Starting a record label can be an exhilarating experience, but if you're not careful, you may find yourself facing major setbacks. New label owners often make common but costly mistakes that can derail their progress before they even start. In this blog, we'll explore the most critical errors to avoid when starting a record label, helping you lay the groundwork for long-term success.
Mistake 1: Not Defining Your Label Type
The first unforgivable mistake is not figuring out the type of record label you want to run. Defining your label's niche or genre is crucial because it provides direction. Without this clarity, you'll find yourself constantly shifting, trying to hit a moving target, and ultimately running an unsustainable business.
Ask yourself these important questions:
What type of record label do I want to run?
What genres will I specialize in?
Finding a focus for your label will help you target the right audience and set realistic goals.
Mistake 2: Ignoring the Business Structure
The second unforgivable mistake is neglecting to structure your business properly. Whether you're going solo or partnering with others, how you set up your label will impact your legal responsibilities and financial stability. LLC, S-Corp, partnership, or corporation—each comes with different advantages and liabilities.
Consider:
How will I structure the business?
Who are my partners?
How long will it take to get my partners and contractors in place?
A clear business structure will guide your operations and keep you legally protected.
Mistake 3: Underestimating Capital Needs
Capital is the lifeblood of a record label. Without enough financial backing, it’s almost impossible to get your label off the ground. Record labels are capital-intensive, and you’ll need a plan to secure funding, whether through investors, loans, or other financial arrangements.
Think about:
How will I capitalize the business?
Securing funding early on will help you navigate the costly processes of recording, marketing, and promoting artists.
Mistake 4: Failing to Test Before Committing
Don’t make the mistake of committing to an artist without testing their music first. Whether it's a single track or a full project, this testing phase helps determine if the artist and their music will resonate with your target audience.
Ask yourself:
Have I tested the music I want to release?
Have I recorded demo records with the artist I want to sign?
Have I tested the demos with a focus group?
Testing before making a full commitment ensures you're making informed decisions that will benefit your label in the long run.
Mistake 5: Overlooking Contracts
One of the most unforgivable mistakes in starting a record label is neglecting proper contracts. Contracts are vital in protecting both you and the artist, ensuring ownership, obligations, and expectations are clear.
Consider:
Do I have a standard contract for artists and producers?
Do I have a course of action to increase the value of the assets I'm producing?
Proper contracts will help you avoid legal disputes and ensure that everyone knows their role.
What If I Tested the Records but the Artist Doesn’t Want to Continue?
Always make sure you own what you’ve paid for and promoted. If the artist decides not to continue with you, it's best to let them go. It's too early to get them tied up in complicated clauses like sunset provisions. However, if things look promising after testing, negotiate for a small percentage of future earnings from the artist’s work.
The Only Money I Can Get Is Credit!
In a capital-intensive business, finding creative ways to secure funding is essential. Seek out partners or sponsors who can help finance your projects in exchange for promotion or other benefits. Be transparent with your artists about the financial challenges, especially during the early stages.
When Should I Start the LLC If We’re Already Recording?
Establish your business entity immediately. Without a formal business setup, you won’t own anything you’re paying for, which puts you in a vulnerable position. Secure the documentation for your company and the ownership of your investments as soon as possible.
Resources that can help
If you're a music creative or executive looking to build your label or publishing company in 60 days or less, with a step-by-step fool proof process, Grab the 60 Day record label course and get it done today! You gain the ability to get real funding, prevent yourself from getting screwed contractually, and keep the middle man out of your pockets. Click the link below to get started right now! If you’re skeptical grab the free guide, "10 Ways to Increase Your Record Labels Profits," a free split sheet comes with the download!
Asking these questions before you get deep in…
Will save you a lot of time, money, headaches, and confusion. It will help you grow faster or at least help you complete the first test records or projects successfully.
Ignoring the questions
Will set you back further than you can see because the troubles that are about to be in your way you never seen them before. Trust me I know they are coming.
Conclusion
If you’ve been hesitant or unsure about how to start your record label, this blog has equipped you with the essential insights to avoid critical mistakes. Now, you can move forward with confidence, knowing that you’re ready to become the music mogul you’ve always dreamed of being. By planning thoroughly and learning from these common errors, you're better prepared to build a successful, sustainable record label.
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