Dec. 9th, 2017
5 Steps to Start a Record Label
Starting your own record label is not easy. Far from it. A record label is a business entity and the music market is more competitive than ever. Here’s how to get started.
Anyone can start a label. Labels aren’t like restaurants or cosmetic lines; by simply saying “this is my label” you’ve essentially started your business. But getting your label off the ground and running is going to be a lot more complex than that.
Any one of these steps could be their own article. I could go on all year about how to execute each move to give yourself the best chance of success. But to give you at least an idea of what you need, we’ll start small. (Feel free to ask questions though.)
This article (and the articles that follow in this series) will give you insight into what you need to take your first steps to starting your own record label.
5 Crucial Steps to Starting a Record Label
1. Find Funding
You need money. It takes capital (i.e. funding) to start any business and a record label can’t grow and thrive without the financials to support it.
Before you do anything—before you pick a name—do yourself a huge favor and figure out how you’re going to fund this business venture. You’ve got a lot of options to consider when finding funding. If you have a job, start saving every penny or get a side hustle (Uber/Lyft, Fiverr, Craigslist gigs, etc). Start a crowdfunding campaign. Sell your Jordans. If you have a supportive network of family and friends, bring them on as investors.
Everyone (who wasn’t born into money) in the music industry has a story about the times they were starving and struggling before their dedication and hard work paid off. If you do this right, you’ll eventually have one of these stories too.
Indie label LVRN (responsible for signing and breaking 6lack and D.R.A.M) hosted a panel at the 2017 A3C conference in Atlanta about how they started their label. Justice Baiden, co-founder and co-manager of A&R, artist relationships, and rollouts, spoke about the unique way he secured money to get LVRN off the ground.
“I have like $20,000 in student loans but they’re really ‘rapper loans’,” Said Baiden
While attending university, the label founder funneled some of his school money into his music business. Your financial aid advisor definitely won’t recommend you go this route, but it demonstrates how committed Baiden was to his cause (his career).
“We scrambled up $5,000 between all of us and a lot of loans,” said Carlon Ramong, LVRN co-founder and creative director.
Starting a business means you will likely take on some debt. Be ready for it (and learn to spend your money and your business’s money the smart way).
Music Biz Tip: Count twice, spend once.
This first step is also a good time to get a rough draft of a business plan together. So, in the future if you pitch to potential investors (whether they’re family, venture capitalists, or a bank) you have some idea of the startup cash you’ll need to get going.
For more on investments and finding funding, check out the Independent Artists course and Investing In Yourself.
2. Create The Brand
This might be the most fun and exciting part of the process, so take your time and enjoy it. It is all hard work, not quitting, and long hours from here on out.
Your brand includes what genre(s) of music your label will sign. Pick one. Whatever argument you have about your personal tastes right now, shelve it for when you are already running a successful label, and pick ONE genre (maybe even sub-genre) to work with. You’re responsible for knowing every aspect of this genre (how to market to it and in it, who’s big and who’s coming up, its history and what the future holds, etc) so make it at least a little easier on yourself and start with the genre that you are most passionate about—instead of what’s popular or selling the most units. When you truly love the music it’s easier to sell it to others.
Now, choose a label name. This isn’t as simple a step as it seems. When you’re forming a business you fall under certain laws of copyright and intellectual property. That means you can’t pick a business name that someone else owns the rights to.
In the U.S., states maintain a database of registered business names and most databases are searchable. Simply go to Google and search “[YOUR STATE] business name availability” to get started. LegalZoom and MyCorporation can also help prevent you from encroaching on another business’s rights (and protect you from losing your business’s name).
You’ll want to run a domain name search too to secure an easy, searchable website title for your record label.
Once you settle on a name and have verified its availability, go ahead and buy a domain name and set up your social media accounts. Domain names are pretty cheap and doing this prevents someone else from coming along and jacking that perfect @username.
Next, think about your label’s logo and the company culture you want to create. Branding is SO IMPORTANT. Everything needs to line up if it’s going to make sense to an audience (something I talked about in How to Build a Loyal Fanbase). Consider paying a graphic designer to draft a logo (they’re trained to take an idea from words/feeling and translate it into an image). If you’re struggling with how to effectively communicate your brand clearly online, check out our previous article: The Musician’s Guide to Social Media. These two articles are excellent resources for steering your business’s brand in the right direction, creating a social media strategy, and building an audience for your artists.
Another important aspect of branding is how the label will release music (digital downloads, streaming, CDs, vinyls). We won’t get into that here, but know your genre’s market and make the decision from there.
3. Form A Team
You may think you can do it all on your own but unless you’re skilled in business and sales, contracts, networking, A&R, tax law, music production, distribution, public relations and marketing (and a literal score of things we don’t have the room to include here), you are going to need business partners.
Not everyone has a network of reliable individuals to work with, so you may need to contract out some early work to make sure it gets done right. Pay professionals to complete tasks like press releases using public relations professionals; for contracts consult lawyers or business advisors. If you don’t have the money to go that route, learn these skills yourself (though it may be better to wait until you have the funds to reach out for help). Do NOT haphazardly research topics but honestly put forth effort into learning and understanding what you don’t know. It will help you make better decisions in the long run, prevent you from making avoidable mistakes, and know when someone’s trying to take advantage.
Tunde Balogun, LVRN co-founder, manager of the day-to-day goals, and self-described man who “puts out fires”, gave genius (albeit expletive) advice on this point:
“We really don’t f**k with excuses. Dead**s. If you have to figure something out, go figure it the f**k out… if you’re looking for a handout, we can’t f**k with you. Money should not stop you from doing what you want to do.”
No matter if you are going to school or working full-time, you’ll have to work on your label daily if you want to see it grow. If that means you have two full-time jobs or three, then that’s the struggle to which you have to dedicate yourself. Bringing on team members means they’ll need to commit themselves to the same thing.
Teammates can help you accomplish your goals faster, but make sure everyone is covered—legally and in their responsibilities.
— Love Renaissance (@LVRN) November 16, 2017
4. Learn About Contracts And Negotiation
This should and will be its own article, but for now let me give you some very, very basic insight into the legal and business aspects of starting a music label.
This is an area where I most strongly suggest you seek advice/aid from legal professionals. Mistakes made in this step can haunt you for the rest of your career (check out the stories of TLC, Kesha, and Little Richard for just the tip of the iceberg).
Business entities operate under several laws and jurisdictions and contracts/licenses are central to that. Do not underestimate the necessity of paperwork (people have gone to jail for a lot less).
To start, strongly consider obtaining a business license. Business licenses can protect your personal assets and help you out during tax time. Having one also gives your operation a definite level of legitimacy. You may turn a profit without a business license, but the back taxes could kill your business as it’s getting started.
If you’re starting out by yourself, think about creating a sole proprietorship. If you’ve got a small team, consider forming an LLC (limited liability corporation).
When starting a label with others you’ll need an agreement to protect everyone involved in the business (and to ensure they hold up their end of the deal). This is contained in the LLC Operating Agreement: who will run the big picture and day-to-day, who owns what parts of the business, what happens when someone leaves, who will be responsible for the bank accounts and taxes, etc.
- Ran by one individual
- Legally, business and owner are the same entity (Meaning: business is sued, you are sued. Business debt is your debt and vice versa.)
- Owner can report profits and losses on personal tax filings
- Business name can be the name of its owner or a chosen business name, such as Bill’s Record Label. The chosen name is a “trade name” only (similar to artist monikers)
- Proprietor need only register his or her name and secure local licenses
- Ran by one or more people
- Member-managed = members run business
- Manager-managed = one person runs business
- Must create LLC Operating Agreement
- Personal asset protection for business (protection agains lawsuits)
- Won’t be taxed twice, compared to other business setups
- Can create by registering with your state
- Owners can report profits and losses on personal tax filings
- Can issue stock
- Few restrictions on structure of the business
- Access to business loans (business has its own credit history/rating)
- Owners are responsible for paying taxes on their share of LLC income
While much of this paperwork can be obtained and filed without professional help, I recommend you pay for the time of a lawyer or tax or business advisor. Set yourself up for success if you’re unsure of something and avoid mistakes.
Your label will enter into contracts with artists so learn about the different types of record deals and which will work best for your label. Many labels use the 50/50 deal: artists bring you finished masters, you provide label services, and you split the profits 50/50.
But we’re not done yet. Your business is going to be responsible for sample clearances, trademarks, consents, copyright notices, and much more. It’s a lot. It can be overwhelming. The best advice is to take your time and learn as much as you can about absolutely everything. The internet is a big place. Use it. And reach out for help when you need it.
5. Invest In Production
This is high on the list because it’s just that important. The sound of your artists’ work represents your label before anything else. It is your label’s first impression.
“We’ve seen flash-in-the-pan. If they’re not that talented, they’re not going to last. Focus on great music and I guarantee everything will be alright.” Said Balogun.
Invest in good mastering. Find a talented engineer and pay them well enough that he or she wants to come back to work. Even if your label produces Lo-Fi music, that is a style that is done on purpose and takes skill to do right.
If your label asks artists to come to the table with a finished product, you’re putting the overall quality of the music in their hands. This is fine, many indie labels do it, but make sure your artists’ contracts and record deals reflect this delegation of responsibility. Your label has the option to pay for the mastering and then recoup the costs in other ways from the artist.
Stay tuned for How To Start A Record Label: Part 2; including Distribution, Promotion, and Royalties/Publishing Rights. And Part 3 with 10 Tips To Remember.