In the first installment of this article on music business plans, I mentioned that there is no one-size-fits-all format. Nevertheless, every business plan should convey certain "standard" information. I have found that incorporating the following sections into a business plan ensures the inclusion of the most critical information:
1) The Executive Summary. This should be the first section of the business plan (although it is typically the last section actually drafted). As the name implies, this section is a summary of the key points discussed throughout the business plan. In the context of a music business, this section usually includes, but is not limited to, information about the types of products and services to be provided (e.g., recorded music, live performance, composition, merchandise, etc.), the applicable musical genres, company goals (often broken down into short-term, mid-term, and long-term goals), and information about the target markets for the company’s offerings.
2) Mission Statement. The mission statement often appears second in the business plan. The mission statement should paint a picture of the company’s goals, ideals, and business philosophy. Because the mission statement often provides a persona for the company, the creator should take great care to develop a message that accurately reflects the character of the company.
3) Company Overview. This section provides information about the basic structure of the company, including its legal structure (e.g., sole proprietorship, general or limited partnership, corporation, or limited liability company (“LLC”)). If the company requires special licensing, it is advisable to also include that information here. This section should also include a description of the basic management structure and company hierarchy (sometimes including a flow chart can be helpful) and provide descriptions of the various positions in the company. Also include a discussion of the interaction among internal personnel and between the company and individuals and organizations outside the company, such as vendors and consumers.
4) Marketing Analysis. I generally recommend describing in this section what marketing professionals call the “marketing mix.” The marketing mix contains four elements, which are often called the “four Ps”: (1) Product, (2) Price, (3) Place (i.e., methods of distribution), and (4) Promotion. Without going into too much detail, this section should provide rather detailed information about the precise goods and services that the company plans to offer, pricing for those goods and services, the methods of distributing the goods and services to the consumer, and how the company plans to promote the goods and services. This is an extreme oversimplification of the marketing mix. In reality, each of the four elements contains sub-elements, each of which deserves careful analysis.
5) Financial Analysis. This section should include basic pro forma style estimates of financial performance. I strongly recommend consulting a CPA for assistance. This section should also contain preliminary budgets for the company and its various departments. I also generally recommend including a breakdown of upfront capital requirements and how the company plans to raise those initial capital requirements (e.g., debt or equity financing).
6) Risk and Opportunity Assessment. As the name implies, this section should contain a realistic assessment of the various risks and opportunities for the company. I recommend preparing a “SWOT” analysis prior to completing this section. In a nutshell, a SWOT analysis is an analytical framework for assessing a company’s internal strengths and weaknesses and external opportunities and threats. It is generally prepared in graphical form for ease of use and to facilitate a quick understanding of a company’s position. For purposes of the business plan, I recommend translating the data into standard paragraph format.
7) Exit Strategy. Although no one likes to talk about ending a business before it even begins, it is important to include a road map for getting out of the business, for whatever reason. This section is particularly important if you plan to take on investors or seek outside financing.
Again, business plans come in all shapes and sizes. The sections I have described above are some of the more common issues to address in a business plan. Ultimately, each company must adopt a style of business plan that works best for its needs, as well as time and budgetary constraints.
Finally, don’t forget to look up from the plan from time to time. Do not become so obsessed with following your plan — or, more accurately, trying to force your company to fit the precise contours of the business plan that you developed initially — that you overlook changes in the market or in various areas of your business. The business plan should not be a static document. Rather, it should provide flexibility to permit the company to prepare for, and ultimately weather, the changes that might come down the road.
L. Kevin Levine is the founder of L. Kevin Levine, PLLC (go figure), a boutique entertainment, copyright, trademark, and business law firm in Nashville, Tennessee. A lifelong musician who grew up in his family's music store, it was inevitable that Kevin would build his legal career in entertainment and business.