be comparably difficult. Likewise if it would be too expensive, you need to think really hard about being able to charge a profitable rate.

2. the overhead of a one room facility is just about the same as that of a three room facility.

3. a studio manager can make you or break you

4. one of the first things Wally Heider told me as he explained the difference between working for a record label and for an independent studio was that the studio business is the real estate business and not the music business.

I've watched many many people build studios that lost money from the very beginning and finally went under because of there wasn't  enough coming in to keep the gear running. Some of these rooms were very busy right up to the end. It's an unfortunate fact of life that we all have to compete with people who think they can afford to lose money. The lesson in this is to concentrate on selling service rather than gear.

rankus

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Re: The Studio as a Business
« Reply #26 on: December 30, 2005, 03:03:08 pm »

Bob Olhsson wrote on Fri, 30 December 2005 08:50


4. one of the first things Wally Heider told me as he explained the difference between working for a record label and for an independent studio was that the studio business is the real estate business and not the music business.




Worth repeating!
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Rick Welin - Clark Drive Studios http://www.myspace.com/clarkdrivestudios

Ive done stuff I'm not proud of.. and the stuff I am proud of is disgusting ~ Moe Sizlack

"There is no crisis in energy, the crisis is in imagination" ~ Buckminster Fuller

electrical

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Re: The Studio as a Business
« Reply #27 on: December 30, 2005, 10:52:10 pm »

Bob Olhsson wrote on Fri, 30 December 2005 11:50


2. the overhead of a one room facility is just about the same as that of a three room facility.


Staffing is a major consideration, and having run both a one-room and a two-room facility, I don't believe this is true.

A one-room studio can be run by three people comfortably, two, if they're dedicated maniacs, and one if business is modest and he is also a dedicated maniac. A two-room facility can be run by four people at a n absolute minimum.

We (Electrical Audio, a two-room facility) have a staff of six, and we are sometimes stressed to capacity in handling all that comes up in any given day.

With employees and multiple clients come additional responsibilities and paperwork, and by the time there are two studios working and a staff to manage, it is imperitive to have full-time office staff as well. That can be one person if he is a dedicated maniac and perfect for the job, or two if they are lazy layabout degenerates named John Novotny and Russ Arbuthnot.
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steve albini
Electrical Audio
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thedoc

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Re: The Studio as a Business
« Reply #28 on: December 31, 2005, 11:49:54 am »

I think Steve is right on the money in terms of staff count.
Years ago (did I say MANY years?) I ran a one room facility and three people was perfect.  I did the bulk of the sessions, someone else either helped out or dealt with middle of the night additional stuff, and the third person did the paperwork and took out the trash, etc.
This studio had occupancy at about 60% and it felt like things never stopped.  

One person would have dropped dead.
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Doc

minister

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Re: The Studio as a Business
« Reply #29 on: December 31, 2005, 12:08:00 pm »

electrical wrote on Wed, 28 December 2005 18:34

I will record any swinging dick whose checks don't bounce. I think it would be both rude and counter-productive to vet clients along aesthetic lines.
that's an awesome quote.  and well said.

...however, i refuse to record any dick swingers!  Laughing
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