The music business once had many full service major labels. The labels weren’t competing with file sharing; vinyl to CD conversion kept catalogue recordings vibrant and productive; dozens of electronics and media stores were thriving selling music, books, and video products. And then the Internet matured, and with that maturity came the realization of how really immature the music business was. It was unable to fend off theft of its intellectual property, it clung to its decades-old business model, it lost valuable time trying to deny that the digital age had anything to do with music, and then it watched as the sale of recorded music withered. It took the music business longer than many had thought it would, but it succeeded in embracing the new environment for recorded music. Among the biggest changes was the reduction of major record labels from a dozen to three. Labels were consolidated for the efficiency it created. Efficiency in this instance meant abolishing redundant employee positions and eliminating non-essential services from the company; in other words, “let’s fire some people we don’t need and let’s stop spending so much money on things we don’t think are important.”
With this comes the need to discuss artist management in terms of entrepreneurship. As companies have peeled off or drastically reduced services they have previously provided to artists, it has become increasingly important that an artist who presents themselves for a recording or songwriting contract has a measure of creative commercial maturity—meaning that companies are unwilling to spend as much time or resources helping an artist or writer develop into a market-ready asset. And with those services gone, displaced former employees—now entrepreneurs—have set up their own small companies as the go-to places for outsourced services. Those who decide to become artist managers assume a lot more responsibility for providing some of those former label services to their artists.
And that’s the essence of entrepreneurship: finding a need that isn’t being served, being willing to assemble the resources necessary to start a new business, and having a vision to separate it from the competition. And that’s the work of the entrepreneur.
THE TOOLS FOR THE ARTIST MANAGEMENT ENTREPRENEUR
Someone who has chosen to be an artist manager doesn’t necessarily need the broad education provided by a bachelor’s degree. Certainly a four-year degree or even a masters degree in an area of business will help you learn about general business and the music business, and will be helpful in managing your band or opening an artist management business.
Depending on where you are in your life, the consideration of four or six years of formal education plus gaining some experience may be a time investment you can’t or don’t want to make in order to start your business. However, there are some less time consuming alternatives that you could consider. First, the book you’re reading now gives a general look at the music business and a close look at the profession of artist management. My general chapters about concerts and touring, recording, and songwriting will demonstrate how income flows to the artist from those three key areas. So, reading books on business subjects involving the music industry is always a good starting point. Taking your pursuit of knowledge to the next step, there are several top-tier universities that offer varying levels of music business certificates, which do not require your achieving anywhere near degree status, but will have you prepared with a broad and current understanding of how the music business does its business. Google the search terms “music business certificate” to see what your options are. You may find that a community college in your area offers an associate’s degree (two years of study) in the music business, which can be a low-cost alternative to a four- or six-year degree path. Whichever path you choose to get your education about the music business, as an entrepreneur it is essential that you include at least a couple of courses on general business. Without understanding how general business functions and succeeds, your success as an artist manager entrepreneur will be at greater risk from the beginning.
The key here is that an education in the music business not only teaches you the workings of the industry, but it also teaches you the language of the business. All disciplines and areas of expertise have expressions and specific terms that are unique, and part of an education of an entrepreneur includes learning the “language” of the music business. For example, the word “promotion” in general business marketing terms means providing a special incentive to purchase; someone who works in “promotion” in the music business is employed by a record label or management company to lobby radio stations to play their artist’s recordings.
Arguably experience is the best teacher. Certainly the experience of success, even in the smallest way, can be reinforcing. And a failed effort should always be a learning opportunity. But experience coupled with some education can move an artist manager through the early years of the entrepreneurial experience both quicker and with greater prospects of success.
Acquiring experience can be a challenge for anyone who wants to enter a field in which they have little experience themselves. Some of the certificate and degree programs I mentioned earlier include opportunities for internships in the area of artist management. With internships you will experience the operation of an artist management company at firsthand. As you work through your internship, you’ll have opportunities to meet people who can become part of your network, even though it’s in the incubation process.
Another way to gain experience is through the experience of others. What I mean is, find a mentor or counselor with whom you can have continuing conversations about your ongoing efforts to develop as an artist manager. Seek out people who can tell you where to put your energies, how to focus your effort, and to point out ways to avoid mistakes that they made that cost time and money. In other words, allow them to give you the benefit of their experience. Even if your music business network isn’t well developed, use it to find some who can mentor you. Just having a family member, friend, or associate listen to you talking about your endeavor can reveal an opportunity or weakness you haven’t considered. And certainly finding an entry level job with a management company can give you valuable experience.
As the entrepreneur, it’s up to you to decide what kind of an artist management company you want to have and how the business will be fulfilling and rewarding for you on a business and a personal level. In other words, this vision for your business will help you set its values and goals, and direct the work of the company. Mission statements define what your company is today, often in terms of customers, service, and serving needs. However, an entrepreneur’s vision is an expression of what he or she feels the business could be in some defined future—perhaps in a year or two—and then develop a strategy to make it happen.
For example, a woman who has always wanted to be an artist manager and has the requisite background to start her own business may choose to manage only women seeking careers as artists. She sees her business in two years as being able to create opportunities for women who are performers and writers, and to become known in music business circles as one who represents well-prepared talent. That’s her vision, and her planning, her time, and her other resources begin the day the business opens with a clear understanding of where she’s going with her business.
Chris Ash lists these points about a focused entrepreneurial vision:
• It identifies direction and purpose
• It sets standards of excellence
• It inspires enthusiasm
• It encourages commitment
• It is easy to understand
• It challenges and inspires employees
• It reflects the company’s unique strengths
• It fits with its culture and values
• It results in efficiency and productivity (Ash 2014).
And even if your management company begins with you as its only employee, your vision will keep you focused and it will be a touchstone for you and your company as it grows.
At this point, the entrepreneur manager must validate or modify the vision for the company based on the environment of the music business. Is the vision realistic given what’s happening in the industry?
A business plan can answer the question of whether the company can thrive in today’s music business. And it’s absolutely essential for anyone planning to open an artist management company to develop a detailed business plan specific to their vision and the path to the company’s growth and development.
There is a lot of guidance on writing a business plan, but most have the same elements and most are patterned after those shown on the Small Business Administration’s website (www.sba.gov). But there are a few specific areas of the plan that can cripple a new artist manager’s business if they aren’t honest with themselves when preparing it. First, you must be confident you have the education, experience, and network in order to do business as an artist manager. If you can’t get through to the gatekeepers, you can’t get business done. Sure, some of that will develop as time goes by, but you must be able to connect with people and companies on behalf of your artists.
You must do a thorough analysis of the number, kind, and location of artist management companies as well as the most current short term projections for the health of the recording and touring sectors of the music business. Don’t seek out a couple of data points and feel that is adequate. Pull together a complete and deep look into the assumptions the business forecasters are using, and consider how well you feel you can compete in an environment like that. You will need an understanding of the current music in the genre you favor for management, looking at things like:
• How many groups, males, and females are finding success and are there any trends here?
• Does the music being recorded have any tendency towards themes?
• How are sales of recordings and performance tickets for the genre? And how are sales trending for all genres?
• What is happening in corporate radio, how many stations program this kind of music, and how accepting is traditional radio and online streaming of new artists in this genre?
• How many new artists get into the top 20 airplay spots? This is where the money is, and an analysis of chart trends for a year or so can tell you about opportunities for new artists.
• What tools are other artist managers using to launch new artists and how effective are they?
• What trends are appearing within the culture of the genre?
You will need a realistic idea of how you will be able to promote and market your artist(s) at the level they will work. If you are a self-managed artist, or if you manage your own band, consider what it is that you’ll have to do to compete with the many others who are trying to make a living doing what you plan to do. Can you realistically earn enough after expenses to satisfy the financial needs of yourself and your band members—or do you need to seek a booking agent and perhaps a manager to help you make a place for yourself among the competition?
Likewise, a manager needs to know how he or she will market their artists against others who are also doing the same thing, how they can make their artists stand out, and how much in the financial plan needs to be set aside for that expense. A full view of financial planning will be discussed in the money management section of this chapter.
An important part of your business plan is making the decision about what form your business will take. In Chapter 8 we discuss forms of business in terms of the artist, and you must make the same decision for the company you start. As in the case of the artist, the manager entrepreneur should seek advice from an accountant or an attorney (or both) to help you decide which form is best for you, based on your overall business plan.
The business plan you prepare will perhaps be the key to attracting the funding you’ll need to have for your management company during the early, lean times, up to the point that your earnings cover your expenses. For many entrepreneurs, including artist management business people, it can easily take three to five years to make a profit.
THE SKILLS AND CHARACTERISTICS OF THE ENTREPRENEUR MANAGER
There are many characteristics of people who work in artist management that are the result of where their life has brought them, along with the personal attributes they have acquired. In that way, everyone is different in their own way. Skills, however, are those things a manager can learn, and having as many skills as you can develop makes you a more effective advocate for the artists you manage.
One of those skills is negotiating. Nearly every commitment a manager makes on behalf of their artists involves negotiation toward finding agreement. That’s the way basic business negotiation is: “I’ll give you this if you’ll give me that.” If that isn’t agreeable, then the two parties seek a compromise to close the deal. Being an effective negotiator is a skill that requires some measure of training for most people. While there is give-and-take as part of the process, there are also other things going on at the same time, not unlike playing a hand of poker. If the manager doesn’t have negotiating skills in their background, many colleges and universities offer courses and seminars in business negotiation. Take the time to learn this skill. For some negotiations, you will want to rely on your attorney, and a course in negotiations will help you know when to turn to him or her.
Managing disagreements and conflict in a creative environment is another of those skills that often requires some guidance through training. Conflict is perhaps at the top of the list of things that people don’t want to deal with; conflict makes everyone uncomfortable and needs someone to step in and bring it to resolution. Disagreements among musical groups can be among the most challenging for a manager to sort out, and often managers won’t consider taking on groups as clients because of their propensity to break up the act and leave the manager with a time and money investment he or she will never recoup. Regarding conflict resolution, training through professional seminars offered at many colleges and universities covers topics including special communication skills, the basics of problem solving, and conflict management models.
Among the most important characteristics that management entrepreneurs have is that they are willing to accept risk. Risk is part of the underpinning of entrepreneurship. If you start a business in a very competitive industry like the music business, the success or failure of it is entirely yours. If the business fails, you stand to lose all that you’ve risked. But the nature of entrepreneurs is that they are okay with risk because they have measured the risk and feel they can be successful with their venture.
Some people assume that the artist manager must have an outgoing personality in order to achieve success in a business that seems so socially oriented. It comes down to a matter of style. Someone who seeks out business-related social events enjoys building the important network that way, but may not enjoy attending to the details of planning and finance. Likewise, someone who is more introspective brings advantages of attention to the details and tasks needed to manage. Both styles have their relative strengths, and I know very successful managers with both. The advice here is to be as social as you are comfortable with being.
Effective entrepreneurial artist managers, by definition, are proactive in their business. They are goal-oriented both for themselves and their artists. After all, no one else is bringing business in the door but you and, without initiative, your business is at risk as well as the careers of the artists you manage. Being self-motivated means that when nothing is going on, it’s up to you get something going.
MONEY MANAGEMENT: YOURS AND THEIRS
Understanding and managing the sources of income for yourself and the artist are among the most important functions of the artist manager entrepreneur. Some artists want to be active participants in overseeing these aspects of their careers, but artists in the development stage especially soon find out that the business side of their career is better handled by their manager. Until new artists become comfortable with someone else managing their earnings, it is important that they participate in the financial accounting for their work, and, more importantly, develop the understanding of reports and documents that show their earnings and the costs it took to create those earnings. Depending on when they are ready to place major reliance on the manager to oversee their business affairs, they will meet regularly to review reports and financial summaries that will be as general or detailed as the artist requires. Because disagreements over financial matters are often the catalyst for ending relationships, it is important that the artist be as much a part of the financial accountability and reporting as is necessary. Likewise, decisions the manager plans that impact the earnings of the artist should always be done in consultation with the artist. For example, if a performance contract requires the rental of additional equipment which will reduce income from the booking, the manager should be sure the artist understands this before the contract is signed.
The sooner that the artist finds a level of comfort in having the manager oversee their business affairs, the sooner the artist can build a focus on creativity and artistry—which are the elements that create the true value and earning potential in an artist’s career.
This section is not intended to show the artist manager entrepreneur how to become an accountant or even a bookkeeper. My intention is to show simple ways to keep financial control of your company.
Knowing where and when your money is coming into the company and knowing when and where it must go out of the company are perhaps the most important pieces of information you can have for the health of your company. It really is the simple concept of balancing the amount that comes in with the amount that goes out. If more comes in than needs to go out, that is easy to manage; if more goes out than is available, it needs to be fixed. The starting point in managing your company’s money is to put together a budget. As you prepare a basic budget, know that budgeting is nothing more than setting priorities for your management company—funding and amounts are set aside in the budget based on what you think are the most important requirements for the company. Since you have already prepared one for your Business Plan it may not be difficult to do, but let’s go through the steps:
1. Determine what your monthly basic recurring operating costs will be for your company, such as office space, phone, supplies, utilities, car expenses, and rent.
2. Determine how much you will include for monthly business travel and entertainment.
3. And determine how much you will require for your personal living expenses each month, because your business will be the source of income for paying yourself.
Be realistic with these amounts and base them on something. By “something,” I mean how much will each of these expenses specifically cost based on your research. Finally, determine how much money is coming in per month. If this is early in your company’s life, determine how much of your available financial resources you are able to set aside to operate the company for a month and cover your living expenses.
Total your income sources and total all of your expenses, then subtract the total expenses from your total income. If you have more income than expenses, you have a manageable budget for you and your company. If you have more expenses than you have income, this is the point where a budget becomes an exercise in setting priorities. In order to balance your budget (where income and expenses are equal), you will need to find places where you can reduce spending—or reach into your personal resources to balance your budget, which is a short term strategy, and one which you won’t be able to sustain in the long term.
Somewhere in your career you received a regular paycheck from an employer. It was easy to plan your income and easy to plan when your regular bills should be paid. But as a business owner, your income can be somewhat unpredictable since it is based on the earnings of your artists which can be irregular in amounts and timing. For example, some of your artists’ performances will pay more than others, causing your commission to vary; winter performances in many parts of the U.S. can be victimized by the weather, and the most you may be able to earn will be a commission from the guarantee, if there is one.
And the timing of your expenses is equally important. Both small and larger management companies track the impact of operational expenses on a regular basis. All track them on a monthly basis, but some keep up with both income and expense balances on a weekly and sometimes on a daily basis—especially new companies. Nearly every decision an artist manager makes during the typical business week has an impact on expenses and income for you or the artist, and it’s important to know that those decisions are in line with your budget expectations. For example, if you decide to have an artist travel in a van and find you need to add a trailer for additional equipment, you can easily increase the budget by several hundred dollars a week for rental and lost gas mileage from towing.
An accountant can prepare monthly operating information in what’s called a Cash Flow Statement. It gives you an ongoing monthly report that summarizes what income you had, what expenses you had, and what cash you have left that can be carried forward to the next month. However, if you choose to use software like Intuit’s Quicken or Microsoft’s Money, you can spend 30 minutes with YouTube tutorials and your software, and you’ll be ready to track your daily, weekly, or monthly cash flow information yourself. If you do this yourself, you will also need the discipline to enter all of your company expense items as well as income. I can’t emphasize enough how important it is for you to know your cash flow information as you consider decisions that will impact your budget.
Two other money management tools you’ll receive from your accountant will include an Income Statement. This typically is a monthly or periodic statement that tells you how much revenue your management company brought in from all sources and how much your company expenses were. The difference between this and a Cash Flow Statement is that the Income Statement gives you a look at income from all sources, including non-cash items like depreciation. The Cash Flow Statement shows specifically how cash is being used by your company and how much cash is being generated by its operation. The other financial statement you’ll see at least annually from your accountant is a Balance Sheet, which tells you how much of your business you own and how much you owe to others, showing you how much your company is worth to you. Accountants will explain these statements in more detail, but I’ve shown the essence of their value to you as a small business owner.
Funding your Company at Startup
I saved this for last, because having an understanding now of the importance of sound money management puts the value and importance of funding of your company initially, and in the early years, in context.
When you complete your business plan, you have the framework to understanding how much money you will need to survive three years—perhaps longer—without making a profit. Not making a profit is okay in the early years of a company, especially an artist management company which is investing time in developing artists to be come commercially viable. So, plan on not making a profit and plan on ways to cover expenses.
A term called “bootstrapping” often applies to new entrepreneurial ventures. It means that you, as the owner of the management company, operate at the lowest level of personal expenses that will still allow you to be effective for your artist(s). It doesn’t mean being cheap; it means doing things like waiting longer for your smartphone upgrade and buying good, used office furniture. Bootstrapping gives you more control of your company because you either have no debt or less debt to those who loaned you your startup capital.
The basic sources for your necessary startup money and continuing cash requirements will be your own savings and investments, family and friends, angel investors who believe in your vision for your company, and selling shares to the public. But understand that those who give you money for your company often aren’t loaning you money; rather, they are expecting an ownership stake in your management company which means they are expecting an unending return on their shares. Other sources include venture capital if you have a promising artist, or bank loans if you have an extraordinary relationship with one. Crowdfunding is “the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet” (Prive 2012). While crowdfunding has raised tens of thousands of dollars for some companies, its value to a new artist management company isn’t proven.
To complete this chapter I want to share the thoughts of one of the most successful entrepreneurs in today’s music business. Entrepreneur Jeff Walker started the AristoMedia Group, his management-publicity-promotion company, over 35 years ago and it is one of the largest such companies in Los Angeles, New York, Nashville and London. He has guided his company through the many cycles of the national and world economies, and the music business. Here are his thoughts for the new artist manager with an entrepreneurial spirit:
• Consider opening your business in one of the major centers for the music business and seek to be a representative firm for a management company in one of the other major cities.
• Be sure you feel good about operating your business and resist getting caught up in the personal side of your business associates.
• Don’t be afraid to reach out to people you know for advice.
• There are no “get rich” schemes. Watch your overheads, balance your expenses and income.
• Build cash reserves for the rough times.
• Expect it to take five years to begin earning a profit—if you get lucky breaks.
• To get established in the music business and find a foothold, you must watch your overheads daily. Every decision you make impacts your overheads.
• Give back. Volunteer for industry committees and volunteer your time for non-profits associated with the music business.
• Success as an artist manager hinges on not only what you know, but on who you know. You must have those relationships.
• Your relationships can become stale; they may become yesterday’s news, so you need to keep building a current network of relationships.
• Taking on an entrepreneurship in the music business requires you to take a great leap of faith.
• Hire people who complement you and your company’s expertise.
• Regulate your pace.
• Choose who you do business with.
My special thanks to Jeff Walker for helping you to achieve your success.
References
Ash, Chris. “Peak Performance Through People Development.” Evolution Training, 2014.
Prive, Tanya. “What Is Crowdfunding And How Does It Benefit The Economy.” Forbes, 6 Nov. 2012.
Walker, Jeff. Personal interview. 18 Oct. 2013.