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Projecting Future Business—While You Enjoy It!
Your mother was right when she used to tell you: “All work and no play makes Jack a dull boy.” When you own your own business, the most difficult time to schedule is time off. There is always something that needs to be accomplished in the studio. Or your “best laid plans” get destroyed when a big client calls with a new project and wants to work only with you, or won't book your studio unless you are there for aid and comfort. It's hard to get away.
From my experience, solitary reflection is an essential element to achieve business success. It has always amazed me how a good getaway can give a person a fresh perspective and new insights. The best solutions for business challenges and problems that need solving often come to me while I am looking at the moon and stars late at night while on vacation with my family, after they have all gone to sleep. My mind is open, there are no interruptions or heavy stress, the telephone does not ring, and the answers I am searching for just seem to appear. Try it—you'll like it!
The summertime, in our business, is the time for that reflection and business planning for the next fiscal year. Summer is a brisk time for album projects and brings the end of hiatus for the visual music and postproduction studios. Many of the TV music people finished their season in April, did their reflecting and business projections in May, updated in June and July, and are ready to start their new season in August. The only difference between the two types of work is that the TV music people have their time off defined for them, and the record industry folks have to find a space between projects to get away for a vacation. Film music people tend to follow the TV music trend, because so many of the participants work in both areas of visual music creativity.
Wise studio owners plan for the next 12 months during the summertime. It is a time for thinking about how to stay ahead of the competition. Take a look at what has happened since last fall. What did you do right, and what could you have done better? What can you do to fix it? Is it additional equipment, a different niche market to attack and conquer, new expert personnel to hire to gain their client base, or new money negotiations to attract profitable bookings that you missed? Focus on the problems and solutions for the fall and for the coming year. Make your annual sales projections. Write them down, then let them sit and age for a reasonable period of time while you ponder them to be certain they are correct.
After a while, come back and reexamine them to make sure you aren't fooling yourself or haven't forgotten something. Look at the state of the economy, using the federal government's published economic indicators, which tell you about inflation, unemployment, prime interest rates, and what the Feds and the stock market think is going to happen over the next year. Figure out how it will affect your particular business, depending on your clients’ sensitivity to these economic indicators. Also study what your alternatives are to counter any negative economic forces that might keep your business from staying vibrant. All of these statistics are available on the Internet for your viewing. Among other things, the Internet is one of the greatest business reference libraries in the world, and it is free for the surfing!
It is important to remember when you are doing your projections that they are not just financial numbers that you are putting down on paper based on historical evidence plus a subjective annual percentage increase that you have decided fits your business situation. It is much like the problems faced by an audio engineer when he or she mixes a tune. There are a great number of elements that must be considered in your projections, just as, for example, the audio engineer considers lead guitar, bass guitar, drums, and vocals, and each element's specific sound level of domination for that particular song. Do you have enough and the right mix of people working at your facility? How about your client mix and the cosmetic look and feel of your facility? What about your PR, marketing, and image? Looking at your financial history, do you have the proper credit lines in place for spending what you need to maintain your market position? Will you still be able to put aside enough of your available cash to reserve for that quiet period when not enough money will be available for collection from accounts receivable to pay your mandatory accounts payable such as payroll, rent, and telephone?
It is important to understand the “rhythms of the year.” Timing is everything. During my Record Plant era, I knew I would always have two bad months each year. I tracked monthly sales for many years, and it was always true. The only problem was that I never knew which two months it would be. It was different every year, and just when I thought I had figured out which bad months to expect, the bad months would change. Sometimes it was a month here and a month there. The worst times were when it was two months in a row. But, because I was aware of that fact, it allowed me to plan cash flow and sources of credit for those times and arrange a reserve of cash to carry us through when the down months happened without warning.
This is another reason for keeping day-to-day financial records—so you can see those bad months coming and not be taken by surprise when they appear. In my experience, their arrival has been like the turning off of a faucet. One day, everything is fine, business is good. The next day the phone does not ring, and suddenly that feeling of panic, which all of us have experienced, just happens. The studio is empty, and there does not seem to be any reasonable explanation for it. There also doesn't seem to be anything you can immediately do to resolve the problem, except the obvious emergency procedures.
Once you are satisfied that you have all of the contingencies covered, plan what to buy, what to build, whom to hire, and what direction to take with your facility. This is what keeps your business fresh and alluring to the client base whom you are trying to attract. Their curiosity is many times what motivates them to try your facility to see if it measures up or is better than your competitor whom they are now using to fulfill their audio requirements. Your clients are busy trying your competition as well, which is why it is so important to maintain consistent quality in the services that are provided by your facility.
After completing your projections, come out of summer like gangbusters, while everybody else is still wiping off their sunscreen. Once the fall season starts and the end of year holidays approaches, you are probably going to be scrambling just to keep your facility busy, instituting your new plans for the coming year, and finding enough cash to meet your company payroll. Our industry is a never-ending challenge—one of the major reasons why we are so happily addicted to it.