Music Promotion Business Planning

Introduction

The business environment is often characterized by dynamics that require financial planning and rationale in making decisions. Specifically, a business in the music industry is dependent on the perception and preference of the target clients. Thus, this reflective treatise explores the important factors in establishing a music promotion business, financial statements, and business evaluation.

Factors to Consider when establishing the business

  1. Expertise: Knowledge of the music industry is necessary to ensure the sustainability of the business.
  2. Market demand: Market demand will determine the returns against any investment in the business.
  3. The cost of the business starts up: Knowing the business start-up cost is critical in drawing realistic financing options and planning for expenditures on running the business.
  4. Capital/Financing: Financing options available is important to make the business idea into a reality since there must be a source of funds for investment into the business.
  5. Competition: It is necessary to review the market to understand the weaknesses and the number of competitors to draw an ideal business survival strategy.
  6. Location of the business: The business should be located in a strategic area to attract more customers and self advertise.
  7. Regulations, rules, and laws governing the business industry: This aspect is critical in cushioning the business against illegalities that may negatively affect its operation.
  8. Expected returns on units of investment: It is necessary to make practical estimations on the expected returns on units of investment to determine the feasibility of the business idea.
  9. Manpower: Before transforming a business plan blueprint into a reality, factors of production such as labor is critical in evaluating the expected magnitude of operations.
  10. Technology: Technology will ease advertisement, communication, sales, and efficiency in running the business.

Factors to arrange in promoting and staging the rock Concert

  1. Equipment: The business must acquire or hire the necessary equipment to stage the concert.
  2. Renting the location: The concert area must be rented before the music concert to divert any inconvenience.
  3. Hiring a Deejay: The deejay will be the main engine controlling the flow of activities during the concert.
  4. Printing and selling tickets: Ticket sales will form the part of direct returns in the business of music promotion.
  5. Budgeting of funds to ensure that funds used to organize the concert are accounted for when reconciling the accounts after the concert.
  6. Advertisement: Through the printing of burners and fliers, the public will be made aware of the upcoming event.
  7. Seeking concert license permit: This is critical for security arrangement and protection against damages that a third party may add to the business.
  8. Research: Research is critical in gaining substantial knowledge of what to expect of the concert, in terms of sales, turnout, and performing artists.
  9. Arranging for support services: Through a partnership with providers of other services such as soft drinks to ensure that the concert will be all-inclusive.
  10. Contract negotiation: The concert cannot happen before signing an agreement with the performing artists expected to grace the concert.

Financial Statements

Before deducting expenses

Music Promotion Company

Balance sheet statement. As of 30 June 2012

Amount ($)
Current assets 256,000
Long term assets 235,000
Total assets 491,000
Total current liabilities 180,000
Stockholders’ equity
Ordinary common stock 1,000
Additional paid-up capital 160,000
Retained earnings 150,000
Total stockholders’ equity 310,000
Total liabilities and stockholders’ equity 491,000

Music Promotion Company

Income statement

As of 30 June 2012

Amount ($)
Net sales 353,717
Cost of sales 239,083
Gross profit 114,634
Net profit 114,634

Music Promotion Company

Statement of changes in equity

As of 30 June 2012

Common stock Additional paid-in capital Retained earnings Other comprehensive income Treasury stock Total stockholder’s equity
Opening balance 1,000 160,000 150,000 0 0 310,000

After deducting expenses

Music Promotion Company

Balance sheet statement

As of 30 June 2012

Amount ($)
Current assets 265,416
Long term assets 235,000
Total assets 500,416
Total current liabilities 170,000
Stockholders’ equity
Ordinary common stock 1,000
Additional paid-up capital 160,000
Retained earnings 150,000
Total stockholders’ equity 330,416
Total liabilities and stockholders’ equity 500,416

Music Promotion Company

Income statement

As of 30 June 2012

Amount ($)
Net sales 353,717
Cost of sales 239,083
Gross profit 114,634
Sales marketing 45,924
General administrative 38,464
Amortization 1,046
Other expenses 34
Total expenses 85,468
Income before taxes 29,166
Taxes 8,750
Net profit 20,416

Music Promotion Company

Statement of changes in equity

As of 30 June 2012

Common stock Additional paid-in capital Retained earnings Other comprehensive income Treasury stock Total stockholder’s equity
Opening balance 1,000 160,000 150,000 0 0 310,000
Changes 20,416 20,416
Closing balance 1,000 160,000 170,416 0 0 330,416

Evaluating the business

Reviewing the profitability, liquidity, and efficiency ratios

Profitability ratios indicate the earning capacity of an entity. The ratios measure the effectiveness of a company in meeting the profit objectives both in the long run and short run since it summarizes the returns for every unit of investment resources. The ratios used are the returns on resources ratio and marginal ratio. Thus, when the profitability ratios are positive, the music promotion business will go on.

It is necessary to maintain optimal liquidity ratios since either low or very high ratios are not favorable. When the liquidity ratios are stable at the medium level, the business will go on.

Efficiency ratios focus on the internal operations of the company. These ratios show the company’s level of efficiency. That is, how adequately a company pays creditors, how efficiently the company receives payment from debtors, and how frequently the company purchases merchandise. Reflectively, some of the efficiency ratios used are turnover ratios and days in receivables. Besides, creditor payment periods are also used. At the end of the three months, a stable efficiency ratio will mean that the business is sustainable.

If the concert is unsuccessful, the business will not be shut down because it is prudent to analyze the finances of a company after the close of a fiscal year. In addition, a firm should only shut one when the profit generated cannot cover the fixed costs incurred in running a business. Finally, businesses often follow the growth hypothesis.

In the first few years of operation, profit is likely to be low due to the high cost of operation. However, after some time, the business is likely to pick and earn higher profits. Thus, it is not prudent to close down a business after a few years of operation. However, when the underperformance persists for long, then it would be necessary to close down the business.

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