Starting a record company is a viable way to embrace your love for music. You can tap into your passion and energy to achieve success in a highly competitive sector. However, you need to familiarize yourself with various facets of running a record label.

Gaining an in-depth understanding of how to start a record label is vital to your venture's overall success. Making the right decisions during the early stages can save you a significant amount of time and stress. From choosing the right brand name to identifying the right business structure, every decision makes a difference in shaping your label's future.

Whether you desire to start an indie label or become the next major label, the most successful record labels employ effective marketing strategies, advanced distribution methods, and quality software. This article will provide an overview of what you can expect when starting your own record label.

How to Plan Your Record Label Operations

A well-developed plan prepares you for long-term success. Skipping or rushing this process can undermine your record company's ability to stand out in the highly competitive music business. Proper planning helps you assess various aspects of business operations, allowing you to anticipate issues and map out solutions.

Some points covered during the planning phase can include your record label's offerings, your target market, the distributors for your music, operating costs, and more. Additional considerations may include record label insurance and drafting a master service agreement (MSA).

During this phase, you'll also want to determine the amount of time and effort to commit to business operations. In doing so, it becomes easier to align operational requirements and business goals with your time commitment.

Additionally, research average prices applicable to music projects. For instance, the national average price for reserving a recording studio is $50 to $55 an hour, but this might differ depending on whether artists are signed or independent. You'll also want to research how much instruments, sound gear, and recording equipment cost.

Prepare a Business Plan for Your Record Label

Composing a business plan is a critical aspect of the planning phase. This document outlines specific facets of your business, including the label's strengths. For instance, you can highlight access to well-equipped recording studios and your artists' reputation as key strengths.

Also, indicate who is responsible for the label's day-to-day operations. If you plan to hire employees or co-own the business, include these facts in the plan. A well-written plan plays a role in attracting investors to the record label. It serves as a road map or blueprint that guides day-to-day activities.

Select Service Offerings

Established and upcoming record labels need to identify the right service offerings based on factors like their target audience. Depending on the recorded music genre involved, you can sell releases through physical and digital distribution channels. Some customers may prefer vinyl records and CDs while others will go for digital downloads and music streaming platforms like SoundCloud, iTunes, and Spotify.

Since your target audience can influence your service offerings, it's vital to pick a niche, sound, or market. These choices can help your brand stand out. In the end, revenue streams that your business can target include:

  • Film
  • Television
  • Commercials
  • Gaming licensing deals

Determine Operating Costs

Financial planning allows you to identify specific expenses, such as recording costs, networking, promotion, legal services, and physical production costs. Record production is a key aspect of operating a business in the music industry. Commercial recording studios charge varying hourly fees that can run into hundreds of dollars per session.

A significant amount of operating costs also go toward graphic design. Designing quality logos and other materials is critical to marketing your label's offerings. Music promotion is another component that may require significant starting capital. You might need to enlist the services of booking agents, music promoters, and publicists to showcase new releases.

How to Register Your Record Company

Once the planning phase is complete, the next stage entails forming a record label business, obtaining relevant permits, opening a business bank account, and getting proper insurance.

Choose a Business Structure

Registering a small business comes with liability protection benefits. If you skip this part, you might have difficulty opening a business account or accessing business loans.

It's important to do your research, though, before registering as any type of business. States have varying formation requirements depending on the business structure involved, and not every business structure might be right for your record label. Some common business structures include corporations, limited liability companies (LLCs), partnerships, and sole proprietorships.

If you're an independent label, you might prefer opting for a simple business structure that provides personal liability protection in case of legal troubles. LLCs are ideal for indie labels for this reason. By forming a record label LLC, you can co-own the business with potential investors. This approach boosts operating capital available to your venture.

Some states also have laws compelling new businesses, including record companies, to hire a registered agent during the formation stage. The agent ensures that your record label receives all legal, compliance, and regulatory correspondence. An entity or individual can handle this role.

Pick a Unique Name for the Record Label

A carefully chosen name gives your new label a distinctive personality, maximizing brand visibility in the music industry. Create a list of suitable business names and check for availability with your Secretary of State's office. If the name is available, consider trademarking it to retain exclusive rights to it.

Open a Business Bank Account

To open a business account, you might need to obtain an employer identification number (EIN) from the Internal Revenue Service (IRS). Most banks use this tax ID to verify the company's name and registration details. For this reason, they ask businesses to submit an EIN confirmation letter or verification letter issued by the IRS. Additional documents you may need to provide, depending on your business structure, include the articles of incorporation obtained from the Secretary of State's office.

A business bank account is a practical way to separate your personal and record label finances. This approach also eliminates the risk of corporate veil piercing. The ability to establish a business credit record is another benefit of opening a record label bank account and credit card.

Obtain Relevant Permits and Licenses

You'll need to obtain a sales tax permit for your record label to sell physical and digital products. However, sales tax for digital products sold via online platforms can be a bit more complex. You'll need to do your research, as states have varying e-commerce laws.

Zoning laws may also affect your record label's office location. Therefore, check with your city or county authorities before making a final location decision. Some laws prohibit conducting specific commercial activities in residential areas. Laws may also compel your business to acquire a compliance certificate or permit under the local zoning ordinance.

Obtain Insurance

Your record label's insurance should cover risks, such as personal injuries to office or studio visitors and property damage or loss triggered by a storm, theft, fire, or other hazard. A general liability policy provides coverage for risks like a slip and fall or other unfortunate incident. Property damage insurance should protect essential items like recording equipment, office furniture, and the building.

Effective Ways to Market Your Business

Adopting an effective record company marketing strategy helps boost your business's long-term growth potential. A robust strategy can bolster your label's visibility and appeal to your target audience. Here's how you can effectively market your business.

Adopt an Effective Branding Strategy

Effective record label branding can help music fans recognize your business. Pick a consistent color scheme, record label name, and logo that appeal to your target audience. You'll want to pay especially close attention to your company logo, as it could appear on various merchandise like:

  • Websites
  • Branded T-shirts
  • Stationery
  • Vinyl sleeves
  • Social media
  • CDs

Platforms like 99 Designs and Canva are great for creating stunning logos and other graphic designs. You can also opt for paid logo design services that can help create a unique but eye-catching record label logo.

Create a Record Label Business Website

A well-designed business is a must-have in the music industry. Your website should showcase new releases and other products, as well as provide a convenient place to engage with music fans.

Fortunately, creating a site is now easier than ever before thanks to the availability of intuitive website building tools. These tools help reduce the cost of creating a secure, professional website. Examples of platforms for building record label websites include Wix, WordPress, and Squarespace. Professional website designers are also available via Upwork and other freelance marketplaces.

It may also benefit your record label to set up pages on Google My Business, Yelp, and other online platforms that boost overall visibility.

Establish a Social Media Presence

Setting up social media pages on Twitter, Instagram, LinkedIn, and Facebook is also vital to getting your record label's name out there. These platforms provide the ideal environment to connect with fan bases, announce new releases, share music videos, introduce new artists, and invite feedback. Regular posts keep fans well-informed about new music, interesting playlists, and key events.

What Goes Into Running a Record Label?

To understand your record label's financial performance, you should follow standard bookkeeping and accounting practices. Doing so boosts the efficiency of various processes, including billing, handling purchase orders, tracking receipts, and managing expenditures. Skynova provides easy access to software solutions that can help you simplify and speed up the billing process.

Your record label's day-to-day operations may encompass handling bills of sale, invoices, and packing slips for shipping if you have an online music store. By using professional-looking templates, your record label can make a positive impression.

Leverage Skynova's Products to Make Your Business Sing

As a label owner, you'll have a lot to keep up with when setting up and running your record label. Whether you're interested in pursuing independent music artists or mainstream music that gets on radio stations, it's important that you keep up with the day-to-day operations of your business.

Thankfully, Skynova can help you reach your music dreams with easy-to-use accounting software and other software products. Whether you need business templates to streamline operations or want to keep your bookkeeping organized, Skynova can help.

Take your record label to the next level with Skynova.