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Preparing Music Business Financial Statements
1. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business
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Statements By Kevin English
Sunday August 23, 2009
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The Angel ft
Jhelisa –
I’d like to pick up where I left off with my Music “Ultra Light”
Business Template and talk more in depth about Giveaway
how to prepare your financial statements. I’ve seen 43 Comments
many new businesses write their entire plan first,
You & The
then work the numbers last, wrong move. Once you
Post Album
have established the overall business model in your Music Fan
head, START with the Financial Statements. All of 16 Comments
the words, goals and context that are in the rest of
your plan should be dictated by how the numbers August in
play out, not vice versa. What happens if your plan Arizona
10 Comments
proves that you will not make a profit after three
years, and the business will fold? I’ll tell you how to
address this common mistake at the end of the post. Preparing
Music
You don’t have to be a mathematician or an
Business
accountant to understand and prepare these statements. In fact, if you consider yourself an Financial
entrepreneur, you will make it your business to learn, create and monitor these four statements Statements
very closely. Below are the typical parts that should be included in your financial plan. Without 5 Comments
these things you will not have a clear picture of how you will make money and the rest of your
music business plan will be a waste of time. The Liberation
of Music
Start Up Cost – Grab a pencil and a piece of paper. Divide it in half by drawing a line down the 2 Comments
middle of the page. Label the first column, “Items”. Go on to write down everything that is
necessary to get your business off of the ground. Examples can be, studio and band equipment,
manufacturing costs associated with the products or service you intended to sell, initial marketing,
Read More »
promotion and distribution costs. Keep in mind that these may be recurring charges, but at this
point, you should only calculate the amount you need before you release your first product or
http://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
2. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business
service offering. In the second column, write down the “Estimated Costs” associated with each
“Item”. At the end, total up the second column and there you have your estimated start up costs.
[Sample] [Editable Worksheet] September ‘09
Balance Sheet – This statement is broken down into three basic parts; Assets, Liabilities and Playlist
Owners Equity. Write down cash in hand, equipment values and any money that is owed to your
business in the Assets column. Next write down everything you owe (and I mean everything) in the
column marked Liabilities. Subtract the liabilities column from the assets column and you get
Owners Equity. The purpose of this statement is to see exactly how much you are worth today.
Scary I know, but its necessary for future success in the music business.
[Sample] [Editable Worksheet]
Break Even Analysis – To determine exactly when you will become profitable, add up the total
costs associated with creating your product or service. Include manufacturing, marketing,
promotion and distribution costs to this figure. Then figure out how many units or hours you need
to sell in order for it to equal your costs. The simple equation for Break Even is Total Cost = Total
Revenue. [Sample] Tip: Use the total operating cost column in your projected income statement
below to get your total cost. This way you will know exactly how many units you will need to sell to
breakeven monthly, quarterly and yearly.
[Example] [Editable Workseet] Get this player from Fairtilizer!
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Projected Income Statement – This statement will help you forcast your sales and expenses
12 months in advance. An easy way to remember the components of this statement is the acronym
U.S.A.I.I.R (as in US Air force with two I’s).
[Sample] [Editable Worksheet] This one is a bit of an eye chart, I know.
Utilities
Salary
Advertising
Interest
Insurance
Rent
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As you can see, based on these arbitraty yet attainable numbers, your music business is seeing a
loss at the end of each month. What gives? Most business won’t see profits until the end of the
September 2009 (6)
third year. You can either reduce the cost of start up, increase your projected sales number or
acquire outside funding. August 2009 (14)
July 2009 (8)
“A common fatal mistake for many failed businesses is having insufficient
operating funds. Business owners underestimate how much money is needed June 2009 (12)
and they are forced to close before they even have had a fair chance to
May 2009 (14)
succeed. They also may have an unrealistic expectation of incoming revenues
from sales. April 2009 (9)
It is imperative to ascertain how much money your business will require; not March 2009 (23)
only the costs of starting, but the costs of staying in business. It is important to
take into consideration that many businesses take a year or two to get going. February 2009 (7)
This means you will need enough funds to cover all costs until sales can
http://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
3. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business
eventually pay for these costs.”
- excerpt from Patricia Schaefer’s, “The Seven Pitfalls of Business Failure and
How to Avoid Them“
So there you have it. I hope you’ve enjoyed my brief overview for creating your music business Blogroll
financial statements. If you have questions after reading any portion of this plan, please feel free to
call me directly. My number is (347) 688-KEVE. Thanks again for reading and I look forward to
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hearing from you all very soon!
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5 Comments
Dave Lopez (Reply)
on Sunday 23, 2009
Great article for the up and coming, or even the experienced musician. Being creative types
musicians often ignore the business part of the music business. If you plan on being in this
business for a long time the points above will increase your chances of longevity.
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I’m hoping in the future you will piggy back off of this post and touch on the topic of taxes. There
How Am I
are a lot of benefits, and pitfalls, that musician should know about before that annual date of Doing?
anxiety, April 15th. 0 Comments
Dave Lopez – Mixing and Mastering Specialist
Cr@zyEye Music Services The Angel ft
Marketing Music Online Jhelisa –
“Ultra Light”
Giveaway
Kevin English (Reply)
43 Comments
on Sunday 23, 2009
Peter Hadar +
Clipse Show @
Excellent idea Dave!
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