Digital landscape changes music industry
New technology is allows small producers to play with the Big Boys


The digital landscape has changed things for everyone around the world (who new 20 years ago that Google would become verb?). But perhaps the most significant change, as mentioned in the Future of Music blog, comes in the recorded music industry.

As you can see from chart one, in 2000 the majority of music sales came in the form of CDs. Over the next four years, that percentage continued to grow. But in 2004, a change began. By 2010, the CD dropped below half of royalties earned, while downloaded singles and albums reached 32%.

The impact on the individual artist cannot be overestimated. Before, the huge marketing machine created by existing labels was required to get an album in the hands of the consumer. With the advent of digital downloads, pioneered by Apple with their iTunes software, anybody could get an album in the new virtual stores.

With this change came greatly improved recording and editing software that allowed amateurs recording engineers to create professional sounding recordings in the comfort of their own living rooms. Creative artists now had control of the entire process, from start to finish.

The result is an explosion of recording artists recording, producing, mastering and selling their material. The effect for a small studio like Sharp Audio is very real. With the new technology and digital distribution channels, we can play the role of a home away from home studio, offering those artists who remain reluctant to strike out on their own by providing an inexpensive recording facility as well as help making their work available through digital downloads.

Basically, while the new technology might sound a death knell for the larger labels and recording studio (or at least a rethinking of their business plan) a small operation like ours stands to gain. We are now poised to provide the same services as the Big Boys, but at a much lower price point. We are, in effect, poised for success.

Pie charts courtesy Digital Music News.

How research changed my mind

Experts lead the way to creating an effective business plan

If you have been following my blog, you know that I am writing a business plan. In the process, I did some research, consulting experts in the field to get some good advice as to how to proceed. I consulted two experts in particular: Guy Kawasaki, a former Apple executive and Peg Corwin, a consultant with SCORE.

I learned some valuable lessons from these two experts. Corwin was adamant that the budding entrepreneur can learn a lot from the existing marketplace. She stresses that researching actual prices and getting industry feedback can provide solid facts in a business plan filled with necessary speculation. She uses the phrase “breaking down and building up” to signify the process of creating individual expense break downs and then applying that expense to the appropriate number of personnel. Travel expenses were one example she offered.

Faced with such excellent advice, I had little choice but to follow it. I have put together a survey and am sending it out to several key individuals in the local industry, including one man who has agreed to act as my mentor. The information that comes back from these key players will feed my business plan with hard facts amidst the speculation.

More hard facts will come in the form of price quotes from existing suppliers. After compiling a list of equipment and other expense items, I will get actual prices from suppliers. I will incorporate these actual figures into my business plan. The solidity of these numbers will lend the entire plan more validity.

Kawasaki had similarly good advice that I can put to use. Following his advice to approach my business plan not just as a means of raising money, but as a way of analyzing my business and lay out the best approach. The business plan is a way to make the business the best it can be. Sometimes that involves investment; it always involves planning.

Following his advice, I have looked at my plan from a new perspective. Certain elements, such as the required investment, take on a new aspect. I realized that earning money was not only no the most important part of my business plan, but it was not necessarily part of the plan at all. I reoriented my business to focus on the nonprofit aspects. It really changed the way I think about the project. Thank you, Guy Kawasaki.

References:

January 21, 2006 The Zen of Business Plans

http://blog.guykawasaki.com/2006/01/the_zen_of_busi.html#ixzz1bf9m8sDF

Peg Corwin, http://blog.score.org/author/peg-corwin/

Writing a business plan

Expert advice is a must have for the start-up entrepreneur

Here at Sharp Audio, I am busy writing a business plan for the Band Off, our signature annual festival featuring a competition from local up and coming talent. When you write a business plan, it is best to take the advice of experts. By definition, almost, the author of a business plan is new to the game; advice from people who have been there before is invaluable.

This week, I happened on some wise advice from Guy Kawasaki, the erstwhile Apple guru who metamorphed into a business consultant. On his blog, he often talks about the needs of start-up companies, since that is what he does in his day job: listen to investment pitches. He has nine points of good advice.

I won’t share it all with you (you can read the blog yourself), but I would like to highlight some important point Kawasaki raised that I will be taking to heart.

1. Catalyze fantasy. The very nature of the business plan makes it an exercise in guess work. While we want that guesswork to be as accurate as possible, simply hearing some industry analyst speak highly of the market is not enough. The plan, like the pitch, must capture the imagination of the audience and make them see why it makes excellent sense as a reality.
2. Approach your business plan not as a means of raising money, but as a means of analyzing your business to make it the best it can be. Focus on your objectives (what you are going to do) your strategies (how you are going to do it) and your tactics (who, where and when you are going to make it happen). Money follows ability. Show that the money your investors give you will be effective, and you are more likely to get funded. And even if you don’t, you still have a plan for your business.
3. A good business plan is an extension of an excellent pitch. Rather than writing a long, boring, ineffective plan and then basing a pitch that itself will not work, write a good pitch, a short, pithy, approachable synopsis of what your business is and what it will do, then expand it into a full business plan. Investors are sold by the pitch; they read the business plan next out of due diligence.

I also looked at the website of SCORE in Chicago, a large, but friendly market. One of their expert retired executives, Peg Corwin, gave an excellent rundown on how to estimate expenses for a startup, one of the more difficult tasks in creating a business plan.

Corwin offered three suggestions: get competitive quotes; break it down then build it up and get industry feedback.

The first suggestion applies to actual expenses like rent, insurance and raw materials. Get quotes from suppliers and collate them into your expense calculations. Most of the business plan is speculation; this is one area where you can bring in the facts. Do it.

Second, Corwin has what she calls estimating the pieces and building up the costs. For example, rather than pulling a travel expense number out of the air, figure out the cost of a taxi ride and multiply it by the three associates that will be claiming that expense.

The most important suggestion for numbers that do not lend themselves to actualization is to get industry feedback. Network, research, interview. Learn what others have experienced and develop your financials accordingly. They will have more credence if they are in line with industry projections and industry ratios.

There are other experts out there, I’m sure, but the advice from these two I have found helpful in the past and are sure to be helpful in the future. I hope it helps you, too.