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Profitability. The Studio numbers (incl Excel spreadsheet)
Old 9th October 2006
  #1
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jindrich's Avatar
 

Profitability. The Studio numbers (incl Excel spreadsheet)

Hi gang. This is a VERY simplified economical study of a typical privately owned, one room, mid-level recording studio. The kind of numbers you'd need to present the project to a bank to start the damm thing.
Some of the numbers may vary depending on the country and city you live, those here are IMO an average for the standard occidental city.

So, is this kind of venture profitable? Take a look:

(scroll down to the spreadsheet, observe it, and come back, to keep reading)



As you can see, it doesn't look that great from an economical point of view. It seems you have to be almost FULLY BOOKED the whole year, JUST TO BREAK EVEN.
You might say, boy, raise those rates!. Very well. Good luck finding clients paying something much higher than that (2k a week), at least in many parts of the whole Europe (london might be an exception). Probably the States are better in this regard. But concerning the rates, remember, it's *just* a mid-level, console-less, Protools HD3 studio (but one with LOTS -80k- of fine slutty gear and instruments)

The worst thing in my opinion here, is not only that you MUST fill the studio the whole year (an impossible mission really), but that those 8 HOUR/DAY SESSIONS are probably going to be closer than 12/day. So you end up working a lot for a pay that is not that great in the end. Yes, you are your own boss and own the thing, but still.

This shows clearly to me how the only way to get involved in this kind of projects/Bizness is if you are truly passonate about the matter (aren't we?), and don't mind eating fries and pizza everyday and driving a cheap second hand car (unless you someday hit the jackpot by writing/producing a HIT).



NOTES to this study:

-It's a VERY simplified study (I have some others with lots of economic ratios, formulas, figures and so on, that are 50 times more complex).
-It's a 5 years case study. You must keep this running for that period. After those 5 years you'd OWN the gear. So later on (if you decide to continue) your expenses are NOTABLY reduced. Time to expand the biz.
-The numbers are euro/dollar agnostic. They work the same in both sides of the atlantic, more or less.
-The recording studio would be allocated in some rented space (unless you want to increase the initial investment a billion more to buy some property)
-only 30k for acoustics is too few, really. It assumes more a DIY thing, that is, buying the materials and build it yourself with help from some people in the knows.
-Amortization: things break, get obsolete or stop working, at different time paces. That's why you MUST save some particular amounts every month to replace those things when the times come. Not an expense per se, but you need it to find out your cash flow (mind you, this *saved* money can/must be meanwhile invested into something)
-Owner/Engineer gross salary of 32k a year. This is not much really, depending on where you are. But it's better than a McDonalds pay.
-Many of the expenses are empty fields. You might need them, you might not.
-Bank Loan: ALL of the needed investment comes from the bank. What if you already have some money? you get lower montly payments. But consider that that money you own could give you some other profits, if invested somewhere else. So, it's not a 100% saving here. In economy we say, let the banks finance the business. (Unfortunately any sane bank would reject a biz project with such numbers)


Well, actually, you do are making some profits, in a long term, because after those 5 years , the gear is yours, as you've paid the loan back (and made a living), so you are some 100k+ richer, as you started with nothing.



What do you think? Something wrong here?
Please, feel free to add and or suggest variations on the theme. Or some other numbers. Excel is ready.
Attached Thumbnails
Profitability. The Studio numbers (incl Excel spreadsheet)-stud1a.gif   Profitability. The Studio numbers (incl Excel spreadsheet)-stud2a.gif  
Old 9th October 2006
  #2
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norman_nomad's Avatar
I hope every bright-eyed-soon-to-be-fullsail-student reads this!

I have mucho respect for the guys out there who are just now opening up shop and can somehow make it sustainable...

It's really hard.

I wouldn't wish a full-time studio business on anyone who didn't have an extreme passion for the work and, almost more importantly, a solid business sense...

Yet gear sales continue to rise... hmmmm
Old 9th October 2006
  #3
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The dman's Avatar
 

Quote:
So,Where are the profits?????????????
http://www.exxon.com/USA-English/gFM...s/homepage.asp
Old 9th October 2006
  #4
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You might want get more creative in your financing..You could get 150k for way less monthly..interest only for 10 years??
Check it out..
you could probably get it down to 1000 a month with a private investor..
some rich friend might give you the dough for 8% with the equipment as collateral..
Old 9th October 2006
  #5
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jindrich's Avatar
 

Quote:
Originally Posted by FLYMAX View Post
You might want get more creative in your financing..You could get 150k for way less monthly..interest only for 10 years??
Check it out..
you could probably get it down to 1000 a month with a private investor..
some rich friend might give you the dough for 8% with the equipment as collateral..
the loan, as well as the study, is projected for 5 years, at a 10% interest.
Of course you might get a lower interest if you negotiate, and you can prolongue the payback for longer than 5 years. Then your expenses get of course more relaxed.

But in a Biz like this, in times like those, i wouldn't make numbers in such long terms. This is not a mortage, where the house always remains.
Old 9th October 2006
  #6
ODZ
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ODZ's Avatar
 

well, we didn't get into this biz for the money, now did we.

Anyway, great breakdown. Humbling, but great. Ironically, my mother-in-law makes more after 25 years with McDonalds (per your comment). Go figure. Lucky for me, I have a full time "corporate" audio gig.

Hey, it's audio dammit! and they let me grow my hair and be unshaven, though it can cut into my time that I could potentially be cutting great tracks with killer musicians in my own scraped together studio. I pick my battles. Keep fighting the good fight!
Old 10th October 2006
  #7
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I set up my own shop because I wanted the experience, and internships are next to impossible to get here.

It is not my only source of income.

My loan is a four-year loan, and I plan on doing some travelling shortly after it's payed off. The loan was for €35,000.

The loan was really for the analog console. I had build up much of the other gear over the years working in live sound and sidelining in recording. One of the main reasons for taking this plunge was that I believe the future lies in hybrid digital\analog setups, and I wanted experience in this area.

I wanted to make myself valuable in the real-world to studio owners around the world. I cannot do that with access to the gear. So, I rent in as much different gear as bands/labels budget allows, and take in as much as I can while working under other producers and engineers.

I pay no rent, just a percentage of each session to the guy who runs the rehearal complex which the rooms are housed in. I am extremely lucky here. I essentially have no overheads for the studio itself apart from depreciation

If weeks go by with no work, he doesn't mind so much. The rehearsal thing, along with drum lessons (which he is qualified to do) pay his bills. And it's important to him to house a well equipped studio, even if all the equipment is mine.

I have the best equipment in the small city I live in, and am still learning everyday.

If I had to do this purely as a career, I would be very, very worried. But I've given myself until I come back from travelling (during which time I will try and secure whatever work I can in audio engineering), to decide if I should concentrate on audio, or on my other options.

What I'm trying to say is that if you are clever about what you invest in, you don;t have to get burned too badly if the industry doesn't pick up again soon.

Converters depreciate quicker than analog consoles, the only item in my studio not owned by me is the LynxAurora16.... Going down the Pro Tools route in my situation didn't seem to make much sense. EDL Convert anyone ?

I could have spent 35k on certain audio schools, and I don't think I would have learned anything near as much. I have to deal with the business side, as well as liase with indie label and radio types, troubleshoot gear, track anything put infront of me, and edit and mix anything that is thrown at me, and deal with the fragile/out of control artist ego thing.


BTW I charge a basic rate of €45 an hour.

I would rather lose business to people with less experience than drop my prices, but this is because I have a flexible way to generate income outside of the studio.

I offer an evenings drum setup including drum tech for free before a decent sized session, along with some breaks on editing time off-peak hours etc.

It's definately tough out there.

Nathan
Old 10th October 2006
  #8
Lives for gear
that was an awesome response. I almost feel bad posting after it.

thanks for laying out that spreadsheet...that's really cool......... but what I don't get is how you're spending so much on certain things.....furniture does not need to cost 10k.. you called it a "mid-level" studio....but are going to spend 30k on acoustics? etc, etc.....not trying to dis or anything....just my .02
Old 10th October 2006
  #9
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drBill's Avatar
That spreadsheet should be a sticky - and mandatory readiing for anyone thinking about getting into the "biz", going to recording school, opening a studio, and ESPECIALLY for anyone daring to post asking "is $25 an hour too much to charge for recordiing". Good post!
Old 10th October 2006
  #10
Lives for gear
 

I have built 4 studios in my lifetime. All mid level rooms which fit the secondary markets I have lived in.
IMHO there is no way to make a studio work as a business with $150K in loans. Its just too big of a monkey on your back.

But $50K ??? sure. absolutely can be done.

1) location location location. Its the be all end all. Gotta be were musicians already are. You can build a beautiful room but if its 15 minutes out of the way it might as well be on mars.

2) Your gear estimates are WAY high.
Start with PT HD core and one accel card. Buy everything used. Only shell out big money on a couple name pieces. You will add more later when cash is flowing.

3) find a location were a studio went under. They are everywhere. Sign a lease, wire up and start booking. If that's not possible than 10K in sheetrock, homeschool some acoustic info, get some freinds that want to record for free and have yourself a miserable 3 months. But 10K should do it.

4) Don't buy guitars,amps,drums. Trade for studio time. You'll get better gear and in the case of drums they will show up tuned.

To get serious for a second -
three 8 hour sessions a week needs to be your fixed cost break even point.
Figure that for 40 weeks a year.

50K - some sheet rock buddies - a few bands that need studio time and only have gear to trade - put it in a great location - network- extend MASSIVE good will in the community (ie- if a band runs out of money - finish the record anyway), - and you can build yourself a business that will give you an adequit salary.

As much as I hate digi - ya gotta have PT especially in your location just for file compatiblilty with those who are vacationing but want to work a bit. they WILL NOT want to hear about ways to open their projects in another daw.

And my last and final rule is that every mix that leaves your studio needs to absolutely sound as good as a major release. Your mixes are your best advertising.
Old 10th October 2006
  #11
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jindrich's Avatar
 

Nathan, great post.


A few more aclarations about the spreadsheet's numbers:


-Again, yes, for such kind of mid-level Studio, 30k in acoustics is ridiculous. It should be more like 100k (I think the inversion in acoustics should match that in gear, so you must build a $500K studio to put a $500K SSL board).
The problem here is that the space will be rented, and who knows what your landlord will say in 5 years. Also may the Biz go bezwerks, the amount spent in the room could not be recoup, in contrast with the gear.
Still, 30k is not too bad if you do it yourself, with help from someone with some experience on the matter: hire an acoustic consultant for the project and then build it DIY style with a couple of friends.

-By "furniture" I meant everything that's not acoustics. Sofas, desks, a small kitchen, emergency lighting system, photocopier, fax ...etc. You know how much an Aerion chair costs? (and i havent mentioned ramps or a WC for disabled people yet)

-For the on going rates (2k a week), you must put this much money (around 100k) into gear. Remember, you're just the new kid in town, with no track record, and you'll be competing with everyone else, studios that already have very nice rigs. Why go to yours? Take a look around, for those rates there are studios offering real U47s, Brauners, TC6000s, 1073s and even a Yamaha baby grand. To attract clients, you need not only the gear, but SOMETHING ELSE too.


On the other side, I agree that your break even point shouldn't be beyond 3 days a week on 40 weeks. But what should be cut then here, the loan or your salary? It's a very tough game.



Anyway, that was overall just a simplistic example. There are infinite variations on this, but the basics remain. The expenses are big to start with and unlike other business, you have an INCOME ROOF, because you are selling TIME, and there are only those many weeks in a year.


PS: just as a game, what would be your take here, to make it economically viable? what to change?
Old 10th October 2006
  #12
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Matthew Murray's Avatar
 

Some good thoughts here -- and I don't have much to inject, except this: Being in debt is a death wish. This is why I've opted the slow-man's route. Over the last three years I've begun to acquire gear *only as I can afford it* ... I likely have another year to go before I can turn my investment into a hireable studio, but I'm already to the point where I can at least produce my own music.

The long term goal is a public studio. But if I have debt while I'm operating that studio, I might as well close the doors right away.

In this cut-throat climate, my best advice is DON'T BORROW, at least for 90% of your investment. Go slow, you'll thank yourself.

In the meantime, find the highest-paying job you can and save up for that gear!

Just one man's strategy.
Old 10th October 2006
  #13
Lives for gear
 

Quote:
Being in debt is a death wish. This is why I've opted the slow-man's route. Over the last three years I've begun to acquire gear *only as I can afford it* ... I likely have another year to go before I can turn my investment into a hireable studio, but I'm already to the point where I can at least produce my own music.
I really don't get that. If your making money, why bother to buy more gear? Ahhh so you can raise your rates, or increase workflow - well why not buy the gear now on loan and start with the higher rate/faster workflow?

Fine I could give a couple of reasons to answer the last question - but it's the same answer as to why not to buy the gear in the first place - cash or credit.
Old 10th October 2006
  #14
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Matthew Murray's Avatar
 

Quote:
Originally Posted by kats View Post
I really don't get that. If your making money, why bother to buy more gear? Ahhh so you can raise your rates, or increase workflow - well why not buy the gear now on loan and start with the higher rate/faster workflow?
Ultimately in my situation it's because I'm literally just starting out. It takes a while to gain a client base and reputation, and I think the best way to approach that is to start with lower rates and build. But what do I know?
Old 10th October 2006
  #15
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jindrich's Avatar
 

I don't know of any studio paying a big SSL in cash. They all got a loan/leasing.

There's 3 ways of getting money to create/expand a biz:
-Profits
-Shareholders
-Banks

Getting in debt is normal to every biz. You just have to plan it properly to have it make economical sense.
Old 10th October 2006
  #16
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Matthew Murray's Avatar
 

4. Savings.

I didn't think you were talking about SSL purchases. All of your purchases came to around 120.00 ... the majority of which could easily be saved up with hard work over a few years.

Hey, it worked for me, just putting out another perspective. It's by no means the only road, nor the quickest.
Old 11th October 2006
  #17
Gear Nut
 

Amortization is merely an accounting function - so don't worry about that right away (except at tax time). Do keep in mind that you will probably have to put up the equipment as collateral and you will have to pay back principal along with the interest on the loan. 10% is going to be a bit high - shoot for 8%.

And yes, you do have to book your room at least 80% of the time to break even - but above that it is mostly profit.
Old 15th October 2006
  #18
Gear Maniac
 

This business of a studio

Quote:
Originally Posted by edham View Post
I have built 4 studios in my lifetime. All mid level rooms which fit the secondary markets I have lived in. IMHO there is no way to make a studio work as a business with $150K in loans. Its just too big of a monkey on your back.

But $50K ??? sure. absolutely can be done.
  1. location location location. Its the be all end all. Gotta be where musicians already are. You can build a beautiful room but if its 15 minutes out of the way it might as well be on mars.
  2. Your gear estimates are WAY high. Start with PT HD core and one accel card. Buy everything used. Only shell out big money on a couple name pieces. You will add more later when cash is flowing.
  3. Find a location were a studio went under. They are everywhere. Sign a lease, wire up and start booking. If that's not possible than 10K in sheetrock, homeschool some acoustic info, get some freinds that want to record for free and have yourself a miserable 3 months. But 10K should do it.
  4. Don't buy guitars,amps,drums. Trade for studio time. You'll get better gear and in the case of drums they will show up tuned.

To get serious for a second -
three 8 hour sessions a week needs to be your fixed cost break even point.
Figure that for 40 weeks a year.

50K - some sheet rock buddies - a few bands that need studio time and only have gear to trade - put it in a great location - network- extend MASSIVE good will in the community (ie- if a band runs out of money - finish the record anyway), - and you can build yourself a business that will give you an adequit salary.

As much as I hate digi - ya gotta have PT especially in your location just for file compatiblilty with those who are vacationing but want to work a bit. they WILL NOT want to hear about ways to open their projects in another daw.

And my last and final rule is that every mix that leaves your studio needs to absolutely sound as good as a major release. Your mixes are your best advertising.
Edham,

Thanks so much for the very informative post. After having built 4 studios I'm betting you have a damn good idea about how to best go about things.

jindrich,

thanks for starting this thread, its really great to see things discussed from a "business perspective." In fact, I think it would be very nice if there was an additional part of gearslutz dedicated solely to business concerns in the audio production industry.

Best, trans
Old 15th October 2006
  #19
Lives for gear
 

Thanks Trans.
Just trying to give back a bit to this forum.

After re-reading my inital (and quickly typed) post the only thing I could add is that every one of my studios broke even within 6 months. My partner and I sold our last one to our head engineer who is simply kicking ass with it. He took it up another level and that's a really cool thing. (www.studiocrash.com)
My partner moved to key west and I moved to NYC (clearly he is smarter than I am since he was at the beach today). Given the current NYC real estate rental prices I don't see how to start another one and make it work. My hat is off to all NYC studio owners who are making it work.

The toughest thing to get through your head is that it's a TIME BILLING business and as far as businesses go - its a crappy time billing business.
But we don't do this because it makes sense - its about the music.

The most viable studio business model going forward is the engineer owned one. Preferably built in his house or next to his house unless he has the cash to buy a commercial building.
Most studio owners made their money sitting on the real estate over time. the business pays the mortage and at some later date they got to cash in on the underlying value of the real estate.
That system may not work anymore as we could well be in a 10-15 year downward cycle for real estate.
In 10 years time most studio's will be in or next to the owner/engineers house. Think Rudy Vangelder. That model works and will always work. And if your mixes sound like a major release (meaning that your are great at polishing turds) your room will be booked and you will make a good living.
Just keep your debt level as low as possible. Pay it down before you buy new gear. Invest in AS LITTLE Digi gear as you can get away with. The common wisdom here on Gear Slutz - that Mic pres and comps and mics HOLD value - digi stuff loses value - is great advice. Just don't ever think that your clients really care about the name on the gear. YOUR MIXES are what they are paying for therefore only invest in things that make your final product sound substantially better. Avoid spending 3K on something that is a marginal improvement. You may not end up with the Sluttiest room but you will make money.

It has been 26 years since we have had a REAL recession. The teeny micro one that almost happened in 2001 was avoided by every american ruining their financial health by tapping 300 million in home equity.
You must view your spread sheet with an eye toward surviving a tough recession. One is on the way unless you believe in Tinkerbell fairies (alan 'bubbles' greenspan) and the cheerleading squad on CNBC.

Anyone who personally signs a high dollar loan or lease is risking bankruptcy. Only risk a large loan if you can get one as a corporation without a personal guarentee.
Have fun trying to do that. It should be a clear signal that banks are tightening up and bracing for a recession.

Big ears - low or no debt = a profitable studio. I don't care if thats in the boondocks with adats and a mackie or in LA. Big Ears (great mixes) and low or no debt wins the day.

Sorry if this comes off preachy or as a bit of a rant. I've been at this over 20 years and I have learned every single lesson the HARD way thanks to my hard head.
I always get animated when I can help anyone avoid a few land mines that I have run over before.
Location is a big land mine. Be IN the scene not near it.
Keeping your total nut LOW is key.
No debt or really low debt gives you a fighting chance.
Mix your ass off and you will build a following and a carear no matter if your in a third tier market. As long as your location is where the musicains already are your golden.
And my big secret tip would be to find someone who has a great template for printing $100 bills. When you find that guy please send me a PM.
Old 16th October 2006
  #20
Gear Maniac
 
Peter Morrison's Avatar
 

Quote:
Originally Posted by jindrich
So Where are the profits?
well one good spot is booking your studio out for more than just 8 hours a day. You don't have to be the engineer on these sessions, get an assistant who works on spec, if he books the time in the off peak hours, then he gets a portion of the studio time fee. Unfortunately studios aren't a 9-5, 5 day a week gig.

Peter
Old 16th October 2006
  #21
Lives for gear
 

I called that Bonus Bucks.

Since we mainly booked evening hours we looked at day sessions as bonus bucks.

Cool story ---------

We had a client who was a day session client. Because he would come in mornings we cut him a great rate. As in killer unbelievable rate because it was "day work".
He was always on time. Always prepared. The music was killer and he was a super nice cat to deal with. Everyone involved in his sessions were totally cool to work with.
The mixes came out great and he really took care of his business. Sharp cat.

We know him as John Stevens. You all now know him as John Legend.
His grammy for Best New Artist was well earned.

Mike Harmon our then head engineer and now current owner of our previous studio is still doing sessions for him.
Sometimes the nice guys win.
Old 16th October 2006
  #22
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Makinithappen's Avatar
 

This is only for a one room studio....

Our situation is an A room for 50 an hour and a B room for 40 and hour. Both rooms are booked full. On slow days, each studio is booked 3 or 4 hours and there is always corporate stuff to work on if we're slow. (Corporate rate is 60 an hour.)

Not only do we break even but it is really very profitable.

Also, there are no racks of LA-2As, 1176's and Martechs. I'm sure that would cut into profits quite a bit. But it is possible to make it work.

(Of course it took us 10 years and a couple big names to get us to this point. )
Old 16th October 2006
  #23
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RCM - Ronan's Avatar
This is a really interesting and appreciated post. While I agree completely that getting into recording is an insane business (its been my day gig for 15 years or so, but its much harder for guys starting up now), but the numbers on your chart are way out of whack by many standards. I do a lot of consulting for people trying to start up studios and when I see expense sheets like that I give them a stern talking to.

The most important thing is that the biggest thing that will sell a studio is the people running it and "names" that have worked there in the past. I have a very comfy commercial studio with some cool stuff, but me with my D&R console and Pro Tools mix system I can bill a higher day rate than some of my competitors with SSLs and HD rigs. I am not a rock star producer but I have made more records than some of the competitors. People sell studio time, not gear for the most part.

30K for a new HD rig? This is the biggest bullet in the foot mistake I see start up studios making. You can buy turn key Mix systems these days for around $4000USD with the computer and plug ins. I have one in my room and in the last 2 years I have had 1 potential client question me about not having an HD rig. I told him I was happy to get an HD system in for his session but I would double my day rate. He booked the session with me and my Mix system and left very happy. These days you can get a decent analog console (something like and Amek, Neotek,etc) and a used turn key Pro Tools system for well under $10,00. You can also look at used RADAR system or even the Mackie multitracks.

$40k for Outboard? I think there is a guy on GS today selling a 4 channel API pre for 2 grand. Get two of them or a lunch box filled with pre flavors of your choice. Now you have 8 channels of great pres for $4-5k and you have all the decent pres in your Amek or Neotek. enough to track any band. Buying used you can put together a very nice collection of comps, EQ and verbs and still still be well inside of $15,000.

$30k for acoustics? Find a place with a good sized control room. That will solve the majority of your problems right there. A day of labor and $300 worth of wood, fabric and OC-703 will fix most of the problems. if your control room is a bit small you may have to put a couple grand into some bass traps. If your control room is tiny, what are earth are you doing renting a space with a tiny control room for?

Put a few grand aside for instruments if you want, but most people will bring their own. The only things that will really ad value to your studio in terms of attracting business will be pianos and a B3. Great amps and drums etc, might make your job easier, but it will not really attract customers.

$20k for mics? Its a nice thought, but you can get a very very usable mic cabinet for half that. Your fellow gearslutz may be impressed by your expensive mic collection but most of the people that are booking time at a mid level studio will be more impressed by a fish tank, than a Brauner. (That said, I love great mics, but my clients just care that stuff sounds good and they have a good time)

I love big expensive studios, and I love cool audio business making a good living, but taking on high debt is the best way to kill a career in recording. You need to be prepared to have bad months, or sometimes years. If some one had a space that did not need major construction you can get into a very cool mid level studio for under $50,000. A Trident 80B in great shape with an Studer 2 inch including cabling can be had for less than $30! Add that used Pro Tools system for 4 grand, and you still have another 16 grand to play with. Many classic hit albums have been made on much less.

Unless you are trying to build a studio that will be solely rented out to other engineers, focus on the tools you need to make good sounding records, not what will impress other gear slutz. If the biz starts taking off, then you can start adding all the cool toys that will make the rest of us jealous.
Old 16th October 2006
  #24
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Makinithappen's Avatar
 

Quote:
Originally Posted by rcm View Post
This is a really interesting and appreciated post. While I agree completely that getting into recording is an insane business (its been my day gig for 15 year taking off,.....
.... then you can start adding all the cool toys that will make the rest of us jealous.

great post!
Old 16th October 2006
  #25
Harmless Wacko
 

Somebody used the words "Studio" and "Profit" in the same sentence.

Without the presence of any negative modifiers.

Alert the press.

We have a madman loose.

SM.
Old 16th October 2006
  #26
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jindrich's Avatar
 

Hi again, thx for all the useful comments. keep them coming.


Some friends asked me recently for advice to put up a recording studio. Not that I wanted to discorage them, but I had to show them the truth. This days it makes no sense to start such a "business".

The crazy investment numbers I put here on the first post ARE indeed realistic, at least in Europe. I can point you to several studios charging 400/day 2000/week, offering 100k+ of gear, and even grand pianos. Yes, it doesn't make any economical sense and reflects the fact that many studio owners are simply gear collectors. But if you start a new studio you'll be COMPETING with them, and clients paying 400/day DO CARE about equipment (and room size/acoustics): "You have no U47, 1073, TC6000 or PTools HD3 (...) and charge the same as studio xxxx?" "Did you work for Sting at least?"...

It is a VERY TOUGH business. Somebody wrote here weeks ago that the recently opened, fellow gearslutz member Dave's studios (blast recording), based in Newcastle (England), was currently charging £250 a day as book rate! That's less than €400 a day!!!!!! Take a look what you get for this money, unbelievable! AMAZING PLACE and GEAR:





Yes, that's an SSL AWS900 on the pic.
(his website http://www.blast-recording.com/ is down as we speak, I hope it's just an IT matter)


Someone commented amortization is an accounting term. Yes, but you better plan and save properly for it or after 4 years you'll be stuck (it's an example) with a PTools Mix on a 800mhz G4 with 888 converters, whereas your nearby studio will have a flamboyant HD3 rig with the latest converters and cool HD Plugins on a Quad MacPro and a monster 30" screen. Which one would you book?

A whole new PTools tunrkey system cannot be bought for less than 20k (HD2, single 192, MacPro, screen, drives, altiverb, autotune). Used gear is less than an option in Europe, you'll hardly find what you want. Yes, 50k of initial investment gets you in the map, but at way lower rates than 2k a week (which will hardly cover your salary and the studio's rent)

On another matter, the 8hr sessions will easily turn into 10hr or 12hr ones without you charging for it, as you need to keep the clients happy. And if you want to retain the drum mic or gear setups, forget about renting the studio in the nights -for which you need to find a 2nd engineer, as you are already doing 12 hour sessions during the day (and preparing for a divorce).



As a comparison let's suppose for a second we're putting up an independent Video Production company to make Videoclips and such, instead of a Recording Studio:

Well, for just 30k you get all the gear you'd need: a full MacPro-FCP-Motion-Soundtrack rig with 24" screen, Filmtools plugins, Panasonic HVX-200 (a HD varicam P2 camera), 35mm adapter and nikon lenses, 7" HD TFT, Mattebox, focus pulling system.., tripod, small dolly, compact lighting kit.. etc.
You can produce film-like, MTV-quality videos with this (trust me). You don't need to invest thousands of dollars in treating acoustically the shooting spaces. You might not even need one if you always shoot location (on the street, the beach, the park, train station, abandoned factory, somebody's pool, local school gym...), so you can run this biz from home.
Regarding rates, you can easily charge 400 a day (or more to corporate clients), just what our example of mid-level recording studio charges today. Say we offer a package of $1,200 per videoclip (a bargain!), that includes 1 day of pre-production, 1 day of shooting, 1 day of editing.

Bingo, you get those 2k a week or 8k a month. And as you don't have to pay a rent and the loan is just for 30k, you will end up making money, instead of breaking even. Now get 2 MONTHS of holidays while renting the whole (insured) Rig for 300 a day to indie filmakers and groups of film students. That's a Biz Plan (in just 2 paragraphs!).



The Recording Studio Business. What a wonderful world.
Old 16th October 2006
  #27
Quote:
Originally Posted by Matthew Murray View Post
In this cut-throat climate, my best advice is DON'T BORROW, at least for 90% of your investment. Go slow, you'll thank yourself.

In the meantime, find the highest-paying job you can and save up for that gear!

Just one man's strategy.
This is the route I've taken also. But sometimes I wish I'd just have the balls to borrow the cash just to get things finished quicker.

I started building my place in February and had used up all my savings by June with the place only half finished. Since then I've been doing EVERYTHING myself - plastering, painting, electrics, building furniture, acoustics, doors, windows. So I saved £10,000 for the cost of the labour, but it cost me an extra 3 months of my life and I'm still not even finished.

My build is slightly different though, because it is a place which will be used be me only to make my music (mainly for Film/TV/Advertising etc), so I can still do work when it comes along even if the place is not finished - in fact I've been incredibly busy over the last 2 months, which has been the biggest hold up; at least I'm earning cash again though.
Old 16th October 2006
  #28
Lives for gear
 
gainreduction's Avatar
 

Depending on which kind of business... but if you're running a proper "Inc" with you (or anybody else) beeing the shareholder(s) you HAVE to make more profit than your inventory's (gear) value depriciates (20-33%/year is standard in the accounting world) to not get bankcrupt.

So if your initial investment is $150.000 you have to write off $30.000 - 50.000 annualy and compensate that with profit to make it back to zero. there are more factors to this, but basically like that.

Further, a bank won't loan you money for business for a longer time than the total write-off period, maximum 5 years. Probably closer to 3. If you are buying a building or something likely to last forever that's another story. In the banking world recording gear is disposable and does not qualify as full security for a business loan.

This is probably different from country to country but is how it works in Scandinavia.
Old 16th October 2006
  #29
Lives for gear
 
Switchcraft's Avatar
 

Take Ed words very seriously. I worked for him for almost two years and the owners knew how to keep it thriving. Oh and I got some legend sessions as well.
Old 2nd February 2012
  #30
Quote:
Originally Posted by edham View Post

It has been 26 years since we have had a REAL recession. The teeny micro one that almost happened in 2001 was avoided by every american ruining their financial health by tapping 300 million in home equity.
You must view your spread sheet with an eye toward surviving a tough recession. One is on the way unless you believe in Tinkerbell fairies (alan 'bubbles' greenspan) and the cheerleading squad on CNBC.

Have fun trying to do that. It should be a clear signal that banks are tightening up and bracing for a recession.
Sorry to bring up an old thread, but wow, you saw that coming. and in 06 to boot.
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