Don't Make it Personal

I was once advised to treat my money as though it belongs to somebody else, as though I have a solemn fiduciary duty to protect and preserve it for my future self. Looking back, I think that is some of the best advice I ever got. Money flows in and out of our lives like water, and perhaps because of its intangible, liquid nature, it can be easy to adopt a casual, easy-come-easy-go attitude about it. But without a constant, vigilant effort to preserve money, again just like water, it tends to evaporate.

Don't invest for personal, emotional, or sentimental reasons. If you have some money, you may be approached by friends or relatives to invest in their business ventures. They will probably be very sincere and persuasive about the prospect. It might sound exciting, and you will naturally want to help facilitate their dreams, but this is the point at which you need to remember your duty to preserve money for your own future. I recommend that you think very carefully and do a lot of thorough research before even considering such a proposition.

First of all, partnerships often end badly. You might be best friends in the beginning, starting off with the best of intentions, but sooner or later, somebody will want out of the deal. When that happens, the remaining partners have to take up the slack, figure out a way to buy out the share of the exiting partner, etc. Even if your business venture succeeds, the stress of co-owning a business can really strain relations. Sometimes, if a friend borrows money he is later unable to repay, you might wind up losing the friendship, too, simply because he is too embarrassed or ashamed to face you again.

Secondly, the failure rate of new businesses is very high. If the proposed investment is a new venture, there is a good chance that your entrepreneur friend hasn't really done all of her homework and doesn't completely know what she's getting into. If it's an existing business with a good track record there may be better odds, but why do they need your money if they are already doing so well? In any case, sinking a significant portion of your money into one business is a violation of the basic principle of investment diversification, and puts you at unnecessary risk.

When I do embark on a private business venture, I prefer to go it alone, limiting my investment to an amount that I can completely afford to lose, and knowing that if things don't work out I will only have myself to blame. For the bulk of my money, I always remember that responsibility to preserve it first, and I stick with boring, safe, impersonal types of investments.

Find a Niche

When I first came to L.A. back in the eighties, it seemed like everybody in this town was an aspiring shredder, complete with spandex, big hair, and Jackson guitar. I mean, there were more glam metal rockers here than there are Elvises in Vegas! It was a ridiculous overabundance of people all trying to get in on the pop culture fad of the moment. Of course, there wasn't nearly enough demand in the music business to accommodate the supply of rock bands in L.A. (still isn't, as a matter of fact), a state of affairs that led to the infamous "pay to play" phenomenon at Los Angeles nightclubs. We all know that when supply exceeds demand, prices fall, but did you know that when supply gets outrageously excessive, prices (i.e. musician's wages) can actually become negative? Don't let this happen to you!

How can you avoid such a fate? By finding a specialized niche. If you are trying to sound like the current Hip Hop chart toppers or American Idol winners, chances are that 1) that style will no longer be marketable by the time you master it, and 2) there are millions of other musicians aspiring to the same thing, so the competition for those gigs will be overwhelming. If, on the other hand, you devote yourself to mastering a less common or less currently popular genre of music, you may actually find it easier to get gigs and make money.

This seems ironic at first, but makes sense when one thinks about relative supply and demand. For example, when I lived in Washington, D.C., I was a member of a local Zydeco band...no, make that the local Zydeco band! Certainly, Washington is not known as a hotbed of Cajun and Creole culture, but there were just enough Louisiana-style dancers there to generate steady demand for live Zydeco music. And when they needed a band, we were the only game in town! There was never any shortage of gigs for us.

Here in L.A., I know one band that plays Hawaiian music exclusively. To be honest, they are not the greatest master practitioners of that musical style, but they have their act all worked out, with hula dancers, leis and everything, and they work constantly making good money. I have another friend who specializes in early rock and R&B style drumming. He has deeply studied this style, owns plenty of authentic vintage drums, and has made a name for himself as the go-to guy in an often overlooked older style of music.

A geographical niche might also work for you. L.A. and New York are surfeited with professional musicians, but some smaller towns and rural areas are starving for entertainment. Once again, if you are the only game in town, you will get all the gigs! However, in smaller towns, there also is often a shortage of musicians to fill out your band, so watch out for that potential problem. Good luck, and I'd be curious to hear from you about any unusual niche gigs you have experienced.

By the way, there is yet another new free resource listing links of interest and benefit to independent musicians. Please check out Music Nomad.

Negotiation Part 2

Thanks for the helpful comments and tips contributed by readers to last week's blog entry! We have all learned some tough lessons through past negotiation experience. The important thing is to use that experience to your advantage in future deals. Here are a few more suggestions that I have on the subject:

1. Limit your own authority. You may have had the frustrating experience of bargaining with a car salesman at a dealership, and being told "I'll have to get approval from my manager for that price". This is a common ploy that is used to keep their price high. You seem to be bargaining with someone who lacks the authority to make price concessions, so you (the buyer) wind up making all of the concessions yourself. Of course, when you're buying a car, you should never tolerate this tactic. You should insist on negotiating directly with someone who has authority to agree on a price. But when you are selling your band's services to a club owner, the same kind of strategy can work to your advantage. If the client offers a fee below your asking price, you can tell him that you will need to consult with the other band members before agreeing to such a low fee, and chances increase that the busy club owner will make a concession on the spot just to get the deal closed promptly.

2. Play up your popularity. The music business is a lot like the fashion business. Everybody wants in on the latest fad, and nobody is interested in last year's products. We would all like to think that the service we offer is all about musical quality, but to a large extent, it is often about popularity, so the busiest bands often attract the best offers. If you seem to be really busy and in demand, clients will find you more appealing and also will feel like they have to compete (i.e. offer more money) to win your services. You should definitely let them know about all the great gigs you are currently involved in, but of course you must not lie. If you promise the manager that you can pack his club on a Monday night, you better be able to deliver.

3. Consider the whole package. A steady gig in hand is worth two in the bush, so consider making some price concessions in exchange for stable employment. Also, be willing to barter and cooperate to reach a deal. For example, if the venue is running on a really tight budget, you could agree to play for $10 less per band member in exchange for free meals. Some venues provide a house PA system for your use, which will save you a lot of setup time and trouble. That kind of thing may be worth making some bargaining concessions. On the other hand, if you have to schlep your own PA, lighting rig and instruments 100 miles to the club, then you should explicitly list those expenses to the club owner as justification for asking a higher price.


Every gig is different, so it is important to think all of these things through and be ready to adjust your fees to fit each circumstance. Also, if you find yourself getting so busy with work that you become stressed, then that is often a sign that it's time to raise your rates. A problem we would all love to have! :-)

Negotiation Part 1

Musicians complain constantly about being taken advantage of. Let's face it, most of us feel somewhat insecure about the strength of our negotiating position with employers, so we fail to drive a hard bargain, or perhaps fail to even negotiate at all. I'm no exception. Talking money is one of my least favorite parts of the job. It often seems as though the service that we provide is deemed frivolous or expendable. The bartenders, caterers, and waitresses all have to work, but the musicians get to play.....we probably shouldn't get paid at all!

The reality, however, is that competent professional musicians possess rare and highly developed skills which are essential to the success of the establishments that employ us. No disrespect intended to any other professions, but customers don't come to nightclubs to see the bouncers, they don't enroll in a music school because of its bookkeeper, they don't buy CDs because of the packaging, and they don't come to concerts to check out the engineer doing the monitor mix. It's the music that drives the business, and that's our department. Employers know this, and they are usually more willing to reward good talent than you might think.

There is no need to resort to cutthroat competition in order to be fairly compensated. Just bear in mind some basic principles and you should do fine. Remember that building a large network of good relationships will always be the key to your survival in music, so try to stand firm for your best interests while maintaining a sympathetic and cooperative tone. Here are a few key points to apply when negotiating:

1. Don't undercut yourself. Sometimes when I have a used piece of gear to sell, I catch myself setting a price based on what I imagine the buyer will consider a good price, instead of starting from a price that I wish to receive. It's like I'm negotiating against myself before the actual bargaining has even begun! Start higher than you think you can get and give yourself a chance to win a better deal. You'll be giving yourself room to compromise if necessary, and you might be pleasantly surprised at what the buyer is actually willing to pay.

2. Decide on your starting price and your minimum price in advance. If you get called upon to quote a price for a gig before you have thought everything through (travel and preparation time, equipment issues, etc.), you might feel uncertain about your bottom line, and that is a vulnerable negotiating position to be in. In such cases, I usually try to postpone the negotiation until I've had time to think out my position, or if pressed, I will simply quote a high price. I also have a rule of thumb that my time is generally worth $X per hour (a generous but not outrageous rate), so if someone proposes an unusual job that I haven't done before, I can simply quote them that rate and know that it will be worth my while if they accept.

3. Make small concessions. Let's say you're booking your band for a wedding gig. The client initially offers you $800 and you tell him that you normally charge $2000. These are your respective starting prices, and they don't mean much. You're both going to have to make concessions in order to reach a deal, but it's the next step that will determine the likely victor in this negotiation. If his counter offer is $850 and you respond with an offer of $1500, then two things have happened. First, he has signaled by his small concession ($50) that he intends to hold pretty firm to his price, and second, you have signaled by your large concession ($500) that you are willing to come down a lot more. The momentum of this negotiation is now definitely in the client's favor. Don't get in the habit of immediately saying "oh let's just split the difference". Start by making a small concession. Chances are the other party will follow with a large concession.

Next week, I'll share some more thoughts on the subject of negotiation.

Speculating vs. Playing it Safe

Few investors think of themselves as gamblers. These days, most of us would be happy to just earn a modest rate of return on our savings, perhaps enough to fund a comfortable retirement someday. However, we often fail to recognize the risks we are taking with our money. For some reason, musicians seem particularly vulnerable to getting drawn into risky, unconventional investments, when in fact they would probably have been better served by the most boring, safe, bland investment choices.

Perhaps it's because we aren't accustomed to having any spare money to invest! For whatever reason, it seems that when a musician runs into a small windfall of cash, he is usually uncertain of what to do with it. And when you don't know what to do with your money, you're most likely to first get wind of whatever the latest investment fad happens to be. A great investor named James Gipson used to refer to this as the "cocktail party test". Generally speaking, whatever "hot" investment people are currently talking about at cocktail parties is probably already at or near its peak, and when any investment has recently performed outstandingly well, it then becomes more likely to perform poorly in subsequent periods. Two recent examples of this are real estate and commodity prices (like oil). Can you recall a couple of years ago when everybody was trying to "get in" on the real estate market? It turned out to be the absolute worst investment available at the time, though it seemed like the best based on recent performance.

Inexperienced investors who place their precious savings into such investments often do so without fully researching the investment first, and without any awareness that such outsized investment performance is almost never sustainable. If you don't fully understand a speculative investment before getting into it, you are violating the principle of good investment diversification, and essentially gambling with your future.

Avoiding losses is more important than boosting returns, because losses are hard to recoup. If a given investment returns -50% this year, then it will have to return 100% the following year just to break even! Of course, we all have to take some risk in our investments, but if you do some research, you'll find that over the long run, some of the most diversified, simple, conservative investments (such as some index mutual funds and government bond issues) provide very competitive returns with far less risk than the latest exciting cocktail party conversation subjects.

Networking

How many professional musicians have you met or worked with? And how many of them did you get a business card from? And how many of those people have you spoken to recently? Every professional contact that you make is a potential doorway to future gigs. It goes without saying that you should always play your best and behave professionally on every gig, but once you have made a good impression on someone by performing well, it is a shame to let that door close by failing to exchange contact info. If you are afraid that offering your card to someone will make you seem too pushy, then simply compliment the other musicians at the end of the gig and ask for their cards. Invariably, they will ask for your card in return. I am constantly amazed by how few musicians carry business cards with them to gigs. Don't they want more work?

If you collect contacts regularly in this way, over time you will accumulate quite a large list of phone numbers. The music business really has no formal, civilized method for job placement, so these informal contacts are the primary way in which we get work. Therefore, your contact list is one of your most precious assets, and you should back it up periodically just as you do with critical computer data. Don't keep phone numbers only in your cell phone! One laundry mishap, and your whole network could be washed away.

Merely having a list of phone numbers won't guarantee you steady gigs, however. The busiest and most successful musicians I know all regularly tend their network like a garden. I have one busy friend with hundreds of contacts, and he has a policy of calling every person on his list at least once every six months just to say hello (and incidentally remind them of his existence). It's no coincidence that he works constantly, and has great relations with everybody he knows.

Other classic networking strategies include going out to see live music regularly, maintaining a content rich and up to date web site of your own, and of course, using social networking sites like MySpace.com. You do have at least a MySpace Music page with quality demo songs on it, don't you? Other great places to meet musicians and build your network are retail music stores and music schools. Networking is much easier these days thanks to the Internet and modern technology. It still requires an investment of time and effort, but making that effort may have a greater impact on your career than anything else you can do.

Buying Gear

It's tax season here in the U.S., and most of us self-employed artists are tearing our hair out trying to sort through piles of receipts and cancelled checks. If you bought a lot of musical equipment last year, you might be congratulating yourself in anticipation of the advantage you will gain from writing off all of that gear on your tax return. It's important to realize, however, that the cost of that equipment is only partially offset by reduced taxes. Those equipment costs simply reduce the amount of your Net Business Profit, which in turn is taxed at whatever tax bracket you fall in. So if you're in the 15% tax bracket and you buy a $100 piece of equipment, your tax bill will be reduced by only $15. You didn't really think that Uncle Sam was going to completely subsidize that fancy leather gig bag that you splurged on, did you? I'm not sure how other countries treat equipment purchases for tax purposes, but I suspect it's similar in many cases.

So did you really need all of those new instruments and stage clothes you bought last year? Perhaps you did. This is one area in which I'm not quite as ruthless a cost cutter as in other areas of my life. I figure that as a full time musician, I spend a lot of time with my instruments, so having nice equipment makes a big difference in my quality of life. Also, I owe it to my clients to create the best sound possible; and the basic equipment costs that a musician bears are still relatively inexpensive compared to startup costs of, say, a restaurant business.

But it's important not to get carried away with this mentality. Don't kid yourself into thinking that the tax write-off makes it okay to go hog wild with equipment purchases. You are ultimately paying for all of that stuff with money that could have otherwise been invested for your future. Also, don't forget that most musical equipment depreciates in value fairly rapidly. Very few instruments actually increase in value over time. And above all, it's important to keep in mind that what really counts most is in your fingers and in your creative skills, not in some shiny new piece of gear.