How to Start a Record Label with a 7-Step Business Plan

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Record Label 7-Step Business Plan

In this video I’m going to help you decide how to write a business plan for your record label.

I’ll walk through all the essential sections you’ll need to write, as well as giving examples to help kick start your own record label business plan.

Hi. My name is Nick Sadler from the Label Machine, and I help music artists and managers, run and grow their record labels.

Now, running a successful record label is like running any other successful business, first and foremost you need a plan. 

Every business I have started has begun with a plan.

It doesn't need to be fifty pages worth of minutiae account details, but, it is important to write down what your goals are for the first 12 months.

It's not just the final result of a finished business plan that is important, the process of creating a business plan is equally important as it forces you to make realistic decisions on how you are going to move forward and make the label a success.

Once you have made these important decisions and committed them to a document, any confusion or worry about what direction you need to go in is removed.

This will give you the confidence to move forward in a meaningful way, giving you the best possible chance of success. 

Also, some music distributors require a business plan before considering working with you.

If you want to distribute your music with an established distributor such as Ingrooves, Believe Digital, or you want to put your music on a specialist music store such as Beatport then you need to apply and get accepted by these distributors.

If you fail to show the distributor that you have a grasp on the business aspects of running a record label you will get rejected and you will fail at the first step.

Also, in some countries you need a business plan if you intend on opening a business bank account for your label.

In short, writing a business plan is an essential step towards building your record label.

I would suggest before starting a label, that you have at least three music releases you plan to release, with the first release ready to go.

By "ready to go," I mean you have a finished single or EP of music that is fully mixed down, mastered and ready to go out to the public. without any more changes.

When you write you business plan, you will have these first music releases in mind to help plan your label objectives.

Business Plan Breakdown

Title Page

This includes your: 

  • Record Label name
  • Business address
  • Email address
  • Phone number

Summary

This is the section that will summarise the main objectives of your label. This section will actually be written last.

After you have completed the rest of the document, you need to come back and summarise it into a short paragraph here. Here are a couple of examples:

Example 1:

420 Records is a new music record label focusing on building a brand that people can trust and turn to for the latest and greatest Hip Hop music. Working to sell & distribute music and merchandise worldwide through stores such as Itunes, Beatport and Spotify.

Example 2:

Kudo Records is a new indie rock music record based in Seattle that is focused on signing the new wave of local live bands in the state. Our mission is to sell every bands music release with at least one item of merchandise t-shirt and to support the live scene by running local stores at shows.

Business Overview

Introduction

In this section you want to introduce the key people who are involved in the label and what experience, qualifications and training they might have, along with where you will be based and the future goals of the record label. For example:

Founder Max Williams has been involved in the Hip Hop music scene as an artist for 15 years, DJ’ing across the globe, holding residencies at Miami;s LIV nightclub and a weekly radio show on Origin US. After being signed to various indie labels, Max has decided to establish his own imprint. Being a graphic artist, artwork will feature prominently throughout the labels releases and ethos. Digital music will be the revenue stream in the first year, but eventually the record label will offer merchandise and artwork prints based on the high quality artwork of the releases.

Current Position

This is a summary of where you are right now with your music plans. For example:

Currently we have the first release from ‘Contact One’ ready for a release in June, and have signed ‘Red Lights’ and ‘Matrixxx’ for subsequent releases.

Growth Plan

This is a summary explaining how you aim to grow your record label with your financial goals. For example:

We plan to release music from other artists, such as ‘Se Metta’, ‘B-Hive’, and ‘Midnight Hour’. We will grow revenue after the first year by running events based in the capital and main city centers focusing on the artist’s we have signed to the label.

Strengths, Opportunities and Core Values

This is where you will list your strengths and opportunities as a record label. It gives you an opportunity to create a USP and critical success factors.

If you have something unique that will ensure success, such as a link to a key industry contact, or opportunity, this is where you should list it. Examples:

Strengths:
•Understanding of the current music landscape via our current DJing bookings
•Links to multiple artists with established fan bases
•Advise and industry support via The Label Machine

Opportunities:
•Access to industry database, press and music industry contacts
•Access to other artists in local area


Your core values should answer questions such as:
•What is important to you as a label?
•Are you going to be pushing underground music, are pushing experimental music, is this to release your own album to support a tour, or are you interested in working with more mainstream music and artists?
•Is there anything unique you hope to achieve with your music releases?
•Are you using the profits for a charity?
•Do you want to focus on events only, or focus only on physical releases or a mix?


Some examples for Core Values are:
•To build a brand that people can trust and turn to for good quality music
•To have the confidence to push new music as opposed to just following recent trends
•To build on personal relationships within the music industry in order to create a successful brand that people trust and want to be associated with

Business Strategy

Outline your business strategy for the first five years. These are your tangible goals.

How many releases do you aim to have? Do you want to sign new artists? When do you aim to break even on the revenue? 

As a bare minimum your goals should aim to release at least 3 singles or EP’s in your first year if you are a DJ or band, and 6-8 records of you aim to sign artists to your label. I would also aim to be breaking even from 12 months of your first release so the label is supporting itself financially.

The 3-5 year goals are what you will be doing should you achieve your 1-2 years goals. These goals that are more flexible, and are likely to change but ensure you set goals of where you intend to go. For example:

1-2 Year
•To have released our artist album and a follow-up single.
•Have a combined download and streaming total of over 100,000 units
•To have set up a merchandise website that is turning a profit.

3-5 Years
•To have a full roster of artists releasing under the label.
•To have set up a management arm as a sister company to the label
•To be hosting club nights in Miami under the labels banner.

Distribution and Label Products

This is where you talk about your music products. You want to list your distributor and any other label products you aim to offer at the label.

First list your distribution channels for example:

Music distribution to all major stores of
iTunes, Spotify, Apple Music, Deezer, Amazon, and Google Play via the DistroKid distribution platform.

Events

If you are doing events, who will run the events and how will they be promoted?

Label events will be arranged with our contact ‘Zeal Promotions’ throughout North America, with our focus being on our home state Miami. Events will be promoted through local and national media coverage via ‘3rd Eye PR’

Merchandising (Optional)

If you are doing merchandising, who will be responsible? Where will you sell and manufacture your merchandise?

Abbie Street will organise and implement the merchandise for the label. It will be hosted on Shopify website, and manufacturing will be carried out by a print-to-order manufacturer based in Miami

Label Management and Operations

This is where you list who will be managing the label and any other team members you will have.

You can also list here any key partners you will use, such as the Label Machine, merchandise companies, or management companies. For example:

Label Management Team
Joe Stone – Label Manager
•Responsible for A&R, signing and managing new artists
•Managing the music distribution and royalties
•Administrating and registering the catalogue

Wayne Fever – Marketing Manager
•Responsible for online marketing and PR activities for releases
•Overseeing the artwork and marketing asset creations


Abbie Street – Merchandise Manager
•Organise and implementing the merchandise for the label.
•Maintaining the Shopify website
•Fulfilling the manufacturing and shipping

Marketing

In this section you want to put your marketing goals, objectives, targets and promotional activities for the label.

Goals and Objectives

Describe your goals and objectives around the marketing; list the campaigns and plans that you have in place and your strategies for the future.

Example:

•Research blogs and press publications that support your genre of music to create label brand recognition
•Develop innovative marketing plans that utilise chatbots and other cutting edge technologies to build an audience
•Increase sales through social media campaigns and PR strategies
•Increase awareness of artists and label with 3rd party revenue streams such film, TV and game sync deals.

Target Market

Here is where you can clearly define your target market. Important to put the genre of music you will be releasing, locations and age group as a minimum.

Example:
•We aim to sell to all audiences, but with a more biased approach by making sure we appeal to the up and coming Hip Hop music markets such as the U.S.A. and a core demographic of end users between the age of 14 and 30

Advertising and Promotion Activities

Here you want to describe what advertising platforms you will use to promote the label and the releases.

You might want to list any creative ideas to get the brand out there, any PR companies you might use for your first release, and which social media platforms you will promote on.

Example:
•Using physical assets such as vinyl and cassette mixtapes we will create a rich online experience based on real life products, which we believe is missing from a lot of digital labels today.
•We will use a DJ promotion service ‘The 7th Degree’ to garner maximum DJ support from the industry.
•We will run Instagram promoted stories and sponsored Facebook posts to create awareness of new releases to fans of similar genres.


Financial Budgets and Forecast

This is the section where you can provide financial budget and forecasts, such as:

  • Startup Label Expenses
  • Release Expenses
  • Cashflow Forecast
  • Optional Revenue Streams such as from merch and events
  • Profit and Loss Projection


Once you have completed this and have your budget you can copy and paste the summary page into this section of the business plan which you can see an example here.

When starting out its often difficult to forecast your expected revenue. One technique you can use is what I call the "20 + break even" forecast.

If you make the assumption that you want to cover your expenses and make a 20% profit, then you can estimate your revenue by adding up your expected costs for your first year of operation and adding on 20% more to the top. 

After your first year, you can then go back and adjust your figures to reflect your actual royalty income and update your business plan.

Conclusion

I know it it can be daunting to write your first record label business plan. But you have to remember, that what you write is not set in stone forever.

As your record label progresses, your business plan will change too, and it should. Use it as a reference document to guide you, that you review at least once a year.

Now, if you want to get a copy of the business plan template, that has more examples like the ones I have shown here, and get access to the budget template, then join The Label Machine below.

Joining will also give you access to tonnes of other resources, to build, monetize and grow your own record label.

Alright, I hope you enjoyed this video, I’ll see you on the next one.

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