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Sunday, August 23, 2009

A Record Company Business Plan - Projecting Sales

Your business plan's success will hinge on its ability to convince readers that the revenues you project are reasonable. The costs are generally more or less verifiable, so it is the sales numbers where the most art must enter in. These are some methods to base these guesstimates in reality.

Case Studies

For the type of music you seek to produce, look at the sales statistics for artists who you consider on par with your intended roster. Use these as case studies, perhaps demonstrating within your plan why they are valid to use in this way by describing the similarity of how they were found, groomed, and promoted with your intended operations methods. If your company's management team has a track record, the artists they launched can be the best type of case studies. However, no reader of your plan will accept that every find will be a hit, even for an expert recruiter.

The Portfolio Approach

One way of looking at your potential sales is to consider your roster of artists as a stock or investment portfolio. Some will pay off big, some will be a loss, and others will be steady, but not spectacular, earners. By creating believable projections of how many albums/artists will fall into each of these three categories over your first five years, you can show those who read your financial plan that you have a deep understanding of the realities of the market and the element of luck involved.

Market Sizing

Making reasonable assumptions about both the size of your market and the speed at which you can reach this market over your first years of operation will be another important element to your sales projections. The growth in sales you show depends on when you plan to achieve distribution milestones. Again, demonstrating that this growth is possible from short case studies of other record labels you will model yourself after can help, as can a clear description of the steps you will take to achieve this distribution.


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