We’ve written before that the entertainment industry is a tough nut to crack. The superstars are banking the big bucks, playing to stadiums, selling merchandise, and racking up record downloads.
But for the rest? It’s a grind.
Writing music – good music, music people want to listen to – is a skill. Getting paid for it? That’s the hard part. And if you don’t know where your next gig is coming from, you could struggle to pay your rent or put food on the table.
Show business is still a business
Ethel Merman sang ‘there’s no business like show business’, but show business is still a business, and you need to treat your music career as one too.
This means accepting that cash flow concerns aren’t unique to musicians. In fact, cash flow kills 25% of all small businesses. Thankfully, there are a number of ways for you to manage and overcome stressful cash flow situations.
Here we take a quick look at six of them.
6 ways to manage and overcome cash flow issues
1. Start with a cash flow forecast
A good forecast can help you avoid difficult, seasonal cash flow challenges. With just one glance, you’ll be able to identify when you owe money (for example, travel costs, fees, licenses, etc.), and if you have enough in your bank account to cover the expense.
If you’re unsure as to how to set up a short-term and long-term cash flow forecast, we can help you get started.
2. Get paid faster
This might seem like a simple idea, but it’s one that’s often overlooked by busy musicians. If you’re not being paid at the time of your performance, make sure you provide your client with a clear and professional invoice.
What’s more, ensure your payment terms are reasonably short, so that your client is encouraged to pay you quicker. And make sure you have a process in place to follow up with clients who have missed the payment deadline.
In short, be prompt and professional. Don’t leave getting paid to chance.
3. Join a union
If you’re eligible, consider joining a union for further protection. For example, the American Federation of Musicians helps musicians in both the US and Canada with contract negotiations, working conditions, healthcare, and retirement planning. And they can also help you get paid what you’re owed.
Even if you perform alone, you’re part of a wider industry, and the AFM is just one example of an organization that’ll have your back in your time of need.
4. Plan for seasonal cash flow in your budget
Depending on the gigs you have lined up, some times of the year can be busier than others. This makes planning for income a major challenge.
That’s why creating a budget can help you navigate the quieter months with ease. Along with the forecast we discussed earlier, you can use your budget to pinpoint when business is slow, and compensate for that by saving more when you’re busy. That way you’ll have the peace of mind that your expenses are covered while you pursue more work.
5. Reduce expenses when it’s quiet
Another great way of dealing with the ups and downs of cash flow is to consistently monitor your expenses. Use your forecast and your budget to identify needless costs and cut them out. This could be as simple as reducing the number of store bought coffees you have in a week, pausing a Spotify subscription, or finding a cheaper space in which to rehearse.
6. Have a plan B
As a professional musician, there’ll be times throughout the year when you’re in demand, and times when it’s painfully quiet. That’s why having a plan B is a sure fire way of seeing you through the slow periods until business picks up once more.
For more traditional businesses, plan B usually involves finding a lender who’ll fund a shortfall in cash. But for your situation, you need to put your skills to good use. Perhaps you could busk to earn some extra cash between gigs? Or you could offer lessons to aspiring musicians in your local area?
Be proactive and ready to fall back on another revenue stream when required.
Ready to get started?
Making money from music is incredibly challenging. But it’s also an exciting and rewarding way to make a living.
In order to succeed as a musician, you need to think of yourself as more than just a performer. You need to be a businessperson, prepared to face the ups and downs of cash flow fluctuations throughout the year. Be prompt and professional with your invoices, forecast your income and expenses, and put a budget in place to manage your spending.
And if you need help making the transition from amateur musician to professional performer, we can help. We’ll introduce you to the systems and processes you need to efficiently manage your growing music business.
To find out more, speak with one of our dedicated business advisers. Contact us today.