Recording Studio Business Plan
Nick Adams
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#1
10th December 2010
Old 10th December 2010
  #1
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Recording Studio Business Plan

Hello all.

I am looking into setting up a medium to smallish recording studio in the North East of UK and I need to create a business plan.

Does any one know of any business plans or information that I can look at to help me along with my mission?

Basically would anyone mind me looking at their business plan model to help me form my own plan here in the North East.

It appears to be easier finding the holy grail at the minute.

Any help at all would be great.
#2
10th December 2010
Old 10th December 2010
  #2
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Business Plan

There's no magic to a business plan, a simple spreadsheet with months across the top and a column of different costs (rent, utilities, salaries, advertising, equipment depreciation are the big ones) on the left with them all adding up to a total cost gives you the debit side. Then add margin (how much money on top salaries you as the owner wants to make) and you have your targets.

You now put a line for known revenue if you have any (existing commitments to use and pay for use of your studio) and another for speculative revenue which you plan to get.

Hopefully the sum of your revenues exceeds your cost otherwise you've got some problems already.

Now comes the hard part in figuring out where that speculative revenue is coming from and how you're going to get them.

Any presumption about income will have to based on analysis. what's your target market (demo studio ? High end serving record companies ? Commercial voice over ? Cartoons ? Advertising ? Training material ? Karaoke backing tracks ?) How many similar studios are there available in your catchment area ? Are they all busy ? If not, why are you building another one ?

A friend of mine just closed a dance studio business and had some great advantages like free space but no amount of enthusiasm, energy and advertising could make up for the fact that there were not enough customers fo what she was offering.

I ran a small demo studio in the 80s and now don't. It didn't fail because of a poor plan, it failed because I realised I can't spend 10 hours a day listening to music I don't like and dealing with people I don't like. I didn't figure this out early enough. I also thought that having my hobby as a job would be great but in fact it can just ruin your hobby...a bit like porn stars.

There's a special place in heaven for patient studio owner/operators. Just look at the "most stupid thing you've heard on a session" thread.

Good luck.
Nick Adams
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#3
10th December 2010
Old 10th December 2010
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Thread Starter
Hey man,

Thanks for giving me your time to share your thoughts, much appreciated.

I think I always over complicate things in my head but you have explained things in a clear way which is great.

I've started planning things out Ill let you know how I get on ;-)

Also I have been doing a bit of market research pretending to be a band and have found out that most studios in my area are booked out till at least the 7th Jan. This gives me great positivity that there is a market in my area as Id imagine christmas is a quiet kinda time?
#4
12th December 2010
Old 12th December 2010
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I was in your position a few years ago, with all of the same questions. I started my studio (my first "open to the public" studio) with no guarantee of any income, just a whole lot of motivation. The one thing I made sure of was that I could float the business on solely the income I was generating from other sources. Luckily I found a really good deal on a space to rent and build out, which enabled me to keep my monthly overhead fairly low.

I started out charging next to nothing, getting 90% of my business from my craigslist ad. I really had no idea what I was doing, but accepted this phase as a learning process. I made a TON of mistakes, both on the engineering side, and business side of things, but making them is how I learned EXACTLY WHY I'll never make those mistakes again. Over time I slowly transitioned from being extremely nervous about screwing up every time a new client came in, to being confident enough with my engineering skills to be able to simply relax, have a great time with the client, and concentrate on the client's vision for their project. When you are nervous, it is really hard to critically listen and make important changes. A few times I didn't even realize how BAD everything sounded until after the client had left. My point is, you are bound to run into some road blocks, whether financial, or otherwise. Good planning will certainly help though!

Its been almost 3 years since I started my studio, and I am just now starting to make enough cash on a regular basis to pay all of my bills, both for the studio and at home. If you don't already have a client base, it is going to take TIME to develop one. No matter how nice your studio is or how good of an engineer you are, guitar Joe will still have to see your flyer 10 times before bothering to consider your studio. That being said, every area and market is different. If you can manage to find a town with tons of good bands and no studios, then your set!

To keep this already long story slightly shorter, here are a few key points:

-Make sure you have enough $$ to float the business for a bit while your trying to reel in your first clients.

-Try to evaluate what other studios in the area are charging versus what they offer, and offer a little more for a little less, or at least a little more for the same price.

-Be extremely friendly with your clients! You want to get comfortable enough with them that they trust your feedback and feel you have a genuine interest in their music. This is what will make clients want to come back to your studio, not your rack of Neve pres. I made the mistake of acting too professional and withdrawn at first. Musicians want a fellow musician recording them, not a lawyer.

-Make clients pay some sort of deposit to book any sessions. This can be a fixed amount or percentage. You wouldn't believe how many people just don't bother to show up if they have no money on the line. Some people will have issues with paying a deposit, but these are the people who likely wont show up.


Anyways, that's all I can think of right now. Its 3am over here...

I don't claim to know what I'm talking about when it comes to running a business, but this is what I've been through/learned and I hope you can get something from it.

Best of luck!
#5
12th December 2010
Old 12th December 2010
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8 years now and we are surviving doing what we love to do. We built the studio for a few artist friends to record in, all talented undiscovered for the most part and ten years into a career. Our first reel analog record won the 2004 new mexico music industry awards best rock album award and we have been working ever since with a sliding scale and helping the local scene grow, now most artists who know, know they want to come to our studio to record.

We are booked 4-5 days a week with local talent. We have not done a major label act/record, but lots of little indie labels are starting to send projects our way because of the quality of the experience and product and the price we are willing to do it for.

I 2nd the deposits! nothing worse than someone deciding that they ain't coming in and now there is no time to re-book those dates.

we are lucky on several respects. the incredible talent pool we have for such a small sized town. The gear is all paid for, we save our dough to buy what we need, and it has taken us 8 years to build up a mean collection of toys to play with. We sold some land in Texas my family owned last year and we were able to do a major upgrade, power mac pro 8 core, PTHD2, aurora 16 ch adda, uad2 quad omni, and some actual geAR upgrades, more pre's, comps, eq's.... has been huge for us. Also the property and the studio building are owned and payed for... low overhead.

If I was in this to make a ton of dough I would NOT do this again even with the benefits of owning it all because a great recording studio IS A FINANCIAL BLACK HOLE WITH GREAT ACOUSTICS and this one TO START A STUDIO OR RECORD LABEL, TAKE 250,000 DOLLARS TO THE 55 GALLON DRUM OUT BACK AND POUR SOME GAS ON IT AND LIGHT A MATCH..same thing.... it is not cheap to do this right, and to survive in this climate you must offer more for less, or at least be able to offer more than home recording... something special... we built a huge tracking room - bigger than any home studio - hell, bigger than the big rooms at all the other studios we compete with... it is a great room, artists love the room, they want to keep coming back, if we had a hot tub some would never leave...

anywho you must be willing to put out far more than you might ever get back... at least in the first few years... must be there for the love!

I cannot recommend this for the faint of heart or the financially challenged. After 8 years we are still learning and struggling but we are having fun and we are getting paid, although what we are happy to get paid in New Mexico might be a laughing price to someone in LA.

I know we only get 300/hour for hollywood voice over work, that in LA costs 500-1000/hour, but there are like 23 movies being filmed in New Mexico and if you do that kind of work, it is available.

our studio gets 60/ hour for studio + engineer, the engineer and I split it 50/50, so if working a lot for 30/hour is your kinda fun......., we are contemplating going to 75/hour but we really can't because of the economy and fear of loosing the client base we have built over the years
but as soon as we are fully booked, or have a hit record come out of here, or win a grammy we can't raise our price unless its for a major who needs to block out the whole place for a month.... and they get a deeeeaaal compared to LA or NYC!

sorry what was the point? I start to ramble ..... carry on
#6
12th December 2010
Old 12th December 2010
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Copied and pasted from another post of mine -

Five things go into a business plan and it will be these five that any investor or bank will be looking for in EVERY and ANY business plan - and I read other people's business plans as part of my work!

1. What can I make?

What do similar businesses earn in the same area and with the same level of know-how and investment. Is this business scalable?

2. What can I loose?

Interest costs, opportunity cost, depreciation, etc.

3. What is the USP?

Why would customers come to you and not the other guy?

4. What is plan B?

Exactly how do you propose to pull the business around, if the customers stay away in droves? You will have to have this safety net, to lessen the risk.

5. Says who?

Expert opinions are an absolute MUST on the viability of your plans from such people as market researchers, industry insiders, economists and experienced business people.
Nick Adams
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#7
14th December 2010
Old 14th December 2010
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Thread Starter
What have I missed here with the deleted posts? I wish I had read them, or maybe I don't? ha. Can any one explain?

Some great advice coming through people, really appreciate it as it helps me build my own picture.

I believe I have the drive and passion to push this forward and there seems to be enough bands in my area as most of the local studios are booked out till mid Jan. I am also going to provide dance engineering as well as recording bands which will hopefully set me apart from other studios.

The idea of giving more for less is coming through strongly, this was an idea I initially had so maybe I am already thinking along the right lines in some areas. Basically providing a better or as good as service as others for a cheaper price is always a winner.

Taking deposits and to have enough in the float for the first few months seem to be essential.

I have started collating my business plan data now and seem to be making a little more sense on paper the more I look into it....
#8
14th December 2010
Old 14th December 2010
  #8
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I think I said something in response to another poster using the word persecuted, when he meant prosecuted. I quoted him and made the distinction between the two by calling him a knob turning fader jockey and said "we don't need your kind around here" - In good fun. I think Jules took me seriously, I thought it was obvious that I was joking around.

Sorry for the confusion.
#9
22nd December 2010
Old 22nd December 2010
  #9
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Quote:
Originally Posted by Nick Adams View Post
Basically providing a better or as good as service as others for a cheaper price is always a winner.
Unfortunately that is NEVER true. It's economics 101..... Undercutting is NOT a business strategy for anything other than netting you short term cash. What do you do when the next guy undercuts you?

Secondly - the customers that want more for less - they're the kind of customers that aren't worth having. They don't come back, they prize the price higher than the value (think about it).

Third - if you are providing a BETTER service than someone else why would you need to charge less? The wrong answer is "because they'll book me". Again - clients worth having do not place the cost at the top of the list. Clients look at what they get from you and decide if it's worth spending the money. The worthwhile ones DON'T say things like "but I can go to Joe's place and get it for £10 cheaper".
#10
22nd December 2010
Old 22nd December 2010
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Quote:
Originally Posted by narcoman View Post
Third - if you are providing a BETTER service than someone else why would you need to charge less? The wrong answer is "because they'll book me". Again - clients worth having do not place the cost at the top of the list. Clients look at what they get from you and decide if it's worth spending the money. The worthwhile ones DON'T say things like "but I can go to Joe's place and get it for £10 cheaper".
First off, you are absolutely right. I agree that this is the ideal situation. Unfortunately, this is not always the case for someone just starting a studio for the first time. A person in such a situation could charge less while getting their grips with engineering for their own clients and running a business. Even if their engineering skills are top notch, it takes more than getting good tones to run a studio business. After they become more confident and hone in on the whole "running a studio" thing, they can then raise their rates to a price which better suits their services. Everyone has to start somewhere. Low rates aren't all about reeling in cheap clients, (although many small bedroom studios try this trick). It's more about being honest about what you can offer.
#11
22nd December 2010
Old 22nd December 2010
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Quote:
Originally Posted by narcoman View Post
Unfortunately that is NEVER true. It's economics 101..... Undercutting is NOT a business strategy for anything other than netting you short term cash. What do you do when the next guy undercuts you?

Secondly - the customers that want more for less - they're the kind of customers that aren't worth having. They don't come back, they prize the price higher than the value (think about it).

Third - if you are providing a BETTER service than someone else why would you need to charge less? The wrong answer is "because they'll book me". Again - clients worth having do not place the cost at the top of the list. Clients look at what they get from you and decide if it's worth spending the money. The worthwhile ones DON'T say things like "but I can go to Joe's place and get it for £10 cheaper".
That all depends on where you are in the market and what your price elasticity of demand is.

For the demo studio (less than $100k total investment) there is no point on the graph at which you can turn a profit. Even at the very low price of $100 a day, you can only reasonably expect 100 bookings maximum (demo customers only ever book on weekends) and that means a turnover of just $10,000 and that is well below your costs.

At $200 a day, it is reasonable (but no means certain) that you will get 50 or 60 bookings in a year. So you are still not turning a profit, no matter what you do.

The reason is that the small (demo) studio market is over-subscribed by a factor of 10:1. When supply exceeds demand, you have a deflationary market.
#12
22nd December 2010
Old 22nd December 2010
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Quote:
Originally Posted by The Byre View Post
For the demo studio (less than $100k total investment) there is no point on the graph at which you can turn a profit.
I think the demo studio tag would be better applied to investments of $10k or less. It doesn't take anywhere near 100k worth of gear to get a great demo. At $200-$300 a day, you are in the black after 50 or less bookings, then it's just a matter of covering operating costs and maintenance, insurance, upgrades, ect.

Many small startup studios fail in part because their operators buy in to the idea that you have to spend huge amounts of money on gear or nobody will ever hire you. That is just plain wrong. A well thought out and reliable configuration of semi-pro gear can go a long way. The really good stuff comes slowly as you become successful because of the attention to detail you provide and the relationships you build.
#13
22nd December 2010
Old 22nd December 2010
  #13
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Quote:
Originally Posted by recordinghopkins View Post
I think the demo studio tag would be better applied to investments of $10k or less. It doesn't take anywhere near 100k worth of gear to get a great demo. At $200-$300 a day, you are in the black after 50 or less bookings, then it's just a matter of covering operating costs and maintenance, insurance, upgrades, ect.

Many small startup studios fail in part because their operators buy in to the idea that you have to spend huge amounts of money on gear or nobody will ever hire you. That is just plain wrong. A well thought out and reliable configuration of semi-pro gear can go a long way. The really good stuff comes slowly as you become successful because of the attention to detail you provide and the relationships you build.
Well said sir. A huge investment up front with no guarantee of business can be a tactical mistake. Start small and grow from there.
#14
23rd December 2010
Old 23rd December 2010
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. . . and the building. Do you think it pays for itself?
#15
23rd December 2010
Old 23rd December 2010
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The building? Sure, that's a part of operating costs along with power, water, internet, alarm monitoring, coffee filters, bottled water, and all the other nickel and dime stuff that shows up on your P&L. However I don't know anyone that needs a space that costs 90k a year to lease to operate a mid level studio. My space costs a tenth of that, and has separate living quarters for me and my assistant. Yeah, it kind of does pay for itself.

Just as the acquisition of boutique gear comes with success, so does a dedicated building.
#16
23rd December 2010
Old 23rd December 2010
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I think we're singing off the same hymn sheet here - I absolutely agree that demo rooms have to keep their costs right down to a bare minimum if they are to survive. I put in the arbitrary figure of $100k, simply as an upper limit. $10k on equipment would be my upper limit for any small studio today. PT-native, a used Power Mac, AlphaLink and a used desk and some mics, monitors and all the other bits and pieces and you come in at $10k if you are prepared to spent a few months on ebay.

If there is one thing that kills any start-up business, it is committing to high fixed costs (that's the building rental again!)

But when I sit down and try to come up with profit and loss curves for a small studio, I just cannot make them cross at any point - in fact, not even touch one another! The problem is that there is just too much competition at that end of the market and getting a reasonable price for services is impossible. A digger driver can get - even in today's housing market - $350 a day for man and machine. And that would be for a used Cat or JCB that set him back $25k. You can't get $350 or anything like it for a studio that cost $25k inc. building!

In just about every part of the World, there are small ‘studio’ businesses, such as video facilities, web designers, photographers and dress designers, all struggling to make a living in over-subscribed markets. In fact, anything that can have the word ‘studio’ hung around its neck and is easy (i.e. cheap) to get into, or at least appears to be cheap, seems to be about ten-times over subscribed.

The truth is, a studio is kewl and kewl ideas are seldom good ideas. Kewl ideas are particularly dangerous if you are not deeply immersed in that business and have not already worked in that field. Whether it is a rich man buying a football team, or a housewife starting a knitting shop, get ready to loose money!
#17
23rd December 2010
Old 23rd December 2010
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Quote:
Originally Posted by The Byre View Post
That all depends on where you are in the market and what your price elasticity of demand is.
So undercutting IS a good strategy?
#18
23rd December 2010
Old 23rd December 2010
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As I said, it depends on the price elasticity of demand.

There are parts of the studio facility market that continue to remain profitable and continue to command high prices (DVD authoring of major films, location 96-track recording of top concerts, larger studios catering to the non-rock markets).

The problem for small studios is all the other small studios. The market is ten times oversubscribed and they are all undercutting one another, to the point where no profits are available to any of them.
#19
23rd December 2010
Old 23rd December 2010
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Quote:
Originally Posted by The Byre View Post
I think we're singing off the same hymn sheet here
I love it!

But I don't share your bleak view on the viability and profitability of mid level studios. Sure, there are a million little one mic shops opening up all over the place, but I don't lose any business to the cats that dropped three grand on a neumann and call themselves a studio. Studio operation at the mid level requires differentiating yourself from all of the other yahoos that make beats, and it becomes a networking game. More of my time is spent building relationships than is spent pushing cmd+space. It's not about how many studios are around, or how many musicians there are. It's about character. YOUR character. The clients I maintain relationships with keep coming back, and they recommend me to their friends. The only way to compete at this level is by developing those relationships with your clients. Rates become a non issue at that point. Who cares if they can get it for $10 an hour somewhere else? They don't want to be somewhere else, that want to be at my place.....
#20
23rd December 2010
Old 23rd December 2010
  #20
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In other words, I don't run my business as if it were a retail store that relies on walk in customers to stay alive.
#21
23rd December 2010
Old 23rd December 2010
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Quote:
Originally Posted by The Byre View Post
As I said, it depends on the price elasticity of demand.

There are parts of the studio facility market that continue to remain profitable and continue to command high prices (DVD authoring of major films, location 96-track recording of top concerts, larger studios catering to the non-rock markets).

The problem for small studios is all the other small studios. The market is ten times oversubscribed and they are all undercutting one another, to the point where no profits are available to any of them.
Aye B..... but that's not the same as undercutting. You can't operate "undercutting" as a strategy in the studio business. You CAN respond to market forces and margins within the business. Pricing structure is related to the market, of course - but not related to trying to steal clients based on price alone....... that's the downfall of the small business. Undercut to get clients? I think not! The studio business is way oversubscribed to be able to respond to demand in anyway - there isn't any.

So, OP - think deeper than doing "the same but for cheaper" - In studio land it doesn't work. Go for "being better - in every way" but under the finances you can stand.
#22
23rd December 2010
Old 23rd December 2010
  #22
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There tends to be two elements to a successful business:

1: Barrier to entry. Either the equipment and/or knowledge are expensive or difficult to acquire. Entry level studios aren't really either.

2: Unpleasant to perform/own/operate. The job is hard, unpleasant, smelly, etc. Operating a studio looks like fun, and given to opportunity many clients would like to do it themselves! They're unlikely to pay you a fair wage, since you're doing something they would like to do themselves.


The one really saleable asset is success. People will generally pay to work with someone who is associated with success, in the hopes that they will then be successful (which is ultimately what most artists are after!)

If you want to have a successful studio, partner with a successful producer or engineer. Then hopefully they bring their clients, and their name will attract the wannabee clients.

Or do work that most project studios shun, like commercial voiceover work, etc. You know, the stuff that isn't as much fun!

Edit: I forgot to mention that there needs to be adequate demand. There are some very unpleasant jobs, that with no demand would still not warrant a successful business. I suppose that's obvious, but just wanted to clarify!
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