The 3 Secrets to Making a Successful Music Business
File Under: Making Money With Music, Building Your Music Business
No matter what kind of business you have -- whether it's a taco stand or a multinational oil company -- there's just one formula that determines whether you’re successful or not. That formula is this:
How Much You Make - How Much You Spend = How Much You Keep
It's hard to make money in any business, but it can be particularly difficult in music, especially when you are just starting out. Yet, a lot of people don't succeed in music because they forget this simple formula.
When you work on turning music into a business, you need to work on all three parts of the equation.
1. Turn Up The Income
As we talk about in our online course, Making Money With Music, it's important to both get more out of the income sources you have while creating additional sources of income in other ways. Most of these additional sources can happen on top of ones you already have. For example, affiliate links for iTunes can give you an extra cut for each music sale you make through the service. Royalties from Performance Rights Organizations (PROs) can earn you extra money each time your music is played from licensing it for use. We cover these and other income streams in detail within the Making Money With Music course as well as other articles here at The DIY Advisor, but the point is to make sure you realize there’s more than just selling your tracks and playing live.
2. Turn Down The Expenses
Reducing expenses is one area where a lot of musicians make a mistake. Music is art and it’s easy to get wrapped up in what you create and forget about the cost. However, in today’s world, it’s relatively easy to avoid spending too much money on your work, products, and merchandise. Keeping these costs low means more money in your pocket. As we wrote in an Electronic Musician feature article, it's possible today to start a music business for $0. Whether it's creating merchandise for free or using all of the free marketing strategies available to you you can start making money on the very first sale you make. Plus, by using these techniques and services, you can avoid paying for them until your sales have paid for them in full in the first place.
3. Turn Away The Taxperson
To maximize what you’re able to keep once the money has come in and the expenses have been paid, you need to consider tax implications. Income tax is a fact of life, but the law allows you certain ways to write-off expenses and keep more of the money you make if you do things correctly. Musicians often fail to track all their expenses and take advantage of all of the tax breaks available to them. Keep receipts and records for all the income-producing expenses you incur since these can be legitimate business deductions. If none of this makes sense, but you’re serious about your music and music business, contact a trusted accountant who can explain what’s possible -- especially one who understands music and royalties. Also, don't fall into the trap of getting caught in the "hobby tax". While you can deduct musical instrument purchases and travel costs associated with touring, if your business doesn’t show a profit within a set amount of years, the IRS might pay you a visit claiming you shielded your hobby as a fake business.
As you work to build your music business, never forget the simple formula above. Don’t just limit yourself to the few obvious income streams like selling tracks or merchandise. Read up on, learn, and try creating additional income streams for your music. On the expense side, be disciplined since there's no end to the amount of money you can spend on promotion, marketing, PR, or getting your music heard. But if every dollar spent isn't making you at least $1.01 back or more, it may not be necessary to spend it. If you do things right, you might not even have to spend any money to start making a profit right away.
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