File Under: Building Your Music Business, Making Money With Music
When it comes to making more money with your music business, there’s an important 3-part sequence to keep in mind. In fact, it’s a sequence that’s true for any business and some of the top ones do it all the time. It’s a simple concept, but many ignore it since it’s so easy to keep doing exactly what you’re doing once you get your business going.
As we talked about in The 3 Secrets to Making a Successful Music Business, there's one formula for business:
How Much You Make - How Much You Spend = How Much You Keep
When it comes to How Much You Make, you should experiment with income streams and see what works for your audience. As we discussed in How To Fail At The Music Business, you should be applying the concept of “little bets” to everything you do. This is the idea you should try small experiments that are cheap or free to find out what works. For example, our article How To Create a T-Shirt Design That Sells outlines an inexpensive method for you to find the T-shirt prints your fans want to buy. But this goes beyond T-shirts — how you distribute your music, the type of merchandise you sell, what type of shows and venues you play, how you angle yourself to the press and media, what videos to make and share, and more are all areas to experiment with.
Once you’re in the habit of coming up with and testing money making ideas, then it’s time to run through the 3-part sequence to boost the amount you can make by lowering How Much You Spend. Follow these steps:
1. Find out what's selling and generating you income.
This means you should be tracking your sales and business-to-business transactions so you see how much and where the money is coming from. For example, using the print-on-demand T-shirt example above, you’d check which T-shirt designs sold the most. Bookkeeping and tracking metrics are a big part of measuring and determining what’s working. When it comes to creating and playing music, the feeling you capture and the emotional reactions you evoke in yourself and your audience are often the measuring stick. That’s art. But, when it comes to your music business, metrics and hard data are what should be telling you what’s working.
2. Break down all the costs of what’s working.
For everything generating you income, break down and add up all the costs which you'll need for the third step. For example, in the T-shirt example above, you’d include the cost of creating the T-Shirt, shipping, fulfillment costs, tax, and any others.
3. Take what’s working and find ways to make it cheaper for yourself.
Now that you know the costs of everything that really sells, you can spend some time to try to find ways to make the same thing cheaper for yourself. Using the example of the T-shirt, your print-on-demand option likely results in you only make a few dollars per shirt they have low margins. Doing a T-shirt run with a traditional T-shirt manufacturer may net you a higher margin. You can make even more on each shirt if the manufacturer is in your area since you could reduce your shipping costs to $0. And, many manufacturers offer discounts if you purchase higher quantities, further increasing your margin per sale.
That said, creating an inventory of T-Shirts is a bigger risk than sticking with the less profitable print-on-demand service since you're spending money on a T-shirt inventory and if they don't sell, you've wasted money. This is why the first step in testing out what sells with a cheap option is so important. And the most expensive option which has the highest margin would be getting your own silkscreen equipment if your fans love your T-Shirts enough to make it worthwhile (and you want to make your own.)
This 3-part sequence can be applied to everything making money for you. In fact, we recommend running through this sequence a few times a year to make sure everything you have in place that’s making money is making the most money it can for you. It's always worth taking the time to do the analysis and see if there might be ways to improve your profit margins and make more with what you're already doing.
Challenge: Track what’s currently making money for you and run through the 3-part sequence to see if you can find ways to reduce expenses at something you're already doing well.
- How To Fail At The Music Business
- The 3 Secrets to Making a Successful Music Business
- How To Create a T-Shirt Design That Sells
- The Indie Band Survival Guide (Remixed & Remastered: Second Edition)
- Making Money With Music (15-hour Online Course)
Photo credit: 401(K) 2012