100% of artists face the possibility of going broke in the music business every day. This uncertainty creates anxiety when making major financial decisions without a clear vision. I'm standing right there with you! But if you want to understand the main ways you might face your downfall—and how to prevent it—tune in to the Music Money Makeover Show.
Over leveraged
The number one way many new artists go broke in this business is by being over-leveraged from advances and funding. This means they've maxed out every dollar they could pull from their future earnings, and to get more money, they must first pay down these balances. Sure, the money is needed to get off the ground and break free from where you are right now. However, this creates a scenario where you don't have enough cash flow to pay down the debt you've advanced yourself. Even though you want to get things moving quickly, it's better to take your time and use just a little bit of leverage instead of all of it. This approach lets you build the cash flow you need to sustain yourself step by step. Taking it slower allows for a more stress-free ride to the top of your career. Over-leveraging causes pain and suffering on your way up, and in some cases, you might never make it because of this burden.
Cash flow is too low
Here's why a lot of artists sink fast in this business: it's simply because they're not bringing in enough cash flow. Cash flow is consistent income over a period of time, usually three months. Income must remain consistent. If there is no cash flow, then the whole plane crashes. Artists, when they start to get cash flow, want to take some for themselves—take profit, spend it, and maybe splurge a little bit. Remember that you should keep this money within the business to keep the business afloat. When you do this, then you will last way longer in this business, but if you spend your cash flow as soon as you get it, you'll never have what's called "power" so you can continue to create for a living.
Operating expenses are too high
What no one tells you about running your own record label is that operating expenses are essential—but what happens when those expenses are too high and you don't have enough cash flow to cover them? Your business begins to suffer and can't operate efficiently. When this happens, many people scramble to find different ways to make money, only for their business to crumble beneath their feet. It's best to keep your operating expenses low until you can afford to expand. Remember: slow progress is better than no progress. Even though software and tools can help you reach the finish line, there's no point in acquiring them if there's no return on investment.
What if I can't manage my finances properly?
Money management isn't the problem—lack of financial education and systems is. I would recommend a book called Profit First. This will help you build your financial education from the ground up so you don't go underwater. Start small, track every dollar, and put systems in place before scaling. If you avoid proper financial management, you'll likely join the many artists who go broke. But if you embrace it, you'll build a sustainable career with steady growth.
What if I take on too much debt?
If you're in this position, you have poor leverage management and you'll want to address it by only taking advances you can comfortably repay with current income. I go over this in my Art of Music Funding: Get Money, Stay Independent! master class in the music money makers community. If you avoid all funding, you might struggle to grow. However, if you manage it wisely, you can use leverage to accelerate your success.
What if my operating costs get out of control?
High operating costs are not the problem—what's really happening is inefficient resource allocation. I'm willing to bet that you're not using everything you're paying for, and some of it is probably too expensive. I want you to start lean, only adding expenses that show clear ROI or are necessary to operate efficiently. If you avoid necessary investments, your growth will stagnate. If you invest strategically, you'll build a profitable operation.
Here’s what you can do!
Reduce all costs to you label that are ineffective and don’t generate any return on investment.
Stop using all funding right now if you don’t need it.
Join our Music Money Makers community where you'll get access to financial education resources, including the Art of Music Funding masterclass
Join me Monday night live at 7pm EST in the music money makers community to get your question answered on the spot.
Here’s what you can expect when you manage your finances properly
Based on the strategies we've discussed, here are the key payoffs you can expect when you manage your finances properly:
Your cash flow will stabilize and grow consistently, allowing you to reinvest in your music career without stress
You'll build a sustainable business model that generates long-term wealth instead of short-term gains
You'll have complete creative freedom because you're not tied down by excessive debt or high operating costs
If you fail to manage your finances properly in the music business
You'll drain your bank account and credit, potentially leading to bankruptcy and financial ruin
You'll experience intense stress, anxiety, and loss of confidence in your artistic vision
You'll have to choose between giving up your music career entirely, being dropped or passed off to another label, or struggling perpetually in debt.
At the End of the Day
The success or failure of your music career often comes down to how well you manage your finances. It's not just about making great music—it's about making smart business decisions that will sustain your artistry for the long haul. By implementing proper financial management, avoiding over-leveraging, and maintaining healthy cash flow, you can build a sustainable career that allows you to keep creating the music you love.
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