What's the Deal? Will I succeed with this investment?
Many of you are going to get your record labels started with 10K to 50k next year and you’re looking for an artist to invest in or perhaps you’re considering your niece or nephew this holiday season.
Here’s the looming question… will this be a successful investment? My answer is it can be. However, we’ve got to dig deeper into this artist first before we determine if it will or not. If you want to know what to do when you have no experience you can always go back and watch this video. 4 BulletProof ways to Start Your Own Record Label without any experience.
Right now you don’t have a lick of experience or connections but that's okay because you’re the money person! This is why you feel unsure.
It’s okay to feel this way but just know you can always find experienced help. However, you must consider these next few questions before you press go!
I can testify!
I’ve seen and worked with too many private investors that lost money due to inexperience, connections, and the fact that they never did any intelligent due diligence on the artist. When I was an engineer I would get paid to work with investors who had the bag! In my heart, I knew that the artist wouldn’t succeed but I needed to succeed at making $35-$45 an hour!
Where's the love for the investor?
As an investor ask yourself… Do you really know what you’re looking at? Do you know how this thing can make money? 9 times out of 10 investors fail at investing in music because the money doesn't come back as easily as investing in the merchandise side of the artist ecosystem. Many investors don't know that it's always going to start at the music level and the music doesn’t give a hearty ROI in the beginning like you think it does.
Is the artist already profitable or at least generating cash flow?
As an investor, it won’t be a happy day when you have to get an artist off the ground with your money and you don’t have any experience in the business and neither do they, which is why you need an artist that already generates cash flow from their music.
I don't like going in with an artist if the music doesn't exist and they haven't gone through a few genie pig projects yet. Not only that, the customer isn't ordering anything in exchange for money like artist merch. This tells me that the artist isn't primed for a high-dollar investment just yet.
I recommend shooting a few micro music videos for their IG Reels, Tik Tok, and Youtube Shorts to see the response of the public, based on the music they currently have or one or two songs that you decide to record to know if there will be possible demand for a project. That way you won’t blow all of your cash. If you have a lot of money to invest cap your investment at $10k, or if you have a little, cap it at $1k.
If you put the money in will it blow the artist up or is the money invested to see if their idea might work?
I don’t like seeing if their idea might work. I like it exists, it’s making money, and we got streams with cash flow, we just need our website optimized and built to serve more traffic to sell more merch when we put out our next album that we’re going to promote the hell out of and heaven into!
Does the artist want you to grow their career or do they want you to bail them out of a current situation?
You will usually know this if the artist doesn't have real reasons for actually needing the money.
Is this person motivated? Are they passionate?
If they aren’t then this will not be a viable investment. The artist has to truly believe in what they are doing. I go into more detail on this issue in my video 6 Artists record labels avoid to make money!
Are you willing to lose your money? If you’re not willing to lose your money don't do this. 9 times out of 10 when you invest in an artist early you will lose your investment. If everything goes right your investment will cause the artist to reach public consciousness and give you a very very low profit because after your initial investment more money will be required. I’d have to go deeper on that in a call.
Big labels buy 500 songs a year and 12 of them will make you money and everything else you lose money on but those 12 will allow you to go and buy 1000 more. All you have to do is scale that ratio down to your size.
But wait…! What about…?
How much should I invest? How much are you willing to lose? Then ask yourself the next two questions.
How much will it take to turn a profit? It all depends on what type of music it is, how much it will take to produce it, and then how much promotion it will take to turn samplers on TikTok into streamers on Spotify.
Will I ever get my money back? Eventually, but only if you own a portion of their intellectual property and or their LLC as a partner. I get into the partner stuff in the 60-Day Record Label in Chapter 4 Pages 22-23 and Chapter 11 page 41
You've got work to do!
As an investor, you’re going to need a company to partner with this artist or sign this artist. You will need my 60 Day record label book the executive edition.
If you need some counseling before you take this step my zoom call window is always open. You can book a call with me on the site.
What the end of the tunnel looks like
If your artist gets just a little bit of success or actually turns a profit. You’ll have more experience, connections, and systems in place to invest in the next artist. Or you can keep your eggs in one basket for a little while longer to increase your profits.
What is the opposition?
However, if you blindly say yes let’s do it over a cheap drink at Applebees then you may be up for a proper screwing.
You got this!
Now you should have more confidence in your investment decision so you can come out on top like a champ!
If you make music you should make money
Music Money Makers I'll see you next time!
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