"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 2003 by Keith Holzman, Solutions Unlimited. All rights reserved.
With the realization that were nearing the end of the year, now is definitely the time to plan ahead and get all your ducks in a row. (You can use your own cliché, but you get the idea.) In fact, as I state in my forthcoming book, tentatively titled "The Complete Guide to Starting a Record Company," planning is one of the absolute essentials in effectively running a record company.
The last quarter of the year is traditionally the strongest for sales of recorded music. Thanksgiving weekend is always solid, and for many years the music industry encouraged the public to "give the gift of music" attempting to motivating people to buy music for friends and loved ones. This concept has been less effective of late due to theft of music via online downloading, yet these months still hold a huge potential for selling CDs.
Therefore it's imperative that you're doing your utmost to get your product into stores, and that you motivate the public to go into these stores -- or wherever they buy music -- to make their purchases.
Each label has its own ways of doing this. Some make co-op advertising deals with larger retail chains to stock and advertise their product. Many have their artists on the road, performing, doing radio interviews, talking to the press, and selling CDs at their gigs -- all generating public awareness (and hopefully, sales). Other labels do both, and much more.
If you haven't already developed a marketing plan for the end of the year, develop one as soon as you finish reading this newsletter. It's extremely late, but better late than ! Ideally you will have done this during the summer, will have already laid the groundwork, and will be well on your way. If so, now's the time to follow-up and be sure your plans are being followed -- by your promotion and publicity people, by your distributor, and by your key retail accounts.
This is also the time of year when you should be preparing your operating budget for next year.
Start by figuring out what releases you plan to ship, and in what month. You should even make reasonable guesses as to when music by new artists you sign may be ready for release.
Then, on a spreadsheet, estimate recording and sales and marketing costs as well as projected sales for each release by month of activity. For example, you may ship Artist "A" in January and expect to have an initial layout of 4000 units. Then estimate subsequent re-orders, perhaps for 500 units for each of March, April and May, with somewhat smaller re-orders in the remaining months. If you anticipate having a hit, then budget for incremental higher sales as your marketing plans demonstrate their effectiveness. Do the same for Artist "B," and so on. This results in an estimated profit and loss statement for each title. Do the same on a single page for estimates of sales of your back catalog as a group.
Take the information from each of these releases and catalog pages, and compile them onto a consolidated "top sheet" that has the totals by release, by month, with the details of each underlying release remaining secondary.
And although returns are anathema, you've got to allow for them as well. If you're been conservative in selling, however, and haven't attempted to load too much product into stores, your returns will hopefully be minimal.
The top sheets will then encompass all the sales and marketing projections for the year. Next, include estimates of your G&A (General and Administrative) expenses. All of the consolidated information will yield a forecasted P&L for the entire year. Add Cash Flow projections to the above and you'll end up with a comprehensive budget.
Once you've been through the entire process, you'll realize that you've been required to think very carefully about almost every aspect of the label's operations, and will essentially have developed the road map for how you'll run the label during 2004. This is not to say that you can't or shouldn't make changes as events occur and situations warrant, but at least you'll have thought it through and will know what you should be doing. After you've done this a few times you'll quickly learn what pitfalls lie in wait, and thus be able to avoid or adjust to them that much faster.
Budgeting is a complex and never-ending procedure, and some of us are better at it than others. I've been doing it successfully for many years -- for my employers, for my own label, and for many of my clients. Enlist my assistance if you're numerically challenged or need guidance in approaching budgeting for your label, or if you need counseling in other management or administrative areas. As a trusted advisor to many record companies over the years, I treat all clients and all assignments confidentially. I look forward to hearing from you.
And if you have a topic you'd like me to address in future newsletters, please call me or email email@example.com.
It's also extremely valuable -- and I think essential -- once you get to next year, to have your bookkeeper prepare a spreadsheet each month detailing your actual sales and expenses for the previous month as compared to the budget numbers you previously estimated. A careful study and analysis of the figures will help you to make better decisions and estimates in the future.
As part of the budgeting process you'll need to ponder a number of things. It's like looking at the future through a crystal ball. For example, do you think you'll need to add any staff to the label, and if so, in what departments, at what salary, and in what month? For each addition to staff you'll have to allow for such costs as health insurance, payroll taxes, a desk, chair, computer, software, file storage, and office space. You get the idea! All of these have ramifications in your budget, so be sure to allow for projected capital expenditures.
Another aspect of the budgeting process is allocating for external, non-staff support, whether it's independent promotion or publicity assistance, graphics design, retail marketing specialists, etc. -- those people that I call "virtual staff." These talents contribute to the effective running of the label, but are not salaried, being paid for specific tasks and periods of time. This can be a great money saver and helps you run an efficient operation.
In addition to those mentioned are attorneys who assist you in business affairs, independent accountants who check your numbers and perhaps certify your books, and management advisers such as myself who advise you how to run an efficient and business-like operation. Be sure to plan for all of these as you plan your financial future.
And as the year wanes, take any available extra time and think about crisis management and contingency planning. This is a comprehensive plan that tells you what to do when a crisis occurs, be it blackout, earthquake, etc. I refer you to one of my newsletters from two years ago that deals with this subject in some detail:
And while you're getting into the habit of thinking and planning ahead, do you know what your plans are for such new technologies as DVD-Audio and Super Audio CD; do you know how you'll handle digital rights management; your future on-line marketing; CD copy protection schemes, etc.?
Let "Plan Ahead!" be your rallying cry for the next three months, and the years thereafter.
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And if you have a topic you'd like me to address in future newsletters,
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Copyright 2003 by Keith Holzman, Solutions Unlimited. All rights reserved.