Starting a music studio, need advice

[ToneRich]

I recently moved to the Atl area(school) and Im currently getting a studio constructed and I want to know if anyone has heard of people getting grants for opening studios?(small businesses)
I am thinking about applying for one to get some better equipment(pre amps,mics, etc.)

[frank lyon]

I'm curious if the SBA would loan money for this type of venture.

[gainstages]

hi. i'm in your area. i'm not a complete expert on this by any means, but I do believe i have enough info to be of some help.

due to the current state of the economy, lending standards for loans are more strict than just a few years ago. recording studios have a track record that is worse than restaurants - something along the lines of 50% of restaurants go out of business. studios are the same way, and smaller studios or studios in smaller markets are looked at even less favorably because they usually lack the revenue generating ability that other risky ventures (like a restaurant) have, and appeal to a much smaller demographic - making them extremely high risk propositions.

SBA loans or grants may be a possibility , but probably only for a PORTION of your business, and you need to have more to your business plan than just the typical mid-level tracking and mixing facility. if you are black, hispanic, native american, or female you may have an increased chance of getting a grant or loan, but even so - you need a solid business plan.

unless you bring a large clientel or cash rich account with you to this studio, you are going to have to present a very compelling marketing and business plan to get any interest at all. also, you need to be able to show that you have the financial strength to fund a large portion of start up costs and survive without a paycheck for a period of time during startup.

sorry to damper your hopes - there are options available, but they aren't easy to get and you need to really have your stuff together (at least on paper) to get them.

Feel free to PM me if you'd like. I'm in your area.

[narcoman]

practically no chance of grants or loans for any serious studio business - you might get 5 grand of artistic funding but thats hardly in the serious league.


I'd be looking into getting property yourself and then looking into financing equipment over 5 years via lease. You need to balance this with earning expectation which in turn will dictate what you will be able to get in lease finance capital. You will need a couple of years of trading account to get any decent sized lease capital. Sounds catch 22 doesnt it?

[The Byre]

Here's a real life business model taken from the website audiotalk.org -

You will have to multiply the figures by two to get Dollars.

The £100 per Day Demo Studio in a Rented Rehearsal Room

This is possibly the most popular idea for young pro-audio graduates that want to get their feet on the ladder to becoming owners of a big and internationally acclaimed super studio. The idea is that if you are in a rehearsals centre where twelve other bands are thrashing away every night and weekend, they are bound to come to you for that all important demo CD.

Well, as a Texan friend once told me: `The turkey don`t fly and I`ll tell you why!`

The best case scenario is that the customers come flooding in and every weekend and six weeks are booked. Given a fast build-up time, that comes to £36,000 turnover in the first three years.

The worst case scenario is that the customers stay away in droves and only every second weekend is booked. Given a slow build-up time, that comes to a measly £12,000 turnover for the first three years.

Realistically, a studio owner/operator who knows what he is doing and is able to drum up trade, should achieve £24,000 turnover in the first three years. Given the desire by the demo customer to record only on the weekend, this may seem a little optimistic, but perfectly achievable.

The room is to be rented for £60 a week, all-in (i.e. heating electricity etc. included). So rent and other incidental costs for three years come to at least £10,000. Insurance for that period should be about £1,000 and other costs such as repairs and servicing of equipment comes to another £1,000. So all fixed costs, but not the cost of the equipment, comes to £12,000 for the first three years.

Three possible budget priced equipment setups suggest themselves for a good, but cheap studio.

1. Used analogue equipment with an old 2" reel-to-reel, a good used desk and some used outboard. Total cost about £12,000 including all fittings wiring and mics etc. The residual value of this equipment after three years is about £5,000.

2. New, cheap digital hard disk recorder and a suitable desk and outboard. Total cost is also about £12,000. Residual value is about £3,000.

3. Professional standard DAW with 24 IOs and all effects as plugins. Total cost is about £18,000. Here the residual value after three years is about £6,000.

The cost of repaying the money for the studio equipment at an interest rate of 10% p.a. is £14,000 for the two cheaper options and £21,000 for the DAW. Three years is a typical loan agreement for a small, first time business.

So here is what is left of your money and hard work after three years (turnover - costs - repayments + residual value of the equipment):

1. (old analogue) £24,000 - £12,000 - £14,000 + £5,000 = +£3,000

2. (cheap digital) £24,000 - £12,000 - £14,000 + £3,000 = +£1,000

3. (Good DAW) £24,000 - £12,000 - £21,000 + £6,000 = -£3,000

This model assumes that all three systems will attract the same amount of trade. My suspicion is that the old reel to reel system would do quite well as there has been considerable growth of interest in using older technology and that the cheap digital system would do less well as it is more or less the sort of system that many musicians already have at home.

The cash flow situation is worse because you cannot add the residual value of the equipment (unless, of course you sell up). So the two cheaper options would leave you `in the hole` for £2,000 after three years and the more expensive DAW option would leave you no less than £9,000 short.

After the three years, the owner could be earning £8,000 p.a. once the equipment is paid off. Hardly a living wage and no allowance is made for further development or replacements.

[8th_note]

In order to get a grant you will need to show that the money will be used to benefit the community in some way. For example, if you were going to use the funds to record disabled musicians for free you might be able to find an organization to give you a grant. If you are running a private for-profit recording studio and you think that somebody will give you a grant to buy better gear it's time to put down the crack pipe.

One possibility is to find a local school or community college that doesn't have a recording program and propose that they start one with you in charge. You would have to have pretty good credentials to pull this off but it's a possibility.

There was a mention above of the Small Business Administration. The SBA doesn't actually lend money. They guarantee loans from banks. They have some programs that are targeted at specific industries such as child daycare but recording studios aren't high on their list. You would have to go to a bank with a solid business plan and borrow the money. If you met the SBA requirements you could get a little lower interest rate but that's the only advantage. You still have to pay the money back.

[Chunky But Funky]

I just went through a similar process, so I'll share my experience. My idea was to start a high-end recording rental business in a small to mid-level market (with no competitors in town), not a full studio, but similar enough I guess.

Let me start off by saying that my wife and I both have good full time careers (for the past 15 years) and excellent credit. We have had a couple of mortgages and home equity loans through one bank(never a late or missed payment), so we applied for a commercial loan through them. We are partnering with a music store that has been in business for forty years. So, we will have essentially no overhead. No payroll, rent, utilities or anything. This is a "side business" so no one will be drawing primary income from it. The music store will rent out the gear, and we will own it.

The loan officer said it was difficult to get the loan underwritten, and the only way they would write it was with the gear AND OUR HOUSE as collateral. (This was with an immaculate 15 year history with the bank.) It was much more difficult than I anticipated given our situation. But, in the end we got the loan and will have the gear on the showroom floor in a couple of weeks. If it is meant to be, you will find a way. Heck, I got my wife to agree to let me buy $40,000 of gear at one time! Best of luck! PM me if you have any specific questions.

Doug