Recording Studio Business Plan

Recording Studio Stuff

A business plan sounds like paperwork. For a recording studio it is mostly a set of questions that are cheaper to answer on paper than after you’ve signed a lease and bought a console. This post goes through the standard plan outline published by the US Small Business Administration (SBA) and says what each section means for a studio. The SBA outline is theirs; the studio examples are my own suggestions.

Two formats

The SBA says most business plans are either traditional or lean startup. Traditional plans are more common, use a standard structure, and can run to dozens of pages. Lean startup plans summarize only the most important points, can take as little as an hour, and are typically one page. It says lenders and investors commonly request the traditional kind, and that you don’t have to follow the exact outline: use the sections that make sense for you.

A control room with a long curved console, racks of equipment and a window onto a wood-floored tracking room

Image: The Studio 2 control room at Metalworks Studios by Metalworks Studios, CC BY-SA 3.0, via Wikimedia Commons.

The traditional sections, applied to a studio

Executive summary. The SBA says to tell the reader briefly what your company is and why it will succeed. For a studio, that is one paragraph: what you record, for whom, and where.

Company description. The SBA asks you to explain the problems your business solves and the competitive advantages that will make it a success. It asks whether there are experts on your team and whether you’ve found the perfect location. My own suggestion: say which of the three studio types you are. The DCMS’s 2021 study of English studios defines them as recording studios (live room, control room and machine room), production rooms (editing, mixing and mastering, usually without a live room), and rehearsal studios (soundproofed rooms with a PA, not equipped to record).

Market analysis. The SBA says to understand your industry and target market, and to see what competitors do well. Its market research questions are demand, market size, economic indicators, location, market saturation and pricing. For a studio, “saturation” and “pricing” mean counting the studios and home setups near you and finding out what they charge. The DCMS report says supply is sufficient and barriers to entry are low, so expect competition.

Organization and management. The SBA asks for your legal structure and who runs what. The DCMS report says recording studios in its survey spent about as much on wages as on rent, so a plan should say who is paid and how.

Service or product line. Describe what you offer and how it benefits customers. A studio might list recording, mixing, production, mastering, rehearsal or teaching. The DCMS found that 78% of open studios offer recording, 56% production and 42% rehearsal.

Marketing and sales. The SBA says to describe how you’ll attract and retain customers and how a sale will actually happen. The DCMS found that the preferences of surveyed clients were led by price-to-quality ratio (63%), then skills of the studio’s workers, then quality of analog and digital equipment (38% each). So a marketing section could show your skills and a fair deal, not just a gear list.

Funding request. If you need money, the SBA says to explain how much you need over five years and what it will be used for, specifying equipment, salaries, or bills until revenue rises.

Financial projections. The SBA says to give a five-year outlook with forecast income statements, balance sheets and cash flow statements, and to be more specific, quarterly or even monthly, for the first year.

Break-even for a studio

The SBA’s break-even page gives the formula: fixed costs divided by (price minus variable cost) equals the break-even point in units. It says fixed costs don’t change with production or services and that semi-variable costs should be split into fixed and variable parts. A studio is a service business, so my own suggestion is to make the “unit” one booked hour:

  • Fixed costs per month: rent, insurance, loan repayments, software subscriptions.
  • Price per unit: what you charge for one booked hour.
  • Variable cost per unit: anything you only pay when a session happens, such as an assistant paid per session.

Divide the first by the difference between the second and third. The answer is how many booked hours a month you need just to break even. The SBA says to catch missing expenses this way, and to use the result to set revenue targets. It also says break-even is an estimate, and not a full accounting.

The picture the numbers should respect

The DCMS says rent and business rates were the largest share of surveyed studios’ operating costs, on average 34%, and that real estate pressure was seen as the main cause of closures. A plan that assumes rent never rises is not much of a plan.

My own last suggestion is to write the one-page version first. If you cannot fill in a lean plan, a 30-page one will not help. For the home-studio starting point, see the series post Home Recording Studio Basics: The Big Picture.

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