Did you know that if music creators develop their business skills they are more likely to succeed in music and be happy? As we share in this article, being profitable and managing your cash flow keeps your music business fueled, healthy, and even more fun to pursue! Music and money CAN go hand-in-hand, and the only thing that’s standing in the way of becoming a thriving artist is you!
Music and Money: Lessons From Personal Finance
Late in 2020, my wife and I rediscovered Dave Ramsey’s “7 Baby Steps” and “Financial Peace University” systems. Both are simple programs that help people get out of debt once and for all (and you don’t have to be religious to buy into it).
Now, we were already in fairly decent financial shape, but these steps helped us affirm where we were and get ahead even more. Today, our only debt is our mortgage, and we have a plan to get rid of it so we can be financially independent.
Best. Feeling. Ever.
After the success we saw, I asked their Ramsey Facebook group if anyone knew if and how the 7 Baby Steps could be applied to a business situation. I was given a strong recommendation to purchase and read a book called “Profit First”. After reading it, I looked at the book and asked “Where have you been all my life?” (not really, but that was the feeling I had).
In hindsight, these programs are no brainers and it’s easy to see how simple and effective they are. As humans we need to be given a simple plan to follow to take action, otherwise our brain can create a fog around anything new quickly.
You Need a Plan for Your Music and Money
After reading and applying the “Profit First” book to my own businesses (including Eleven), I realized that this system could easily be adapted to allow musicians, bands and music entrepreneurs to finally get rid of the “starving artist” mantra and replace it with something so much better: the “thriving artist” mantra.
In fact, we believe in this so much we created the “Thriving Artist Profit System” course inside our new Music Entrepreneur Academy to help musicians not just make money, but build wealth, in music.
You can learn more in the book or in our course, but here are the basic steps:
Get into the correct (positive) mindset – You have to be positive going into this. Procrastinating and coming up with excuses will cause this process to be as ineffective as anything else you may have tried and/or given up on in the past. Whether you use the “Profit First” book or our Thriving Art Profit System course, you have to do the steps!
Make sure your band is set up with a business bank account – You will want to have your band or music business established as its own business entity with its own bank account. This will be important in keeping track of your accounting activity, avoiding confusion and keeping a separate record from your personal finances for tax reasons and your own sanity.
Open new/additional savings and checking accounts – Chances are your business bank account looks the way it did when you first opened it: a business savings account and a business checking account. You may use both or you may only use the checking account. These profit systems (book or course) show you some other accounts you should open in order to organize your cash needs.
Update all third party services to deposit payouts into an “Income” account – If you’ve already been doing business, chances are you may have some third party integrations connected to your bank account, such as PayPal, Patreon, ASCAP, or any place else that pays you via automatic transfer. This step is important because since you only had one checking account before, I’m guessing all of these services deposit your funds into that primary checking account. Now you will want all of these services to deposit that income into your new Income checking account.
Decide how much is deposited into each of these accounts as you get paid – This can be a bit of a process in itself, but really it’s ultimately up to you to decide how much you need to allocate to each account each month. The book and course provide starter percentages and other guidelines to help you get started and then allow you to tweak as necessary.
Establish monthly “pay days” and accounting days – Twice a month you’ll establish a day to check on your accounting and move money from the income account to the other accounts based on the percentages in the last step. You may also get to give yourself a paycheck. Amazing! :)
Set up rules for using the funds in your new Profit & Emergency Fund – Another one of those new accounts you set up is the profit and emergency fund. This is one of those you don’t touch often, but it does have rules of its own, 50% profit and 50% emergency fund. The best part, that profit portion is like a quarterly bonus!
Create and stick to a monthly budget to use your cash flow wisely – Having a budget is an important part of making sure that your operating expenses account is working well and has enough funds for all of your anticipated monthly expenses. In fact, it’s the action in today’s article (see below). Even if it’s the only thing you takeaway and do from this article, you will be light years ahead of musicians and bands!
Imagine having funds for new gear, touring, studio time, or an actual band “paycheck”. This simple process has transformed our music business, and it can transform yours too.
Today’s Action: Create a Monthly Music Budget
Think about the things you typically spend money on for your music career, whether it comes from a bank bank account or your own personal funds. Also think about all the revenue streams your music relies on.
You can use the free Musician Monthly Budget template we created to plan your budget. Remember to make a copy of it so you can use and fill it in!
Free Guide: 8 Ways Having a Coach Can Help You Become More Successful in Music
This guide shares eight ways hiring a coach can make you a more successful, profitable, and full-time music creator.
When you understand how a music career coach can get you farther, you’ll be ahead of other music creators growing their music career.
Free Guide: 8 Ways Having a Coach Can Help You Become More Successful in Music
This guide shares eight ways hiring a coach can make you a more successful, profitable, and full-time music creator.
When you understand how a music career coach can get you farther, faster, you’ll be ahead of other music creators attempting to grow their music career.
