5 Things You Need To Know About Raising Finance For Your Music Business

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1. Apart from raising funding via Grants or Charitable giving (this will be covered in out ‘How to raise finance for your music business’ course) all other funders will be seeking to know whether the business will generate enough profit to pay back the amount borrowed or earn them reasonable returns on their investments.
So what exactly does it mean to ‘think as a business’? It means you understand the need to make profit and the concept of ensuring your activities are financially progressive, not merely participating in the industry. This will help you understand that those who have money are seeking the means of making more, not to lose it in a gambling exercise!
2. Build Relationships. It may not surprise you to know that the average music person who comes to see us wants money and wants it now! It may be even less surprising to learn that some of our clients get highly upset if we dare to question their business model or suggest changes to the plans they’ve offered on the scraps of paper, and then wonder why they haven’t received a cheque there and then! You would not be interested in lending money to someone you just met for five minutes because they promise to pay you back from the sale of a “Hit” song you have not even heard. The point I am making is that raising money has got a lot to do with establishing constructive working relationships and we need to ensure we are prepared for this.
One point of advice – Start seeking finance early! You need to start cultivating those strategic relationships now that could benefit you greatly in the future.
3. Nobody Owes You Anything!. Many people in the music business are passionate about what they do; the new song they have written or the new beat they have constructed. With this enthusiasm comes the false notion that everyone should “give me the money to put out my own music”. Having a product you believe in is one thing; convincing someone else to part with their hard earned cash is another. We must work from the point of view of needing partners not on the basis that ‘somebody owes me’!
This paradigm shift in thinking will help the way we approach funders.
4. Educate Your Funders. You may be surprised to know that the majority of people who sit on pots of money have a narrow-minded view of how the independent sector of the music business works. Their view of the industry comes from major labels and from viewing programs such as the X-Factor or American Idol. It is your duty to communicate the potential and opportunities that exists within the independent sector and how you hope to capitalise on it. Failure to do this convincingly may result in the failure to raise funds.
5. Demonstrate That Your Business Can Work. Today there has been a shift from the old way of signing an act to a new business model as far as the record companies are concerned. Nowadays labels only want to sign an act or a track with heat on it. The credit crunch has also made people control their spending. Potential funders need to know that what you say can be done, can be done!
So for example, selling a few hundred CDs or Downloads demonstrates that you have a product that is worth financing. Doing a few paid gigs locally demonstrates you have a good financially viable band.
Just getting a few reviews will not do it. The best way to demonstrate you have a good, solid, financially viable business is to have some people already paying for what you offer. This demonstrates you have a business worth supporting and lifts your profile higher than the majority companies seeking funding who cannot demonstrate this principle.