Everything you need to know before starting your record label 

Music and music production is a flashy and alluring business. All the swag, parties, record releases and celebrities — it’s no wonder why so many people want to try to break into the business.

Some people may not want the limelight of being a pop star, so they may turn their efforts to start their record label. Independent labels have a long history in the business, going back to the post-war era. While many have failed, others have thrived, and others have been bought out by the major three labels, Universal, Sony, and Warner.

The music industry always needs more passionate people to get involved and learn the ways of the business. Of course, just because you’re not necessarily going to be behind the microphone (or maybe you’ll be doing that as well?), it doesn’t mean you’re going to have an easier go of making a living. Creating your venture while doing anything connected to music can be incredibly tough and unless you’re willing to give it your everything, don’t sink any real resources into the project, to begin with.

Here are a few things you may need to consider before you start planning that first release.

1. A strong business plan

Lots of people who either start record labels or who have dreams of doing so don’t necessarily realize what these companies do. They are often music lovers who simply want to help promote great music that isn’t receiving the attention they believe it deserves. While it’s a wonderful and admirable goal, it doesn’t necessarily make for a solid business plan. If there isn’t a strong plan, the company will inevitably disintegrate not long after creating them.

There are a few questions you’ll need to ask yourself — and be able to answer truthfully and honestly because your answers will define how you go about managing your affairs. First, is this record label going to serve just you and your art or is it your intention to sign other musicians and bands? Either answer is fine but it should probably be one or the other. If you simply need some legal protection and benefits for your musical career, a self-owned record label can be a great way to go. However, it’s perhaps not the best option if you’ll be signed to the same roster as other acts, as you are likely to favor your creations and give yourself an unfair amount of resources and not necessarily because of the quality or sales potential.

Second, what is the purpose of your company? I mean, what do you want to get out of this venture? Is it just for fun? Are you looking for a way to break into the music industry and you believe this to be it? Are you seeking fame, fortune, and riches? If the last choice is what is truly in your heart, I can’t blame you, but a record label might not be the easiest route to your dream destination (as if there was such a thing). Be honest with yourself here because it would be a shame to work hard and commit funds to something only to realize later you were doing it for the wrong reasons.

Finally, what will separate your label from the hundreds of thousands of others out there? Will you stick to a certain city or geographic location? Perhaps you want to be known for promoting the best new acts in a certain genre? Or if you think you can make it work, maybe there’s space to succeed working with acts of a certain demographic? Make sure to choose something you can remain passionate about throughout the hard times and the long hours, as there are sure to be plenty of both. Differentiation is key when it comes to ruling with any business, especially in the crowded music landscape.

2. Legal And Financial Help

When you first launch your new venture, you probably won’t need a lot of legal advice and assistance so this may not wind up being a major cost. You should still be prepared to spend at least a few hundred dollars on a lawyer and someone who understands numbers to do this right. Otherwise, you will eventually wish you had done so.

One of the biggest benefits of owning a company, whether it’s simply to release your music properly or to work with other names, are all the benefits that come with being a legally-registered business. 

An entertainment attorney can also assist when it comes to choosing what form of company (an LLC, a partnership, a sole proprietorship, etc.), — which is yet another thing to think about — will serve you best. Some of these are easy to find and take advantage of while others will require a professional to explain. An attorney can help create a contract you’ll sign with your bands to protect everyone involved while an accountant or tax professional will ensure your taxes are in order and you’re handling your money in the best way possible. These people certainly won’t be on staff and you should only retain them for short stints of time, so be smart with the questions you ask and the services you need them to provide.

3. Funding 

You’re doing this for love, not money, right? Unfortunately, everyone you’re going to need to work with to start your label may not be so giving. There are a lot of costs to consider, from pressing albums to the promotion and paying out royalties. But if you’re willing to start really small, there is one positive. The cost of opening up and running an independent record label has gone down considerably within the last two decades — thanks, in part, to the digital music industry — you can be creative and keep your costs down considerably. Do some in-house PR, do artwork by hand, don’t spend money on cool but expensive vinyl and so on.

How much money you need before you begin is up to you. I can’t quote you an exact figure because it will vary widely based on your goals and aspirations. That said, the amount you’re willing to commit should help give you an idea of what you’ll be able to do, at least at the outset. 

However, according to Profitableventure.com, it isn’t as costly to run an indie label in the U.S., Canada, Australia or the United Kingdom. You can start a small record label with as little as $20,000 to $50,000 in capital. This can cover the cost of your equipment (mixers, microphones, amps, cables, computers), licensing and business registration. You may also be able to set aside some money out of this budget for promotion, although it may be low-scale.

Don’t forget, this isn’t a hard and fast rule. The best thing to do is to take some time and do the research necessary to find out what everything will cost, from distributing albums to recording costs to legal fees and beyond. And most importantly — like any other business venture, be prepared not to see a return for a very long time.

4. Distribution

If you want to make some of that money you invested into your record label back, you need some way to get your releases into the hands of music fans. The best way to possibly get yourself out there is through digital channels. Since there’s no cost of having to produce any music physically, you can easily upload albums and singles produced by your label once you’ve hit export on the editing machine. All it takes is producing a digital copy, and putting it on a digital service providers (or DSP, if you want to get the lingo down) like iTunes or Spotify.

This will be a big part of what you do as a record label but it’s important to do much, much more, because no artist needs a label to connect them with these DSPs anymore. Many do it themselves so this can’t even be the greatest thing you bring to the table. Otherwise, many artists you’re interested in signing will likely walk the other way.

5. Partnerships 

Truthfully, nobody can run a label on their own, but at first, you have to be very much prepared to wear more than one hat. With that being said you need to scout for partners that have the same passion for music as you do. One thing to keep in mind is that people don’t work as hard, or even want to work at all when money is not flowing, which is why people who have a passion for music and the business are ideal. You can also look for people in your close circle such as family and friends that believe in your vision and are just willing to help out. Some essential partners to get you started would be the following:

Business Administration: Someone to look over the financials and bookkeeping of the label
A&R: Someone to scout for music talent and the development of the artists
Marketing: Someone that’s really good at communicating your label campaigns to your audience and dealing with fan engagement.

Lastly, you need that one person that’s really good with networking and building relationships with key people that will get the word out about your label and artists. If you’re finding it really hard to find good people to work with there are many colleges and universities out there that offer internship programs with students looking for these opportunities. The plus side is they have a passion for the industry and they’re just looking to gain knowledge and experience. This means no financial expense for you.

6. Promotion

Just like you need to give people some way to buy your albums, you need to let them know they exist in the first place. To do that, you have to promote.

When you’re just getting started, promotion can be a real uphill battle — it takes time to build up the contacts you need so you can relax knowing when you put out a record, someone is going to talk about it. If you don’t do your promotion in-house, it can get extremely expensive, and there’s no guaranteed payoff. Promotion is a necessity, but it’s hard work, and be prepared for a huge learning curve.

But with the advent of social media, there isn’t as much pressure as there was in previous years. And you can definitely reach a wider audience with the right strategy. If you already have a big network, create a website and social media profiles on Facebook, Twitter, and Instagram, and get everyone to share. Keep on top of your promotion through photos, videos, audio clips, regular posts, and events. If you can do this yourself (or convince friends and family to help you out), it may just cost you time.

If you can’t handle it, there are consultants and companies that will manage your social media profiles for you for a cost. If you can afford it, why not leave take that stress away from yourself?

7. How to know if you can survive as a record label owner

That long list of tasks you often have to take on when you start a record label demonstrates the two most crucial things you need to know about getting into the indie label business. While manufacturing, distribution, and promotion might be the practical things you need to release a record, know the following before worrying about that:

  • You must be able to juggle several tasks at once and you must be self-motivated to keep it going, even when it’s not so fun.
  • You have to absolutely LOVE what you are doing. If you don’t, you’ll get tired of the hard work and ups and downs very quickly.

By no means is this the end all and be all of starting a record label, but if you get anything at all out of this, understand that you better know your audience and the music business in and out before even pressing the launch button. Starting a record label might sound like fun; it’s very rewarding and has its perks, but only after a lot of late nights and the struggle of sometimes wanting to give up. But don’t give up or give in because good things come after a long journey. You appreciate it more and will be respected by others when you finally succeed.

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