One of the most important things you can do to prepare for the year ahead is to create a budget for your musical activities. Having a budget will give you a much clearer look at where you want to go financially, how you'll get there, and what your progress is along the way.
We've broken down the process into 4 simple steps to help you create a budget:
1. Ask Questions
To help determine what your financial goals for the year will be, first ask yourself some questions:
- Will you be releasing new music this year?
- How will you raise money to pay for the production?
- How will you distribute your music to digital stores?
- How will you promote your music?
- Do you need new promotional photos?
- Are you creating any merch?
- Are you going to buy any new equipment?
- Do you need a new website?
Try to get as clear as you can about everything you would like to do this year, and be sure to write it all down. Writing down your goals will help give you some direction and focus.
2. Determine Expenses
Once you know your goals, write down all of the expenses that you'll need to keep track of:
Cost of Music & Merch
Recording/Mixing/Mastering: Many musicians now record at home rather than go into a studio, so expenses with recording can vary greatly depending on your approach.
CD Duplication / Vinyl pressing / Download Cards: Research how much it will cost to manufacture any physical versions of your album.
Digital distribution: Although minimal, depending on which service you use, there is either an upfront cost or annual recurring cost to distribute your music to iTunes, Amazon, etc.
Merch: How much will it cost to make t-shirts and other merch items?
Rehearsal space: Will you need to rent rehearsal space?
Equipment: Do you need any new instruments/amps/pedals/accessories this upcoming year?
Posters/flyers/postage: Although not as much as in the past, posters are still useful for putting up in the venues you'll be performing at.
Food & Gas: Whether you're touring or not, getting to gigs and eating before/after costs money.
Lodging: If you're touring, will you be staying at hotels? Using Airbnb? Hopefully you'll be able to stay with friends/family/fans, but that's not always possible.
Conference/Festival fees: Are you applying to perform at conferences or festivals? There is often a fee to apply, and for some conferences, even if you're accepted to showcase, it still costs money to attend.
Graphic Design: Some bands are fortunate to have a member that is a skilled graphic designer. If not, hire a professional graphic designer to handle your album artwork, as well as images you'll need for your website and social media profiles.
Photo Shoot: We can't stress enough how important it is to have professional photos, especially for your website.
Publicist: Will you be hiring a publicist to help with the initial launch and promotion of your new music? How about to help with online PR?
Website: Well, we honestly believe you shouldn't have to pay thousands of dollars for a new website. Check out Bandzoogle for info on how we can help you with that.
Mailing List: Email newsletters are still the best way to convert fans to paying customers. Most mailing list services charge a monthly fee, but if you're using Bandzoogle for your website, a mailing list is included.
Videos: YouTube is the 2nd largest search engine in the world, so chances are people will be trying to find your music on there. Making an official video is a good idea, but you should also upload simple lyric videos and other low budget videos.
Ads: Will you be buying any ads online to help promote your music, live shows, or latest video?
This may not be the most fun part of the process, but it's important to have tangible numbers so you can realistically assess what it's going to take financially to achieve your goals.
Also, these shouldn't represent the entirety of your actual marketing plan. You should be using mostly free promotional tactics to engage your fans like using your website,blogging, email newsletters, as well as social media like Facebook and Twitter to create awareness about your music.
3. Project Income
Now the fun part: projecting your income. Do your best to estimate how much income you'll be bringing in over the course of the next year. Here are some areas where you can earn income:
CD Sales: If you're going to be playing live shows, having CDs on hand is still a good idea. They make great takeaway souvenirs that can easily be signed by band members.
Vinyl Sales: Vinyl sales surged 30% in 2013. Again, if you'll be playing live shows, printing a small batch to have at your merch table can help generate extra income.
Digital Sales: You should be selling digital music through your own website to make the most money, but also through online retailers. Keep in mind for your budget that online retailers take a percentage of sales (ex. iTunes takes 30%, Bandcamp takes 15%), and some digital distributors that get your music into places like iTunes and Amazon will take a cut on top of that.
Streaming: Although per-stream payouts from streaming services can be rather small, they can add up over time, and these services can also help new fans discover your music.
Publishing Royalties: You should be signed up to a performing rights organization so you can collect royalties on your music, including public performance royalties (radio, TV, live venues), mechanical royalties (sales through retailers, streaming, etc.), and sync royalties (commercials, film, TV).
Digital Royalties: Whenever your music is played on services like SiriusXM radio, Pandora and webcasters, they must pay royalties. You should sign up for a free SoundExchange account to make sure you're getting those royalties.
Licensing: If you get your song placed in a film, commercial, or TV show, chances are they're going to pay you a licensing fee. These fees depend on the budget for the project, and how badly they want your song.
YouTube: On YouTube, whenever your music is used in videos that are running ads, YouTube pays a portion of that advertising money to the rights holders of the song. Audiam is one company that can help you collect this money.
Money made from live shows can vary greatly. But the bottom line is that performing live is a great way to earn income, sell merch, build your mailing list, and connect with your fans.
Merch: Income from merch can really depend on the amount of live shows you play. Just be sure to have some t-shirts, as well as smaller items like buttons and stickers that you can sell to fans after the show.
Crowdfunding: A crowdfunding campaign can help generate enough money to offset the cost of producing your album.
Day Job / Teaching: Many musicians either teach or work some kind of day job on the side. The disposable income can then be used to help pay for expenses related to producing and marketing your album.
4. Track Progress
Finally, you'll want to track your progress. Create a spreadsheet that lists all of your expenses and income projections. You can use Google Docs, Apple Numbers, OpenOffice, or Microsoft Excel to do this.
Make sure to have 2 columns for the numbers, one for Projections, and one for your Actual results. That way you can see if things are costing above or below your projections and you can adjust accordingly throughout the year.