Question to anyone who owns there studio

P

pole

New member
I have a question to all the pro's out there that have ever tried to apply for a loan for their studio. I will start by saying, I've done about 5 or six business plans in my 3 years of business, I am also use Business Plan Pro to make all my plans. My question is recording comapnies work on a different concept then all the companies I have ever done. You start with a high adverage per unit and low veriable cost. The software tells me I'm wrong in that area, which with my research I know the adverage per unit cost would be the x amount of dollar the musician would pay per hour, and veriable cost are low because you don't really have an overhead in a studio (per say).

Also you don't really need a lot of emploees to run a studio maybe three at the tops but then you run over a 30% Net profit sales each month, again software tell me I'm wrong, all the numbers are right, at least as far as I know, I keep having to make up stuff just so they work and thats not how this is done.

So I ask please anyone with exspirence in this could you please email me polerite@telus.net Thank you in advance, Thanks.
 
pole said:
My question is recording comapnies work on a different concept then all the companies I have ever done. You start with a high adverage per unit and low veriable cost.
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Recording companies generally work on the "labor of love" principle. You are *NOT* going to get rich at owning a studio.....

pole said:
which with my research I know the adverage per unit cost would be the x amount of dollar the musician would pay per hour, and veriable cost are low because you don't really have an overhead in a studio (per say).
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NO OVERHEAD IN A STUDIO?

What are you talking about? What about the facilities? You have to record someplace after all. What about the equipment? You need something to record on, after all.

Generally speaking most studio have nothing but overhead. Especially right after NAMM.... :)

pole said:
Also you don't really need a lot of emploees to run a studio maybe three at the tops
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Depends on the size of the studio. Some places only have one guy that does it all, larger established studios can have a dozen of people on staff.

The important thing to remember about studio employees is good luck grabbing someone off the street.... Finding good people to just be *INTERNS* is a problem for my studio... much less finding additional engineers.

Oh yeah, lots of people apply but most are more worthless than a Behringer mixer in a George Massenburg session.....
 
Thanks Cloneboy, but I should have made myself a little more clearer, my mistake. I already own a studio the question I am asking is about a business plan. not the studio itself. I have about 15,000 invested so far, I imagine thats knowhere close to what you have, but it's a start for me. And insturments arn't classified as "overhead" in a studio. My problem is finishing my business plan, I already have potential buyers I just like to do things properly the first time.

P.S. I'm not picking at you I do respect the replay and for that thank you, I just think what I'm asking may not have been listed in my origional post.

PPS sorry about the spelling, I'm kinda rushed right now.
 
pole said:
And insturments arn't classified as "overhead" in a studio.
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Depends if they're paid for or not. :)

pole said:
My problem is finishing my business plan, I already have potential buyers I just like to do things properly the first time.
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I have absolutely no idea why you need a biz plan then.... I guess I'm just lost or clueless as usual.
 
No dude you are not clueless, I just have a way of doing business, I exspect to see all the numbers of everything. I also use business plans to design ideas and make them come to life a little better. My program just won't let me do what I want to do. And That get me frustrated.
 
LOL no matter what numbers you put into that little program you're probably not going to like what comes out. when cloneboy said the studio is a labor of love he's dead on. I built mine because I love to do it, not because I wanted to make money, hell I'm known for helping out starving bands in need of demos. You talked about potential clients? you mean someone wants to record in your studio? thats a start and if you're asking what you should charge well that can vary. I know of studios that are 50 to 100 bucks an hour, some guys charge 200 per song, some charge 200 per day, some base it on how good the band is(don't ask me). Anyway if you're program doesn't take the numbers then well it doesn't. And yes there is overhead.
 
pole said:
Thanks Cloneboy, but I should have made myself a little more clearer, my mistake. I already own a studio the question I am asking is about a business plan. not the studio itself. I have about 15,000 invested so far, I imagine thats knowhere close to what you have, but it's a start for me. And insturments arn't classified as "overhead" in a studio. My problem is finishing my business plan, I already have potential buyers I just like to do things properly the first time.
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Um, depreciation and maintence of instruments is. As is electricity, , coffee, soda, beer, weed whatever.

Don't forget amenities like light bulbs and bumwad.
And you will not only want to, but NEED to upgrade your gear down the road. That doesn't pay for itself.

A commercial studio requires constant investment. That's overhead, no?




If you want to do things properly, you should properly categorize your overhead.

And with respect to employees, studios are similar to just about any other small business in that regard.
 
Yeah, and if you want to build a *serious* studio it can be extremely expensive. The current revamp of my studio to involve post prod involves a 5 million dollar business grant/loan with 30 years repayment on top of the current studio, which isn't too shabby now.
 
Massive Master said:
I didn't see anyone mention insurance... Lots of it.
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Yeah, big time. The first studio I worked at almost went under after they were robbed 3 times in 3 weeks. Ugly. They had insurance too.... just not enough.
 
No overhead??????? How are you going to put the roof "over your head?" :)
Seriously, do you have a space? If this is a side job, you can probably get away with using your house (for which your day job will pay for), provided you take care of the liability issue with your insurance carrier. If this is a fulltime job, the money that comes in from clients paying $20 an hour (or whatever) is going to have to cover -
-Rent/Mortgage for the space
-Electricity
-Coffee/Beer
-Woman (just kidding!)
-Insurance (health and liability for you and on the structure/equipment)
-Employees
-Advertising
-Accounting fees
-Payroll/Self-employment taxes
-Equipment deprecation/upgrades/other capital improvements
-hopefully some profit for the business
-Salary for you if there's anything left after everything else

So if you're billing clients at $20 an hour, you might be taking home $10 an hour, which is not something I'd be too happy with. But hey, if you love it, who cares about the money then?

Good luck!
 
pole,

Is the business plan to secure financing? That's what I thought when I read your original post, but then in anoth post you indicate you have buyers. Are you trying to sell the studio? At $15,000 I'm guess you're working out of your house.

I've never used the software program you mentioned, so I can't address why your software does not like your calculations however, I will share my interpretation of your comparison of unit cost to variables vs. overhead.

I assume you are trying to compare the gross income of a unit (a biilled studio hour) vs. the costs of that unit. As an example if you bill at $40 per hour, you need to reduce that by the cost of rent, ulitilties, monthly payments on equipment, etc.

Accordinly, you first have to determine what your monthly costs are. Fixed costs (rent, untilities, etc.) are relatively easy to establish. If you have payroll costs or monthly loan payments, etc. that must also be determined.

Lets say you determine that you have $600 per month rent, $100 in utilities, $2,000 in payroll and loan payments of $300 - that totals $3,000 per month. Let's add another $500 per month for non fixed costs (maintenance, taxes, etc). and another $500 for purchases of assets/supplies.

So $4,000 per month in fixed & variable costs. Say you're gonna bill at $40 per hour. So you need 100 of billed hours per month - to break even. Now if you are trying to secure a loan, what do you plan to buy? How will that purchase grow the business. If it's a $15,000 loan with $500, monthly payments, that's another 12.5 hours of studio time you have to book.

Now as a lendor I want to know how you're gonna secure 112.5 hours of billed time. How do you market (opps, we didn't include that in the budget)? Who do you market to? What percent of the market do you think you can capture? What is you competition?

I don't know if that helps answer you question or not. Clearly, there is always some type of overhead. At the very least the utility cost. If you use part of your house, you could/should allocate a percent of the monthly costs. Even if your gear is paid for, there is some cost for repairs.

I will tell you, getting a business loan for a studio is very hard (lendors don't really understand the studio business, but they do understand that most fail!

I do respect that you are trying to approach this as a buiness with a plan - you may already be well ahead of most "studio owners" (assuming you have the chops to back it up).

One thing that I have observed after many years in the music business. Studio's that make purchases when they can afford it (rather than going deeper into debt) often last longer than studios that get buried under significant debt and then can't generate the cashflow to make the payments.
 
Let me start off by saying thanks to everyone here for thier 2 cents, even if it was total off for the question that was asked, I think I might just focus on what I have now and figure out the numbers a little better, before I make one last conclution weather or not I'm going to keep going on this. I just thought I would ask for some help in this, but maybe I'm going about this the wrong way and should forget the whole business plan aspect, I will not continue on someting without know how well, and how long it would run for.

Again thanks for the replys.
 
pole said:
I think I might just focus on what I have now and figure out the numbers a little better, before I make one last conclution weather or not I'm going to keep going on this.
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Forget the numbers dude... it boils down to this:

If you love recording and are personally highly skilled at it--give it a whirl.

If want to make a lot of MONEY, or aren't an experienced audio engineer--get out now before it's too late.
 
pole said:
Let me start off by saying thanks to everyone here for thier 2 cents, even if it was total off for the question that was asked, I think I might just focus on what I have now and figure out the numbers a little better, before I make one last conclution weather or not I'm going to keep going on this. I just thought I would ask for some help in this, but maybe I'm going about this the wrong way and should forget the whole business plan aspect, I will not continue on someting without know how well, and how long it would run for.
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No one here is advocating that you give up the business plan, in fact, I would suggest that most of us here have one, if at least informally.

We are questioning your assertion that the software is incorrect, when, in fact, our experience tells us that the premise you are basing that conclusion on is faulty.

At least that's what I think your question was, although it was very vague.
 
I've never run a commercial studio, but I am a damn good accountant. That and $5 gets me a Frappucino at Starbucks, except that I don't like coffee :confused:

Anyway, yes I suspect your software has a different idea of variable cost than you do. Most business plans account for the labor of an owner-operator, especially if the plan is used to seek outside financing, whether debt or equity. So even without employees, the variable cost at a minimum would be the burdened salary of the engineer. With that in mind, running a studio isn't a terribly high margin business.

Others have compiled a pretty good list of indirect expenses, so I'd question the 30% net profit figure myself.
 
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