Preparing Music Business Financial Statements

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In depth post about creating a solid financial picture of your existing or start up music business. Worksheets and Sample Statements included.

In depth post about creating a solid financial picture of your existing or start up music business. Worksheets and Sample Statements included.

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  • 1. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business Search Home About Me Contact Check out the Latest Articles: Preparing Music Featured News Business Financial How Am I Statements By Kevin English Sunday August 23, 2009 Doing? 0 Comments The Angel ft Jhelisa – I’d like to pick up where I left off with my Music “Ultra Light” Business Template and talk more in depth about Giveaway how to prepare your financial statements. I’ve seen 43 Comments many new businesses write their entire plan first, You & The then work the numbers last, wrong move. Once you Post Album have established the overall business model in your Music Fan head, START with the Financial Statements. All of 16 Comments the words, goals and context that are in the rest of your plan should be dictated by how the numbers August in play out, not vice versa. What happens if your plan Arizona 10 Comments proves that you will not make a profit after three years, and the business will fold? I’ll tell you how to address this common mistake at the end of the post. Preparing Music You don’t have to be a mathematician or an Business accountant to understand and prepare these statements. In fact, if you consider yourself an Financial entrepreneur, you will make it your business to learn, create and monitor these four statements Statements very closely. Below are the typical parts that should be included in your financial plan. Without 5 Comments these things you will not have a clear picture of how you will make money and the rest of your music business plan will be a waste of time. The Liberation of Music Start Up Cost – Grab a pencil and a piece of paper. Divide it in half by drawing a line down the 2 Comments middle of the page. Label the first column, “Items”. Go on to write down everything that is necessary to get your business off of the ground. Examples can be, studio and band equipment, manufacturing costs associated with the products or service you intended to sell, initial marketing, Read More » promotion and distribution costs. Keep in mind that these may be recurring charges, but at this point, you should only calculate the amount you need before you release your first product orhttp://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
  • 2. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business service offering. In the second column, write down the “Estimated Costs” associated with each “Item”. At the end, total up the second column and there you have your estimated start up costs. [Sample] [Editable Worksheet] September ‘09 Balance Sheet – This statement is broken down into three basic parts; Assets, Liabilities and Playlist Owners Equity. Write down cash in hand, equipment values and any money that is owed to your business in the Assets column. Next write down everything you owe (and I mean everything) in the column marked Liabilities. Subtract the liabilities column from the assets column and you get Owners Equity. The purpose of this statement is to see exactly how much you are worth today. Scary I know, but its necessary for future success in the music business. [Sample] [Editable Worksheet] Break Even Analysis – To determine exactly when you will become profitable, add up the total costs associated with creating your product or service. Include manufacturing, marketing, promotion and distribution costs to this figure. Then figure out how many units or hours you need to sell in order for it to equal your costs. The simple equation for Break Even is Total Cost = Total Revenue. [Sample] Tip: Use the total operating cost column in your projected income statement below to get your total cost. This way you will know exactly how many units you will need to sell to breakeven monthly, quarterly and yearly. [Example] [Editable Workseet] Get this player from Fairtilizer! Send Me Your Music Send me your track Projected Income Statement – This statement will help you forcast your sales and expenses 12 months in advance. An easy way to remember the components of this statement is the acronym U.S.A.I.I.R (as in US Air force with two I’s). [Sample] [Editable Worksheet] This one is a bit of an eye chart, I know. Utilities Salary Advertising Interest Insurance Rent Archives As you can see, based on these arbitraty yet attainable numbers, your music business is seeing a loss at the end of each month. What gives? Most business won’t see profits until the end of the September 2009 (6) third year. You can either reduce the cost of start up, increase your projected sales number or acquire outside funding. August 2009 (14) July 2009 (8) “A common fatal mistake for many failed businesses is having insufficient operating funds. Business owners underestimate how much money is needed June 2009 (12) and they are forced to close before they even have had a fair chance to May 2009 (14) succeed. They also may have an unrealistic expectation of incoming revenues from sales. April 2009 (9) It is imperative to ascertain how much money your business will require; not March 2009 (23) only the costs of starting, but the costs of staying in business. It is important to take into consideration that many businesses take a year or two to get going. February 2009 (7) This means you will need enough funds to cover all costs until sales canhttp://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
  • 3. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business eventually pay for these costs.” - excerpt from Patricia Schaefer’s, “The Seven Pitfalls of Business Failure and How to Avoid Them“ So there you have it. I hope you’ve enjoyed my brief overview for creating your music business Blogroll financial statements. If you have questions after reading any portion of this plan, please feel free to call me directly. My number is (347) 688-KEVE. Thanks again for reading and I look forward to Flwrpt Brooklyn hearing from you all very soon! Hypebot Making The Mogul Music Think Tank Stay Thirst Media 5 Comments Dave Lopez (Reply) on Sunday 23, 2009 Great article for the up and coming, or even the experienced musician. Being creative types musicians often ignore the business part of the music business. If you plan on being in this business for a long time the points above will increase your chances of longevity. Recent News I’m hoping in the future you will piggy back off of this post and touch on the topic of taxes. There How Am I are a lot of benefits, and pitfalls, that musician should know about before that annual date of Doing? anxiety, April 15th. 0 Comments Dave Lopez – Mixing and Mastering Specialist Cr@zyEye Music Services The Angel ft Marketing Music Online Jhelisa – “Ultra Light” Giveaway Kevin English (Reply) 43 Comments on Sunday 23, 2009 Peter Hadar + Clipse Show @ Excellent idea Dave! CMJ 09 1 Comment Das Racist Remembers 9/11 Twitter Trackbacks for Preparing Music Business 1 Comment Financial Statements « eleetmusic – Direction in music, marketing and business [eleetmusic.com] RSS Feed » on Topsy.comhttp://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
  • 4. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and business [...] Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and bu… eleetmusic.com/?p=1398 – view page – cached #eleetmusic – Direction in music, marketing and business RSS Feed eleetmusic – Direction in music, marketing and business Atom Feed eleetmusic – Direction in music, marketing and business » Preparing Music Business Financial Statements Comments Feed eleetmusic – Direction in music, marketing and business 3 Steps to a Clean Email List Chin Chin – “GG and The — From the page [...] Preparing Music Business Financial Statements [...] VIEW ARTICLE SOURCE [...] Business Model (Reply) on Sunday 23, 2009 If you’ve been operating the business, you should also provide any historical financial statements on your results to date. Business Model Leave a Response Name (required) Mail (will not be published) (required) Website Submit Comment Categories About this Blog The purpose of this blog is to assist aspiring musicians and recording artists achieve a greater understanding of the How Tos Music Review music business. Here I will share my knowledge, experience and encounters to all who care to learn. I hope this site will be a constant source of information that will enlighten your quest for excellence in marketing digital music. Uncategorized © 2009-2010 Copyright eleetmusic – Direction in music, marketing and businesshttp://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]
  • 5. Preparing Music Business Financial Statements « eleetmusic – Direction in music, marketing and businesshttp://eleetmusic.com/?p=1398[9/30/2009 7:42:19 PM]