Manage for Success: Budgets (Newsletter#1, May 2001)

At the recent AFIM Convention held here in Los Angeles, I hosted a workshop titled "Effective Label Management." In response to my question as to what problems labels were having that they’d like me to talk about, these topics arose:

Getting Personnel to Prioritize
Managing Internal and External Personnel
Cost of Goods
Software Databases
Royalty Accounting

In this and subsequent messages I will address many of the management problems that plague small, and even large, record labels.

Just what do you need to effectively manage your label? That is, other than lots of money, great staff, and tons of energy?

Well, you need simple, yet comprehensive budgeting strategies, excellent accounting systems, detailed sales and marketing information, uncomplicated royalty accounting procedures, production and product management processes, comprehensive database administration, and most important — a watchful eye on all expenditures.

In this first issue we’ll discuss Budgets and Budgeting.

Did you prepare a budget for this year? How detailed was it? If you didn’t, you ought to prepare one now for the rest of the year, since it will provide a comprehensive road map for your label’s future.

Make up a new spreadsheet, using a program such as Excel. Start by estimating the releases you’ll put out, figuring out when you expect they’ll hit the street. Estimate how many units you will sell during each of the remaining months of the year.

For example: The Doorstops, a new rock band with a rabid local following, will ship in July. Estimate your pre-release expenses for that project in the months prior to street date, estimate sales by month in units, but also in dollars for when you think you’ll actually receive funds from your distributor. Then factor in the marketing expenses for this project for the months in which they’ll occur.

In September you expect to ship a new CD by Suzy Troubadour, an exciting, young singer-songwriter. So plug in the recording and marketing estimates, followed by sales income for the months in which you expect to receive payment.

Continue in this fashion for each new release.

This will be offset by recording and marketing expenses for these projects.

Also factor in catalog sales (for those labels who’ve been around a few years) by month, as above. You will now have a good idea of your projected sales income. Also add licensing income if it’s anticipated.

Then estimate all of your other costs of sales, and all general and administrative expenses, which include staff salaries, fees for independent or casual help, rent, phone, fax, internet, web-site and all other customary and projected overhead items.

Total all the above.

Will you be able to survive? In other words, will there be sufficient income from sales to cover the costs of making and marketing the recordings, and for running the label? If so, great! You’re on the right track.

As time passes you should update your budget by replacing estimated numbers with actual costs and income as they occur, keeping the "road map" up to date. Or, course-correct if necessary.

If your projected income is not enough to cover expenses, do you have sufficient capital to survive, or will you be able to raise funds to stay in operation?

This is the essence of effective budgeting, and should be applied to ALL aspects of your operation. Prepare budgets for each new recording project, and when the master is completed compare the actual numbers to those budgeted. How well did you estimate? Use this experience in preparing a budget for the next project.

Do the same with all marketing expenses (radio promotion, publicity, advertising, etc.) on a project-by-project basis. But most important — keep track of the actual numbers and compare them regularly to the projections.

The more you do this, the better you’ll be at making new budgets, and the more effective you’ll be as a label manager.

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"Manage for Success" is a monthly newsletter for record label executives who wish to operate their companies in a successful and businesslike manner. It’s published by Keith Holzman, of Solutions Unlimited, a management consultant and troubleshooter, and is based on his more than thirty-five years of music industry senior management experience.

If you have problems you’d like discussed in future newsletters please feel free to email suggestions, or call Keith if you’d like to talk about solutions tailored to your particular needs. You may obtain more information on how I may be able to help by checking my web site: <>.

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Keith Holzman — Solutions Unlimited
Helping Record Labels Manage for Success
E-mail: <>
Phone: 310-476-4059; Fax: 310-472-6367

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© 2001 Keith Holzman, Solutions Unlimited. All rights reserved.
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