Music Industry, the DIY Version: Part 3 — Business Management
We’ve reached the midway point! That’s exciting, but it also means we’ve reached one of the most boring parts of the music industry: business management. Unfortunately, business management is also one of the most necessary parts of the music industry.
Business managers handle your finances, making sure checks get paid when they need to get paid. If you’re an artist who ain’t about the money, business management probably doesn’t pique your interest. If you’re not making any money, you probably don’t pique business managers interest.
Business management is the part of the music industry no one wants to deal with, but you’ve gotta. Here’s Business Management, the DIY version.
What Does a Business Manager Do?
A lot of money moves around in the music industry, and it can lead to some problems if not taken care of. Whether it’s checks bouncing, percentages being calculated incorrectly, or a multi-million dollar artist blowing their royalties on cocaine, problems can show up if stuff isn’t handled correctly. That’s the major role of the business manager: to collect what needs collecting, pay what needs paying, and get the rest of the money to you.
This is much more complicated than it seems, though. Money comes and goes, sometimes going before it comes. It requires a lot of effort and knowledge to keep things running smoothly, and a lot of artists lack the know how to get those things done. Taxes, especially, are difficult to predict. Your business manager will have a good idea of how much tax you’ll be paying, and where you’ll be paying them. Some artists might pay taxes in several states, or even countries, which is hard to balance.
Business managers might also be in charge of investing your money. Not everybody is Jay-Z, so it takes a professional to keep us buying art and not being on the Gram holding money to our ear. It might be less fun in the short term, but retirement needs to be a consideration. There’s a lot of horror stories of artists going broke, even if they had a decent amount of time in the limelight. Not everyone is Jay-Z, so a business manager will keep you from being an MC Hammer.
How Much Will a Business Manager Cost?
This varies a little bit, but industry custom is to pay a business manager 5% of money received (profit), with a minimum in the range of $2,000 to $5,000 a month. If your financial situation is uncomplicated or you can do most of the work yourself, you might be able to get a deal with an hourly or flat fee. Business management is relatively cheap for the importance of the service, so make sure you treat your business manager well.
When Should I Get Someone Else to Do My Business Management?
If a $2,000 minimum is close to 5% of what you’re earning every month, then getting a business manager is a good idea. If you don’t trust yourself with the money you’re making, getting a business manager is a good idea. If you’re good with money but staying on top of it is taking too much time, getting a business manager is a good idea. If you’re good with money but having nightmares about royalty calculations, getting a business manager is a good idea.
How Do I Get a Business Manager?
If you’re working with a lawyer or experienced personal manager, they’ll likely have a recommendation of a good business manager. You can also ask artists around your level to see who they’re working with — business managers can normally handle a few clients. Googling can get you far, as well. You’ll want someone who is (preferably) certified to handle money, and has worked in the music industry before. There’s a lot of nuance to music industry math, so you want someone who understands it.
What Does a Good Business Manager Look Like?
A good business manager wears a dress shirt with all but the top button done, and their sleeves rolled up. That’s how you know they mean business, but they’re totally chill.
As mentioned above, certification is always good. A CPA has passed a lot of difficult exams. It’s not the end all be all, but definitely a plus. Your business manager should report to you frequently, and in-depth. You want to know what’s going on with your money. Anyone who lacks transparency, has a “trust me kid” attitude, is an automatic out. If you don’t trust the person completely, don’t trust them with your money and future. Any trustworthy business manager will be open to regular audits, so you should consider that.
You’ll want to know about their investment philosophy, and how it aligns with yours. Would they keep everything in a high interest bank account, or high risk stocks? Buy a gym? Insurance is big, as well. You should expect them to have E&O (errors and omissions) insurance in case they mess anything up, as well as security systems in place to keep your money and identity safe.
How Can I Be My Own Business Manager?
When it comes to the music industry, you shouldn’t be doing your own business management long, but you’ll be doing your own finances your whole life. While you’re doing your own business management, you should be brushing up on your personal finance. Learn how to budget. Some of the best advice I’ve heard in that realm is to budget daily until you stay under, then budget weekly, monthly, and so on. This slow escalation allows you to learn how to handle money over long periods of time, which is hugely important. There’s also a ton of resources available now to stay on top of your own finances. Penny is a chatbot app that links to your bank account and gives you more information than you could ever need, and I highly recommend using it.
When you start to handle more complex finances, with lots of tax forms and invoices, you should try bookkeeping software like TurboTax’s QuickBooks. This type of automation makes the simplest end of business management no more complicated than a calculator, and you can begin to learn about the more complex side with the time saved. At the level where you’re doing complicated accounting but not ready to hire somebody, you might look for a consultation. This would see you sitting down with an accountant for an hour or two, and they would check for obvious errors.
It’s really that simple: be good at money until it’s more convenient to pay someone to do it for you.