Whether you’re a musician looking for more control over the publication of your art or an entrepreneur who enjoys working with talent, you can get any small music business ideas off the ground by starting your own record label. And it’s easier than you might think. Read on for everything you need to start your own independent record label.
What is a Record Label?
A record label is a brand that represents the music of one or more artists. It conducts the business of music, including signing contracts with and promoting musicians, as well as recording, publishing, distributing their music in physical and electronic formats. While all of these functions are typically carried out in-house at a major record label, tasks like publication and distribution often are outsourced to other companies by independent record labels.
How Much does it Cost to Start a Record Label?
You don’t necessarily need any capital to start a small independent record label. In fact, you can establish a label with no money by naming it and creating a social media presence. Once you start working with artists, you can seek an investor to financially support your business venture.
Are Record Labels Profitable?
Publishing records isn’t without its costs, and a record label must pay its artists, pay for recording costs and pay for publication before it can ever sell a record. These costs must then be recouped from music sales before the small business begins to turn a profit. While a record label ultimately can become a profitable business, don’t expect to start seeing those gains immediately.
How to Start a Record Label: 21 Simple Steps to Get Started in the Music Industry
Have you always wanted to try your hand at a music career? Are you a music lover who has always dreamed of becoming a label owner? Check out the following 21 simple steps to get started in the music industry and start a record label:
1. Name Your Record Label Business and Register
What will you call your record label? It’s vital that your label have a unique business name, so be sure to research your options before choosing. Check for other businesses with the same name using sources including state registries, the federal trademark database and even Google. You might also want to be sure the name is available as a website domain, even if that organization does business under another brand.
Once you’ve chosen your record label’s name, you want to protect your brand. By registering for a trademark, you ensure your brand name remains unique among the competition.
What is a trademark? In the United States, a registered trademark provides the exclusive right to use your business name nationwide in connection with the goods and services you identify when you register. It also allows you to enforce your trademark by filing a lawsuit in federal court if a competitor infringes on it and uses your name.
2. Brand Your Indie Label
Your indie label brand might start with your name, but it doesn’t end there. Audiences also identify brands visually, so it’s important to create a logo to represent your record label.
Your logo will visually represent your record company to the market, so it should signify your label’s music, values and vision. If you are artistically inclined, you can design your own logo, or you can choose from a variety of logo design tools and services.
3. Choose a Business Structure
How will you structure your record label? Will you be the sole owner of your small business, or will your indie label be a partnership? Who is legally responsible for the brand?
When establishing the structure of your record company, you can choose from a variety of business entities, but the following three will be most commonly used by small indie labels:
- Sole proprietorship – The simplest type of busienss to structure, a sole proprietorship can be established without taking a formal action since the business and the individual owner are the same legal entity. In a sole proprietorship, the owner is entitled to all business profits and is legally liable for the entire business.
- Partnership – A partnership is a business owned by more than one person. Each partner contributes to the business, although not necessarily equally. For example, one partner might provide capital while another provides talent and skill. Each partner then shares in the profits and losses of the business. While not legally required, it’s beneficial to establish a legal partnership agreement, which is a basic business agreement that determines roles and responsibilities.
- LLC – LLCs combine characteristics of a sole proprietorship and a corporation. A limited liability company is a business structure that protects its owners’ personal assets and personal responsibility for the company’s debts or liabilities. Unlike shareholders in a corporation, however, LLCs aren’t taxed as separate business entities.
4. Research the Competition of Major Labels
It’s important for any small business owner to understand their competition. In the record industry, brands will be competing against major record labels and other independent record labels. Research the competition and see what other labels are doing that you want to emulate and in what ways you can make your indie label unique and stand apart from the competition.
5. Pick a Niche and Understand Your Target Market
If you want your indie record label to stand apart from the sea of competition, it’s important to choose a business niche and target market. The music industry is vast, and your small business will easily get lost in the crowd of independent labels if you try to cater to the entire market. In what type of music will you specialize? Will you sign blues singers, hip hop artists or folk musicians? Will you cater to casual listeners, teenaged music lovers or international fans?
6. Set Up a Business Bank Account
Before your business starts sending or receiving money, be sure and open a business bank account. A business bank account offers a level of professionalism to your small business, and it helps keep your record label legally compliant by separating your business and personal finances.
7. Purchase Necessary Equipment
What equipment will you need to start your own record label? YOu can outsource the publishing and distribution of your music, and you can rent time in a studio to record an album. Some musicians also have their own equipment.
You can establish a basic recording outfit using standard software and computer equipment for as little as $150. Ultimately, however, you will want to purchase professional-quality recording equipment and establish your own recording studio, which can cost $15,000 or more. Equipment includes acoustic drum kits, audio interfaces, microphones, monitors, mixers, cables and even tables and chairs.
8. Create an Online Presence for Your Music Label
Every successful business needs to establish an online presence, and your music label is no exception. It costs nothing to create an online presence. Start by opening an email account for your indie label and establishing a social media presence with profiles on platforms like Facebook, Twitter and Instagram.
You also can create a professional website, registering a domain that ties back into your brand. While you can upgrade to an engaging and even interactive web page, you don’t have to start with a fancy website to create an effective online presence.
9. Get Licenses and Permits
Will you need any permits and licenses to operate your record label? Requirements for businesses to obtain various types of permits and licenses varies by state and locality, so the answer requires each small business owner to do some research. Be sure to check on the business requirements in your locality and apply for any applicable permits and licenses for your indie record company.
10. Choose a Location
From where will your record label operate? While you have the option of establishing your own independent studio in a rented space, you can save money for your small business by operating out of your home office. You can rent studio time and arrange professional meetings at external locations, while running your business from home or a shared workspace.
11. Get Business Insurance
It’s always important to get the right types of insurance for your small business. Insurance policies help protect your company in the event of a fire, theft, natural disaster, crisis or even a loss of sales. To purchase the right types of insurance for your small business, it’s important to identify your needs.
The following business insurance types might be purchased by a small business owner starting a record label:
- Property insurance – It doesn’t matter the line of business, if the company owns and possesses physical property of any type, it should purchase property insurance. This will protect your record label’s property and equipment, regardless where it’s stored.
- Liability insurance – To protect your record label from certain financial losses and even devastation, liability insurance cover medical expenses and legal fees for which your business may be legally responsible.
- Cyber insurance – Small businesses that conduct any business online should protect themselves with cyber insurance, which protects them from malware, cyber attacks and data loss. If you promote your record label on a website or if you engage in digital distribution, you will want to protect your interests with cyber insurance.
12. Sort Out Your Record Label Taxes
Like any small business, your record label will be subject to a variety of local, state and federal taxes. You might owe property taxes, state and federal income taxes, sales tax and even employment taxes. Be sure to register for a Federal Tax ID and any needed state tax IDs, and protect your business by researching the applicable taxes in your region.
13. Join Trade Bodies and Societies
To help further the success of your new music label, you should enhance your networking opportunities by joining relevant trade bodies and societies. Members not only boost their networking, they often are invited to free industry events where you can learn more about the music business.
For example, members of the British Phonographic Industry are considered parts of the “Brit Awards Voting Academy,” which means they vote on the annual winners. Other trade bodies an indie record label might join include the American Association of Independent Music, the Association of Independent Music Publishers and the International Alliance for Women in Music.
14. Set Up a Business Phone System
Your next client could be a simple phone call away. Thus, it’s important for every small business owner to establish a business phone system for their company. You never know when the next up-and-coming independent artist might be trying to contact you.
What features will you need in your record label’s phone system? You might not think you need more than basic phone service features including caller ID, hold and voice mail. When choosing business phone system features, however, remember that your phone service presentation can represent your level of professionalism.
15. Build a Team
Nobody achieves success alone, and even a sole proprietor should build a team of experts to help launch their independent record label. You don’t need your team to physically assemble to be effective. You can surround yourself with professionals around the world and work together virtually.
When starting a record label, you will want to work with professionals including a music lawyer, music producers, accountants, radio personalities, public relations representatives and music video directors. You also will want to make important contacts with talent scouts and entertainment managers who can help you sign contracts with musicians.
16. Market Your Label
If you want the world to know about your record company, it’s vital you market your label. You can hire a marketing agency to promote your business, or you can concentrate on promotion in house. Without marketing, your small label might flounder and fail to grow. Even after you sign artists and record albums and digital music, promotion will remain an integral part of your record business.
17. Get Groups to Sign Up
How do you convince talent they can trust their music careers to your label? Without artists and groups to record music for you, there is no product, and you don’t have a functioning label. Even a new label will likely need to work with artists’ managers and lawyers when signing legal contracts and a recording agreement, so you’ll want representation and legal advice, too.
18. Look for Investors
How will you finance your record label? It might not take much to launch your brand, but running a record label takes money. You will need to pay artists, pay for recording costs and pay for publication, marketing and distribution, among many other costs involved with running a small business. Most small business owners are unable to fully self finance all of these costs, and so they look for at least one person to invest in their business.
19. Release Music
Distribution used to be a headache for anyone not affiliated with a major label, but thanks to online music and streaming services like Apple Music and Spotify, releasing music is now an option for practically anyone.
By choosing a digital distributor, any indie record label or independent artist can sell their music in the world’s largest online music stores. Even a first release can become a big seller and make a profit without recouping all the manufacturing costs associated with physical album sales.
20. Collect Your Royalties
Once people start streaming and buying the music you’ve released, you’ll start receiving royalty checks from your distributor, based on the amount you sell. Ultimately, you also might be paid other monies including mechanical royalties, public performance royalties, Soundexchange royalties
21. Be the Owner of a Successful Independent Record Label
Once you start earning money, you are well on your way to being the owner of a successful independent record label. Like any small business, you’ll want to look ahead toward further growth and maximize your earnings where possible. Scaling the business will be your next major step.
How to Start a Record Label with No Money
Anyone can start a record label, even if they don’t have any money. Eventually, you’ll need capital to expand your business, but it’s possible to find significant savings when you start your indie label. By the time you’ve chosen a name and established a social media presence, both of which are free, your label can be called official.
Networking with artists also costs nothing, and you might be able to score your first contract before you’ve spent a dime. If you still have no money when it’s time to record music, you can seek an angel investor to help your company grow.
This article, “How to Start a Record Label” was first published on Small Business Trends