By, Wendy Day
A business plan is a necessary tool for anyone starting a business or anyone planning to make money with their music (selling music, performing, selling merchandise). It forces you to think about how to succeed, how to move forward, what that will cost, what obstacles you might hit and how to overcome them. It explains how you plan to run your business, how you will build it, and exactly when and how the income will come.
Not only does a business plan force you to think ahead but it’s also a tool that you will need in order to pitch investors and raise funding. It explains what the costs will be, how much you will contribute (often called “skin in the game”), who will help you (your team and advisors), and how the investor will get paid back along with a return on the investment. If you require staff, it outlines who you will hire and what positions are needed, along with the organizational structure of the company.
A business plan also gives you an outline to use as you build your business and it holds you accountable. The plan might change as you move forward–mine is a constant work in progress as I get new ideas, take on new clients and projects, and find new opportunities. I don’t have an investor, so I can change my plan as I please, since it affects no one other than me. With an investor, you would need to interact with them prior to any changes in direction.
If you’re putting together a business plan with the intention of raising money, securing investors, or even for other people to see, keep it as concise and short as possible without sacrificing content (maybe 15-20 pages). For lenders and investors, this will allow them to evaluate your concept and proposed strategy. As an internal document for you, it helps you commit to achieving the goal as only a written plan can do. It commits you to action the way an idea in your head never can. The value is in the planning for your company: researching the competition, planning how to move ahead, intimately knowing your market, and how to reach your fans. It allows you a critical look at your ideas including marketing, sales, staffing, and financial projections. This process is mandatory if you are looking for investors or even just a better understanding of where you’re going and how you’ll get there.
Here’s what needs to be included:
- Table of Contents
- Executive Summary (which you usually prepare last) – Summarizes the info in the plan
- General Company Description – Explains what your business will do: includes a mission statement, lists your company’s goals and objectives, describes your industry and describes the type of company you own (corporation, sole proprietorship, etc)
- Products and/or Services – Provides an in-depth explanation of the products and/or services offered
- Marketing Plan/Strategies – Includes market research, identifies your customers, identifies competition while listing their strengths and weaknesses, and outlines your unique marketing strategy including distribution channels and sales forecasts
- Operational Plan – Explains the daily operation of the business including production, location, personnel, inventory, supplies, and account payable and receivable strategies
- Management and Organization – Explains who manages the day to day operations and who the key advisors, team members, and personnel are. If you are seeking investors, someone with strong experience and a proven track record of success in the music industry should be involved as a partner, advisor, consultant, Board of Director, etc
- Start-up Expenses and Capitalization – List expenses, initial funding needs, and where the money is coming from
- Financial Plan – Includes profit and loss projections, projected cash flow, a balance sheet, and a break even analysis. Projections should be by year for the next five years
A business plan is not something you write and file away in a drawer. It’s a road map that you follow and update constantly. It serves as a constant reminder of where you are headed and how you will get there. No matter what you are doing in life, if it involves making money then you need an accurate business plan.
There are plenty of books, websites, apps, videos, and professionals that can help you put together a business plan. You can obtain helpful information at SBA.gov or SCORE.org or the local Small Business Association in your area.
If you decide to hire someone to write your business plan, make sure they are qualified and have access to the latest industry research. For the music industry, they range in price from $5,000 to $50,000 depending on who writes it and how intricate your company and goals are. Regardless, not having one can cost you a hell of a lot more.
Check out the SBA website for more info: http://bit.ly/MusicBizPlan