Manage for Success: Business Plans, Newsletter #106, March 2010


"Manage for Success" is a free monthly newsletter for record label executives who want to operate their companies efficiently and successfully. It's published by Keith Holzman of Solutions Unlimited, a management consultant, troubleshooter, and trusted advisor, and is based on his many years as a senior executive in the music industry.


Copyright 2010 by Keith Holzman, Solutions Unlimited. All rights reserved.


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Those of you who regularly read these newsletters or who’ve read my book, "The Complete Guide to Starting a Record Company," <http://www.recordcompanystartup.com/> know that I’m a great believer in planning ahead. One key aspect of planning ahead is a well thought-out business plan. I’ve counseled quite a few clients lately on this vital part of preparing to run any type of business so it’s a subject very much on my mind.


A business plan has two primary functions -- to help entrepreneurs raise funds for running a company, but -- and perhaps more important -- also to make them think about the kind of business they're involved in, and how to go about managing it properly and effectively. Ideally, it will become the road map for the first few years of the business' operation.


There are many different ways of setting up the document, and there are software programs that you can buy that might help you. Some cost relatively little, and others can be quite expensive. I don't recommend such software because most won't have the specifics you might need for a company in the music industry.


Bear in mind that a business plan is something that can't be written by anyone but yourself, as no one else will know your intentions, or have the zeal to do it well. I see no problem with having someone guide you through the process or even edit it, but only the principals should write it.


In any event, these are the primary topics or sections that I think should be included in order to become an effective document.


The most important section is the "Executive Summary" and it's the first one that'll be read. If it doesn't seem interesting and worthwhile, it may be the only part that is read! It should encapsulate in just a page or two all of the key ideas about your record label that will be discussed in some detail in the following sections. Make it interesting enough that a reader will want to read through the rest of the plan.


The next section might be titled "Products and Mission Statement." It should describe the type or genre of music you intend to release and what makes it special. Include a timeline of what you plan to do for the first four quarters, and for the second and third years of operation. If you're planning on building a music publishing division, or any other affiliated operation such as a studio, they should be included here. Include your short and long-range goals for the company.


Third is what I title "Management Plan" which is an overview of your proposed company. It should cover type of legal entity, infrastructure and office needs, including its size and whether rental or purchase, operations, staffing, manufacturing, and any special licenses or affiliations such as ASCAP or BMI, and unions such as AFM or AFTRA.


Follow with a section about "Market Analysis and Competition." This is where you discuss the record business and how your music fits into the whole, including its potential for customers and sales. Discuss how your label might be differentiated from its competitors. Be positive, but realistic. This is no place for hype.


Explain how you'll handle your "Marketing and Sales Strategy" which includes how you'll make use of publicity, radio, etc. and how you'll distribute your music -- whether as CDs, LPs, and online digital sales. You might include something about your pricing strategy and how it might compare with the rest of the market.


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Please pardon a brief interruption:


Even after they've created successful business plans, label executives and managers often deal with a great many crises. Contact me if you're having difficulty coping with running your company. I've had many years of record industry experience at labels large and small, and have solved many problems. Let me help you as I've helped so many other labels "manage for success." Email me at (click here) so we can discuss how I can improve your business.


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The next section should be a discussion about the "Management Team." This should include your bio and company title, along with those of other principals who might be involved in building the label. Keep it brief but project the team as industry professionals.


Perhaps the most difficult section is the "Financial Plan." This should be done as a spreadsheet showing your projected expenses and income. Keep it realistic. Project out to at least two, but preferably three years of operation. Show just the "top" couple of pages so as to avoid too much detail, but have all the underlying information available to the savvy person who might wish to see it, and also so you can back up your numbers. Include a Return on Investment Section, Break-even Analyses, and Cash Flow Projections. Be sure to have your accountant review or modify the numbers before they're inserted into the business plan.


Another section should discuss "Potential Risks and Opportunities." This is another place to be realistic, but as positive as possible.


Some business plans have a section on "Capital Requirements." This is the amount you're trying to raise, but some gurus suggest this not be included so you can be flexible, and also not to avoid scaring off potential investors.


You might include an "Exit Strategy" which could discuss possible future sale of the company, but it could also discuss how an investor might be able to withdraw funds once the label is profitable. You should also state under what circumstances any of the principals might exit the company.


Finally, include all necessary "Exhibits" that will enhance your presentation.


Be sure the entire package looks good. It should be comprehensive yet brief -- simple but straightforward. I've seen business plans so scary or negative that no potential backer would be interested, yet I've seen others that made me wish I had sufficient funds to invest.


Remember that the business plan is not only a device with which to raise funds, but it's also your operating roadmap for the future of the label, so be sure you've thoroughly covered all aspects of running the company. Good luck!


Until next month,

Keith Holzman -- Solutions Unlimited

Helping Record Labels Manage for Success.

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Copyright 2010 by Keith Holzman, Solutions Unlimited. All rights reserved.