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Tips for the Smaller Studio

Because emerging multimedia operations, home studios, and project studios have become a more important segment of the recording industry, our business has been redefined. The larger mothership studios now understand that part of their diversification strategy is servicing the small satellite studios at virtually no extra cost to themselves. These new clients provide significant additional revenue, and are not really competition. The benefits of getting more business by providing services like “Do the mix here,” or “Let us do your duplication,” or “We will provide you with tech maintenance at $X per hour if you do all your outside work here” make sound business sense. It is again the basic “make or buy” decision. If the larger studios can provide alternate services for the smaller studios, the smaller studios can concentrate on providing the specialized services that they do best. Count on the big guys to do what the little guys cannot afford to support—or do not know enough about—as long as the project gets done on time and within budget. This entire discussion is based on the premise that you have now made the decision to own a recording studio facility that will provide services to the professional audio industry.

THE NEW BUSINESS—WHAT SHOULD YOU DO?

The new studio operator starts up a business because he or she thinks that this venture can provide certain audio service functions better and/or for a lower price. That formula never changes, but the thought of doing “business” can often prevent creative people from doing it right. They do not fully understand the professional business issues that they must face. Keep on reading. We will get you there. That is what this book is about.

I believe it is all a matter of scale. A one-room operation, with even a single key client who is billed for audio services, must adapt to the same restrictions and regulations as the big guys. It is important to do it legally, conforming to all of your local government codes and the licensing requirements for the location where you have decided to put your studio. Once that is out of the way, and you have your equipment set up the way YOU want it to be, the questions are:

1.  How do I run this place like a business and still have enough time to “do my thing,” which is why I did this in the first place?

2.  How do I know I am buying at the right price? Insurance? Leasing vs. purchase?

3.  How do I hire the right people, and what does that mean in terms of what I have to do to be legal?

4.  How do I find a part-time technician, so my studio can work around the clock without downtime caused by equipment failure?

5.  How do I let the potential clients for my studio know that it is available and better and/or lower priced than my small studio niche competition?

6.  How do I find out what I must do to be professional, so I can compete with the big guys on the basis of my lower cost of doing business?

7.  How should I affiliate with a larger studio that I can trust to furnish me with the services I need but cannot (or economically should not) provide for myself?

8.  What about PR, accounting, accounts receivable and payable, and so on? What is that going to cost me, and how do I know where I really need help?

9.  What services should I buy, and which should I do in-house, such as tech support, janitorial, accounting/ bookkeeping, engineering, and so on? What will they cost me?

With this list in mind, let's establish what a small studio is, and determine the most important strategies necessary to be professional on a small budget.

A small studio has one or two rooms. A one-room operation must establish the location, the cost of operations, and the overhead; meet legal requirements; and hire employees who can help beat the competition. Adding a second room in your current space, out of cash flow or net worth—when you can afford to do so and are certain that the additional demand is there for your facility—usually results in a small increase in overhead that is greatly compensated for by a substantial increase in cash flow (also known as the profit that you have been dreaming of for years).

Here are ten basic professional requirements:

1.  Comply with local laws in your geographical location.

2.  Determine if you should seek professional acoustic help in the design of your room, and/or seek professional equipment recommendations, based on what you expect to accomplish in your studio (for example, electronic vs. acoustic), and on the capabilities of the competitive facilities you have to beat or at least equal.

3.  As previously discussed, create a realistic business plan and a conservative budget that makes sense for your situation and is updated as you grow, by your professional—hopefully objective—experts (bookkeeper/ accountant or business manager /lawyer).

4.  Find a source of financing, such as a credit line, that you know will be there in troubled times or when you must purchase a major piece of equipment that you need to stay competitive and that will pay its way through increased revenue. Only fools or rich people pay cash. Leverage is the entrepreneurial way.

5.  Speak with your accountant, business manager, insurance broker, or banker /leasing expert for these answers; if you do not have one, get one. First, check with the people you respect in the music business to get their recommendations. You do not have time to train a stranger who does not understand our business.

6.  Clearly determine exactly what your niche is—what you do better than anyone else—and stick with it.

7.  Find out what services you can purchase (subcontract) for less than it would cost you to furnish them yourself, taking into account the equipment you must lease or purchase to provide those services. The key factor here is how much profit you can make in your studio by doing one or the other.

8.  Hiring and firing—learn to be a good manager so you can attract and keep good people.

9.  Develop a marketing plan to promote your specialty and get the clients in to work with you. Base your plan on the amount of money you can allocate to that function, so as to succeed in making yourself and your studio an entity that is recognized and trusted in your market.

10.  Develop the private parts of a gorilla—the stamina and staying power to overcome all the threats and problems of running a small business while continuing to provide your special service better than others. Find your will to succeed—to make it happen no matter what anyone says you can or cannot do.

OPERATIONS: WHO DO YOU TRUST?

The first thought to consider when you become an employer is that you are hiring somebody because it is less expensive, in terms of time and/or money, than doing the job yourself and you can reasonably trust him or her to get it done. This includes all kinds of “opportunity costs.” By that I mean that sometimes you, the owner, could do it better but correctly decide to hire somebody, a janitor/gofer for example, to do it for you. This decision gives you the “opportunity” in the same amount of time to do what you do best and make a multiple of the amount you must pay this person. If successful, the result is more revenue for your company in the same amount of time.

Now take a look at how much business you have and what services you can/must hire rather than do yourself. How much of a gamble are you willing to take to save money and make that revenue multiply? Sometimes it's just easier to do it yourself. Next, decide whether this should be an employee or an independent contractor, such as a staff janitor rather than a janitorial service.

An important factor to consider when you hire employees is the number of government agencies and reports you must deal with. To check this out, call your federal and local state income tax or sales tax agency. The Internal Revenue Service (IRS), for example, has Circular E, “The Employers Tax Guide,” which, along with “Publication 334: Tax Guide for Small Business,” will answer a great many of your questions. Your state tax agency, through the same kind of available instruction literature, will be pleased to tell you all of the licenses you must have, to do business in your state. They will also advise you of all the rules and regulations you must conform to, and may even tell you that you need to contact your city government for more permits to do business. Welcome to the employers’ club! Next, decide whether you should hire a part-time bookkeeper, an outside payroll service, or a business manager to take care of these details for you.

All of the above information is provided so that you may be aware of the costs associated with having your own recording business in your geographical area. Once that is understood and complied with, you are ready for your first session in your new facility. And good luck!