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Author Topic: Business Minded Questions  (Read 21020 times)

Rob Spence

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Re: Business Minded Questions
« Reply #10 on: September 17, 2016, 04:44:29 pm »

I hire a particular freelancer to help out at about 2 to 3 shows a year. Some years he gets a 1099. Others not. Depends. He freelances for many people in the area.
Is he an employee of all of them?


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Art Welter

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Re: Business Minded Questions
« Reply #11 on: September 17, 2016, 05:17:24 pm »


1) I have a business partner, but he's not as invested (attitude wise) as I am, so I'm considering buying him out and taking the company to the next level, hence why I'm asking questions.

Honestly, I'm really curious as to the percentage of money in relation to rental, depreciation, gig rate, travel distance, etc. I just want to set my pricing correctly; I feel that as I'm coming out of a hobby my pricing is fairly low/not sustainable. We have made great strides in this avenue, but are still learning.
Nathan,

To preface my reply, it probably includes a longer history than any ever posted on the original  LAB (Live Audio Board, which morphed into Pro Sound Web) who's first poster was the recently passed Monty Lee Wilkes, one of the  many excellent employees I had was privileged to work with back in the years of providing "Sound by the Pound" with Southern Thunder Sound, Inc. (STS).

The LAB (IIRC) was started by a fellow that we rented audio consoles from, I sold a (crappy) monitor console to him early on while he developed a very happening console rental business back in the days before the inter-webs were accessible to mere mortals, he and MLW amongst the early adopters. Decades later, he mentioned that monitor console provided near his best R.O.I. of anything he ever rented.

1) In my first really "professional" partnership with Eclipse Concert Systems, I found the "attitude investment" (and unwillingness of my partners to quit being "penny cheap and dollar foolish") not up to mine.
I left the partnership with a bit more gear than I brought into it, but with invaluable experience that can only be gained touring on a national scale in large outdoor venues, indoor theaters and arenas, with IATSE union stagehands, carpenters, electricians & Teamster truckloaders, and many well, perhaps overly, seasoned pros.

2) My second "really" professional incarnation was Southern Thunder Sound, Inc., a sound,  lighting (and for a short period, roofing) production company better known as STS.  Over the course of 13 years we grew STS from working out of a crappy one car garage (big enough for a VW Bug) with my ex-wife doing office work at the kitchen table, brother Roy running monitors and dry rentals while I booked our shows and ran FOH, to a company with 22 employees traveling world wide while completing over 800 sound and lighting events that were grossing close to one million dollars per year, utilizing over $1.25 million (insured value) in assets, with just barely "Enough Rig(s) for the Gig(s)".

Like the old TV show, "The Wide World of Sports" as competitors in the Wide World of Production we also often suffered the "thrill of victory, and the agony of defeat".  An example would be working with a local artist through their early days, then when they finally were ready to put out bids for carrying production on tour, having another company (Curse You, Dave Rat ;^) ) "steal" them because he had developed 3-way monitors that could bring hearing to the deaf, inebriated punks so dear to our hearts. Dave's "Rat Trap" mains cabinets of that era were never as coherent as my H-34 or H-38 designs (which could be deployed either as a virtual point source, or "line array"), and his subs were not as punchy as the L-2 or L-4, but the defeat still lingers. That said, I feel a true sense of gladness that he is still gigging and has prevailed in a difficult business, not "selling out" after all these years.

In the STS era from 1979-1992, I never took more than $40K annually for myself and office manager/wife, who stopped working for STS after around four years due to a mental illness that precluded her from doing her job.
My highest paid employees each received more financial compensation than me. To be competitive on a national level requires talent, training and excellence.
Supporting and training talent costs money year round, not just the third quarter of the year when we made 50% of our annual income.
During those four months every year, while working like pack horses driven through an ever changing jungle of drunken bands, ascending stars, corporate ass-hats, stellar artists, and shitting fucks on the descending spiral after a short-lived peak, we worked our collective asses off and formed bonds that will last through this lifetime, and perhaps several re-incarnations.

Keeping exceptionally talented employees (willing to put up with a relentlessly demanding perfectionist boss) requires supplying them and the clients with "State of the Art Equipment ". As the owner and sole employee of Welter Systems, Inc. (the name's a conundrum, son), I designed most of the STS speaker and road case systems, as well as early light system packages, while sub-contractors and STS employees (including me in the earlier years) built them.

The "Do It Yourself" approach employed by all major companies of the early era  of "modern" production (sound reinforcement is around a century old now) perhaps saved some money compared to purchasing the few road-ready systems available after the first half of the STS era, but certainly provided employment to our technicians that were willing to do shop work during the off season. Even with many employees finding freelance work as FOH, LD, MME, or TM during the off season, I found myself like a rat on a $175,000 (line of credit) treadmill, going in to debt (at 2% over prime interest, up to 22% back then) every winter to make payroll, and maintain and fund new gear.

In retrospect, if we could have broke that cycle, STS (me..) could have saved approximately a million dollars had I invested the amount paid to the bank in interest.

Doing 800 shows a year, we were at near 100% capacity during the summer "gangbusters" fair, festival and tour season, while in winter we were lucky if we were at 25% capacity. STS was still booking more market share than any of our local competitors at the time, only loosing accounts to those willing to provide complete labor and production packages for less than I was paying my employees. When return on investment and overhead is accounted for, a neccesity in order to stay competitive on a national level, I realized we were heading into uncharted territory where few companies survive.

STS had "maxed out" on a regional level due both to out of state competition for large, high paying shows, and the local "bottom feeders" starting to eat our "bread and butter" gigs.
On the national level, most tours from major label booking agents were controlled by slightly older "big fish" in the business like dB Sound, Brit Row, Clair Brothers, Electrotec, MSI, Showco, Showlights, Upstaging, etc.
Generally speaking, if we were allowed to bid, no matter how low, the "good old boys" still got the tours.
Many of the big tours did not bother with bids, the tour manager/accountants just used who they had become comfortable with, often with "under the table" sweetheart deals. An established production company often would have the "right of first refusal", they could simply match the lowest bid, then later charge back the difference in the form of "additional equipment additions" when items not on the original request for bid "later" turned out to be needed. With so many ways to "play the game", if you were not in from the start, it was tough to get a seat.

From a historical perspective, the post-1974 era economic ripples in the oil industry that increased petrochemical based vinyl record sales and diesel and gasoline tour costs by three times almost overnight, tended to relegate those of us starting then to a subsistence level, working for $50 per night at clubs booked then by an associate that recently sold his interests in the "We Fest" for an undisclosed amount with lots of zeros behind it. "Abe", you did well!

Most of the tours we booked were with new artists not entrenched in the old record label/artist manager/booking agent cliques. 
Though we eventually managed to establish our own new networks of record label/artist manager/booking agent cliques, we never got to hang on the shirt-tails of the likes of Garth Brooks or The Red Hot Chili Peppers, who's early successes led to stellar careers, elevating the production companies to higher levels than possible as a regional provider.  While the many bands we toured with made great music, most disbanded or virtually retired before "making it big".

In light of the depressed conditions we worked in, every year requiring increasingly expensive rapidly obsolete equipment, with escalating labor and overhead costs.
An example were the insurance cost increases after a complete sound system (and all the lighting cable for a 64K system) was stolen on the road.  After the theft, we found we were underinsured, something my insurance agent never bothered to mention.
As well as the difficulty of replacing a touring system with no insurance money, and cost to hire a system, before replacing it with another of ours, before we could receive any insurance money due, we had to do one man-year of accounting.
After all the accounting and inventory management, we only  received about half what the system was worth. 

I decided our only solution was to expand globally- selling my specialty, speaker systems. Interestingly, Clair has successfully later accomplished what I set out to do in 1992.

Early spring of 1992, during a late night drinking session at the STS warehouse with a dear Welsh friend, I developed the prototype Maltese Horn, a very narrow dispersion conical pyramid shaped horn made from cardboard, with a "Keele like" secondary expansion.  Driven by a Radio Shack "Mini Amp", the horn did something like 85 dB at 25 feet in our 10,000 square foot reverberent warehouse. It is certainly possible my recollection or observation is off by an order of magnitude, but the damn thing was definitely loud and clear, using a 200ma amplifier with a 2" speaker, a cut up cardboard box and Nashua 357 duct tape. 

Over the later part of April through August the initial Maltese concept was developed into a three way nested horn within a horn within a horn speaker system. During this time I looked for investors, showing the concept and it's potential to a number of people, first having them sign a non-disclosure agreement. The Maltese system was based on the same virtual single source point concept later employed by EAW, CS&L, Renkus Heinz, and Tom Danley's Unity and Synergy designs. The (far) better executed DSL cabinets are currently selling quite well in the stadium installation business a few decades later.

I was convinced that all who heard the pristine high fidelity of a virtual single point source, with rigging capable of hemispherical arrays to fit any venue's coverage patterns, would feel compelled either to hire STS, or purchase a Maltese system for their own inventory, and thus become part of a global network, inventory scalable for any size event or tour. Sounds familiar now, but not so much in 1992, when consoles were analog, speaker cabinets were made from wood and steel, and men were made from iron.

My project obsession had made those in the know start to fear the company could not sustain additional losses through the winter, since I had already maxed out our revolving line of credit,
rather than paying it down during the busy season as was the usual routine.
I had used around $60,000 funding "Art Charter, Inc.", a sailboat charter company/tax write off scheme designed to be both a vacation opportunity for employees and a place to entertain potential.

After much overtime work, and a 26 hour "all nighter" , as the sun rose we loaded 4 three-way Maltese cabinets, and 8 dual driver Maltese high frequency horns onto the 45' semi-trailer headed to the "We Fest", a three-day outdoor country music festival featuring major internationally known artists playing for as many as 40,000 people each day.

60 Maltese units were still in various stages of the build que, but no more were finished during the 1992 festival season.

For those of you without elephant memories, 1992 was the year of the introduction of the L'Acoustics V-Dosc line array, the first commercially distributed "proper" line array.  Vdosc rapidly was gaining concert production market share, due to both good sound,  and the more important aspect  of "seeing" a show- it's narrow form factor didn't block the video screens that were starting to be a big factor in production, now everyone in the back rows could see their star's zits and nose hair blown up to the size of a VW bus with no pesky point source arrays interfering with the artist's visual presentations.

After literally seeing the "writing on the wall" when discussing the Maltese project with an old friend from my early tour days who had transitioned from tour manager for Dr.Hook & The Medicine Show (who opened for Sha Na Na when they were "big" after their TV show around 1977-78, on my first national tour) to "where the money is"- video, I fully realized that the Maltese system had little no chance of acceptance, a good concept released at the wrong time in history. This discussion happened during a busy Minnesota State Fair, where we were covering the Grandstand and a number of secondary stages (I hear Clair Global handles the Grandstand now, and Clair bought most of the companies that were competing for such gigs back in the day) as well as fielding a large  five week long corporate theater production, and our ongoing gigs at First Avenue, a large nightclub more famous for the place Prince's (RIP) Purple Rain was shot than for Steve McLellan who made the place the legend it is today, yet was summarily dumped by corporate chumps. Don't get me wrong, not all corporations are evil entities, but I 've seen my fair share of them, many purporting to answer only to the universal god of the perpetual tax shelter.

Since most of our lighting inventory was out on various other gigs, I sub-hired a reliable individual working out of Nashville, whom I had worked with for years (at the We Fest) to do the MSF Grandstand lighting. We knew about 50% of the acts, including the first act of the two week run were going to bring in their own lighting/video systems. STS provided the lighting console and snake, which also featured a channel matrix allowing any (analog) console fader to be assigned to any, or multiple, dimmer channels. The sub-contractor owned half the lighting system needed, and dry hired additional dimmers and Par 64 loaded truss from a well-regarded Chicago company we both often had worked, showing up in old road cases I recognized from years before.

To save the MSF IATSE stagehand expenses, "our" lighting system was loaded in and stowed under the stage, but not set up and tested prior to it's first use as had been the custom in the days before many acts insisted on using their own lighting production. The first few days at the grandstand went well, we rigged our lights for the first time on the 2 week run for the Steve Miller Band. I was old friends with three of the band members and their sound man, all from Minneapolis. We had worked with their lighting designer on many occasions with several different artists, and had developed a very good long term working relationship.

While backstage laughing it up with my old friends in the band (Ricky Peterson is crazy funny), I was summoned to the stage by our ALD (Assistant Light Director, who had virtually no lighting experience, but was a good worker working for my old sub-contractor friend ) and found that the lighting focus could not be completed up due to the system only being partially functional. The bands LD was also their tour manager,  and informed me that I would be responsible for union expenses for the overage caused by the non-functional system.

The hands were let go, and we regrouped to address the problem, which was due to a snake pinout difference between two supposedly "plug and play" systems, ours used the Avolights standard, the Chicago company used something else, requiring a 120 pin multicore rewire to be made compatible.

I called Don Rice, the most talented repair technician I know in the world, (we met in first grade, he had been working for me for several years) he sped across town to start the rewire.

As my LD was really not fit to climb, and the ALD barely new what a "hot patch" was, much less being able to do it, the two stayed in dimmer city patching lights into non-dim circuits while I climbed the Jacob's ladder and started crawling the truss to focus the half of the lights that did not work while the two union climbers were on call, around sixty Par 64 cans. Fortunately, we were good friends with the union guys, the Steward looked the other way (or remained sitting at his road case "desk" under the stage) while I was burning the flesh off my fingers twisting rusty lamps- I had forgot to bring up gloves, and as there were several 6K patches, by the time I had traversed the truss back and forth to hit all 6, the porcelains were boiling hot.

After 90 minutes or so, the focus was finished to the band's LD's satisfaction, though he was not at all happy that what should have taken at most an hour had  wasted half his day, and now made him late for dinner. 

When I climbed down from the truss I found  my computer guru/FOH tech, Greg Huber, waiting to hand me his two weeks notice. He had taken a good, secure IATSE position at the Minneapolis Convention center. Greg had worked on and off for STS for 12 years, the brother of my brother's wife, he was the first sub-contractor STS ever hired.

During the weeks prior to the 1992 Minnesota State Fair, both our office and production managers, long term key employees, had quit due to my manic (or in psychiatric terms, "just plain nuts") behavior while attempting to get the Maltese system ready before the busy season.

I had been relieved that we had solved the lighting problem, but felt that the last bit of "glue" holding STS together was now going to be missing in just two weeks, a virtually irreplaceable staff member who had been covering multiple positions since the two other other recent departures.

My tech was able to get most of the wiring incompatibility sorted out by show time, and some of the lights could be hot patched during the show, cued by intercom, there were only a few of the 120 + lights that did not come on at some point during the show.

In a post show negotiation, the LD/Tour manager assessed the lighting system as 80% functional, so we were docked 20% of our day's pay for the lighting portion of our production contract. The extra cost of the IATSE climber's overtime increased production expenses. As the artist's contract specified a percentage of the gross receipts above those expenses split to the artist, I was liable to pay the difference, as I recall it amounted to loosing the lighting pay for at least that day.

I saw my reputation had been compromised in front of both the fair manager and the LD, and now had lost my office/production manager/IT personnel, while other key employees were busy preparing to  tour with the biggest account they had ever brought to STS- Steve (Wally) Wallace and Monty Lee Wilkes were soon to be out providing production for upcoming Beastie Boys tour.

I had still been booking approximately 50% of our revenue, supervising a dozens of improvements to 7 sound and light systems, doing FOH on major shows, while establishing a corporate sailboat charter company in Florida, and supervising new hires involved in creating the new Maltese speaker system.
   
After months of non-stop activity, I was crashing, shattered.
On 9/6/92, I submitted this "Changes" letter to my employees at our weekly meeting:

"Being the sole proprietor of STS allows me the freedom to make any decisions, but ultimately requires that I am responsible for everything. I have made some good decisions, but inattention to the books for the last six months has resulted in STS, Welter Systems and Art Welter owing a total of $175,000.00 with no real sign of closing on the payback of these loans.  Presently I do not have the stamina to guide the company back to a profitable state in the fashion I have in the past. The plan I had to make big money was idealistic, unrealistic and based on mistaken premises. In my present mental condition I am prone to making decisions that I soon regret. Since I am fiscally responsible to the twenty people currently working at STS, serious measures must be undertaken before the problem becomes any worse-i.e.we are unable to pay the bills or payroll. STS presently is “working without a net”- we have no cash reserves available. Drumming up more loans will make the problem worse by causing more debt service and a bigger hole to dig out of. On the upside, we have a larger work force and higher tech gear than we’ve ever had, allowing the potential for better, more profitable, projects than we have had in the past. Our staff consists of personnel that are capable of covering the multitude of needs that we encounter.

I no longer feel I can run STS without financially jeopardizing my employees. Prior to January I always tried to be realistic in regard to what STS can offer to me and my employees. Unfortunately, something snapped back then and my objective reasoning powers clouded. Because of my current mental state I must simplify my affairs or continue to risk ruining what we have all worked long and hard to build up. Just after Easter the shrinks told me - and now I know they were right - I need a long hiatus to sort out my life.  To do that requires that I be replaced in my work capacities.
 
At this point I am considering three basic options:
1)Cut down to one staff member who will sell off my assets.
2)Sell STS and the assets of Welter Systems to the employees, either in total or by purchase of stock. I could still be available in an advisory or technical capacity.
3)Sell to an outside company.

Option #1- the end of the road for STS as a place to work.

Obviously, option # 2 requires enough staff members ready, willing and able to cough up between 15 to 30 thousand dollars apiece in return for their share of the company.

I am willing to sell the company for an inexpensive amount- at this point I would sell for the cost of the debt, the taxes due from the sale and $60,000.00 cash. This would amount to approximately $300,000.00 which hopefully could be financed at Norwest Bank using the company’s assets plus those interested parties‘ equity to guarantee the loans. STS and Welter Systems combined assets are presently valued at over one million dollars. Sales of used equipment could raise $50,000.00 to $100,000.00 and still have very little effect on the company’s ability to do shows, thus reducing the initial investment required to buy the company by as much as one third within the first year without affecting the bottom line.

Option #2 allows the present staff to do largely what their present jobs are, with my position being split up or taken over by one person.
 
Option#3 Potentially could allow for a larger client base and more uniform spread of the work. I have had no real offers and I am not interested in a drawn out sale process.

I deeply regret the problems I have created and I recognize that the Maltese speaker system is not going to do what I hoped it would do. What I thought to be the light at the end of the tunnel turned out to be a flashlight at the bottom of a well. To continue the project would be too much of a financial strain for STS and at this point I don’t think the potential is what I thought it was. I also regret the inevitable pains that will happen with any of the above options, but they are the only way I see being able to take the extended, worry-free type of break I need.  I am open to suggestions that can provide me the time that I need to get my head together. "


I met with a potential buyer at Little Jack's restaurant to discuss purchase terms on 9/21/92. The buyer had purchased most of his sound system from Welter Systems, and his general manager and office managers were both former STS employees.

After what seemed like forever, but was actually just near the end of 1992, we came to terms to sell STS stock, and the assets of STS and Welter Systems. STS owned virtually nothing but office equipment, as WS equipment was leased to STS corporate liability exposure. All the STS and WS assets with the exception of the empty Maltese cabinets (stacked like Dixie cups of the gods in a little room) sold for $400,000, with an additional $100,000 for a non-competition agreement.
Payments were over 13 months, allowing capital gains to be spread over 3 fiscal years to reduce my tax burden.
$175,000 went to pay off the line of credit, after paying the lawyers, taxes and such, I had a bit less than $300,000 due for me and my (ex) wife to "sail into the sunset" with on Art Charter Inc.'s one and only sailboat, the  35' "Paradigm Shift".

Turns out the sunset sail did not improve married life after returning home.
After the company was sold my(ex) wife no longer could emotionally blackmail me, over the months during our sale negotiations, she threatened to mess with the sale by using her long abandoned, but still on the corporate charter, position as an officer of the company to keep me from divorcing her.

After a therapeutic week at the Monroe Institute, I returned with renewed clarity of mind, and she finally agreed to the divorce I had sought for several years.

After the divorce, we split up the assets, she took the house (which was owned free and clear, worth over $100K back then, she recently received almost twice that amount selling the land after the "Hoarder House" burnt to the ground) our financial portfolio worth around $117K, the O'Day 25' "Bolero" sailboat,  a new (used) Chrysler mini van and $2K cash. 

I got the Chevy Astro Van (with 275,000 miles on it) a clapped out Pontiac Fiero which sold for $400, receiving only $200 in two payments before the "buyer" split town with it, a 25' Streamline and 18" utility trailer I had been living/working out of for several months prior to the divorce finalization, but not considered joint property, as they were both titled to the WS corporation,  and the remaining  overdue payments from the sale of STS.

To finally obtain those funds required me to serve a notice of repossession of the equipment, per the terms of our contract. As I recall, the buyer convinced his father to take out a third mortgage on his house to pay off the remaining  $100,000 for the non-competition agreement.

The first mortgage had been for the STS/WS equipment down payment, the second to pay payroll tax and penalties incurred during the Hank William Jr. "Southern Thunder" tour, AKA "Hank to the Bank" tour since Southern Thunder Services (they appropriately changed their name) had defaulted on their bank loan, all funds in receivership, the bank taking tour funds and applying them to payroll taxes and loan reduction.

The new owner had made a major business mistake, deciding to add another speaker system, as well as grossly expensive, completely unnecessary, active spitter snake systems for analog consoles. The new "spare no expense" proprietary speaker system was under the direction of a former dB Sound employee, a "shrunken head" version of the then currently available Electro-Voice MT4/MTL4. Systems such as those, which are neither able to be rigged as a virtual point source, or an effective line array, were already basically obsolete at the time of the build, and proprietary systems, unless the name on them was Clair, were becoming progressively harder to  "sell", riders specifically prohibiting them because of the preponderance of badly executed DIY systems.

"Services" were held for Southern Thunder Services shortly after I was paid off, though having moved South to New Mexico, I was unable to attend. The sale of STS had allowed me to take a trip around the world, and 17 years after my original plan, move "South"

Regrettably, the new owner, with "well meaning" employee input, managed to bankrupt a company that had been going strong for over a decade in a matter of a few years.

It was the end of an era.

I spent 20 years as a one man operation in New Mexico.  After expenses, I used to net around $20K from sound gigs, with only two primary clients, with 80% of the work in a 3 month period during the summer.

My expense vs gross is fairly high, since most everything I do is music or sound related, I write off a lot of stuff.

Considering I never could take out more than $40K annually, and there were a lot of years I took less than $20K, my ROI and the amount of work I did as a one man operation was about 10 times better return than in the "Glory Days" of STS.

The last time I saw Monty Lee Wilkes, he was mixing the Commodores, old buddy David "Gunque" Selg was back again mixing monitors, both working for Naked Zoo Enterprises, a St.Paul company run by the notorius David Fish, who also manages the Commodors. Most Commodores gigs are fly dates, production and back line all hired in, but on some dates, NZE provides production, using the same S4 clones and box truss they originally built around 1982, just before STS took over the Minnesota State Fair Grandstand account which NZE had taken from Anicom around four years before.

Gunque was displeased that Fish was up to the same old crap, booking return flights in the middle of the night, requiiring a 4 AM lobby call after a midnight load out, effectively eliminating  any semblance of a normal sleep cycle.
He mentioned that he had just had a similar day, working as a pusher on some big arena rock show, but as the return time put him into triple overtime (or some such thing), he made over $1000 in a 24 hour time period, pushing boxes across an arena floor.

I seldom have made that much money, transporting, setting up, operating, tearing down and driving back home with a 24 channel system with 9 monitors and four mixes with 10 piece bands playing for as many as 4000 people, but I enjoy what I do- mixing good live music. .

I recently moved to Florida, and have begun another "new era" here.

Designing and building speakers, mixing live and recording continue to be my favorite work, I will continue them as long as possible whether well paid or not- my "work" is fun.

I still have no plans of providing "sound by the pound", and will continue to only book shows that I enjoy mixing, for clients who appreciate a job well done.

My thanks to the many ex-STS employees and friends, living and dead, who have kept in contact and provided moral support over the years, and to the many business associates that have also helped me through some difficult times.

Life is good, and after 8 years together,  Bonnie is still putting up with me, even though I still continue to hover around 20% "just plain nuts".

Art

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Ray Aberle

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Re: Business Minded Questions
« Reply #12 on: September 19, 2016, 12:02:28 pm »

I hire a particular freelancer to help out at about 2 to 3 shows a year. Some years he gets a 1099. Others not. Depends. He freelances for many people in the area.
Is he an employee of all of them?
You'd need to speak to an employment specialist. But, based on my understanding of IRS rules and regulations, based on the scope of the services they provide (and assuming that he's not running a registered business, does not carry their own insurance, and he does not provide his own equipment and supplies for your show), I would lean towards designating that this freelancer is, in actuality, an employee.

Keep in mind I have never proposed this question to the IRS and asked for a determination. My point of view is based on reading the various materials they have released, as linked to previously. I again would urge *anyone* who is paying a person to provide audio engineering/labor services to their company, and is pondering this question, to get a determination from the IRS to ensure they are properly classifying their workers.

-Ray
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Nathan Riddle

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Re: Business Minded Questions
« Reply #13 on: September 20, 2016, 05:03:07 pm »

I am truly humbled by the responses thus far. Y'all have given me much food for thought.

Art, thank you for the candid detailed history of your sound company! I did some looking and apparently you're on FaceBook ;) haha. Also, my searching found this thread: http://forums.prosoundweb.com/index.php?topic=137865.0 I'll definitely read up on some of the history. I absolutely realize and try to not take things for granted these days in that we do have it quite easy compared to the pioneers - you!

I was thinking that maybe we needed a history of sound thread or a thread on how we all got started until I found the above thread.

I've started thinking about a SWOT analysis. I'll post up what I've come up with once I've thought through it some more.

Caleb is helping me out with some pricing questions from a System Designer's, so thank you!

I've been thinking about wanting to be a system designer for a living. I really do like research and solving problems. I don't like my software job as I'm more of a hands on - hardware kind of guy. This is some of the push to be an entrepreneur and build a company for myself. I want to enjoy what I do, not loath it.

Ray, others. Thanks for helping out with the employee situation. My question about that is, how difficult is it to set up that with the IRS? (yes I know y'all aren't IRS people  :P ) Also, the wording on that form FSS8 seems to indicate that the employees SSN would become public knowledge instead of remaining PII, I don't want to do that. At any rate, perhaps talking to an employment exert like you suggest, Ray, would be a good idea.

I have some more questions. I've started working on a few different' proposals/estimates for install gigs. I'm a little lost as to where to start. I've looked at some AV proposals and thought about creating one based off of them.

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What are the differences between estimate & proposal? For each question below how do they relate to each item?

Should I be detailed or not? - Do I list components or state a simple design approach and then compile a list of items?

Should I list every component used down to the last screw/bolt or just generalize this amp + this speaker installed here?

Personalize it or not? - Should I be dry like a legal document or more personalized? Should I explain things in audio to the customer here in the document or in person?

Should I spend the time modeling things before a bid/estimate or wait until the proposal? what happens if the estimate is wayyy off?

What about customer knowledge? - Not everyone understands audio, it is our job to help guide them to a proper knowledge correct? Sometimes they might not care though. But what happens If I spec/install something thinking it is a solution for their issue, but they hate it?

How much time/investigation should be spent on each?

Do I bill research hours or just time spent on proposal/install?

How do I get materials? - Do I mark up prices? Do I have a specific dealer I buy things from? - Just give me a general idea of what goes on here. Maybe I'm confusing things, but as I'm not the customer, but also not the manufacture just some middleman; don't I get a deal on the materials and then markup for the customer? What if they see it cheaper online because I'm buying x item for y dollars and I'm charging 1.1y dollars for item and they found it on amazon for y dollars?

What is the typical markup? - 10%

I'm assuming I need a city/state business license?

What about insurance? I found insurance for gigs, is that the same for installs?

How much for a contingency/miscellaneous fund?

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I may have a restaurant install gig. They need their system either replaced or fixed, a hookup for Dj/musician, radio, some controls for the bar, outdoor speakers added, etc. Friend of mine (same friend who liked the KW181 over the TH118, so if you read that thread you know his background EDM/DJ/club...) sorta helped "Us" get the gig because his friend is the manager there and is the one who wants it done.

There was a difference of opinion on how to execute the install. Mildly annoying, I want to model it; do the math; investigate their current system; spec the correct speakers - 70.7v system; etc. He wants to throw some speakers on a wall. If my company's name is on the bill then I don't want to do it that way heck no! I was approaching it like a proposal, he was approaching it like a bid/estimate (btw what is difference between the two/three? bid - estimate - proposal). Anyways sorta figured things out. I'm still not going to half a$$ things, just not the way I roll. I want specific answers from the customer, etc. I got fairly agitated as I felt like he was just BSing things and I was taking it personally because if the Bill was going to have my company's name on it I wanted it done RIGHT from the START (y'all taught me that).

Anyways, got that figured out. My whole reason for explaining this is; while knowing that my thoughts here are fairly biased, I want to ensure I am still doing the right thing. I also want some help in how to proceed.

Customer doesn't know much about sound; problem is uneven sound throughout and when DJ/musician comes and setups their speakers it blasts the closest tables and nothing far away. Okay, fairly simple solution right? Model the place, use the JBL software, come up with some different budgets.

But sorta like the cart before the horse, (my friend who is wise in this aspect I think) didn't want me to spend a lot of time figuring this out because it is a bid/estimate. They might not go with us and that is wasted time. My thought on this matter is that since we don't have any experience (he has some, but if I'm honest I doubt it really counts) with bids/estimates/proposals we should spend the extra time figuring out at least two different tiers of solution. The issue with taking the extra time is they want an estimate now and I can't get in there to get dimensions until a few weeks from now. How to I tackle this sort of problem? I drew it out on paper and have the basics done or what I think it might take, but without modeling and numbers and ceiling heights it's all just guess work; is it okay for an estimate?

I'll most likely post a thread in the installed contracting subforum for some experts to look at my system design as I don't want to mess things up and this thread isn't the proper place.

Anyways, those are my thoughts and current states of being. Thanks everyone!
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Scott Holtzman

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Re: Business Minded Questions
« Reply #14 on: September 20, 2016, 11:19:10 pm »


I remain NOT a lawyer, tax accountant, employment specialist, or HR person.  :o :-*

Ray

[edit: to indicate how the imaginary college student is paid. And FYI there's really not any little shot bottles of liquor in my desk.]

That is the most cogent explanation I have gotten, including from the aforementioned professionals.  Much to digest.

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Nathan Riddle

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Re: Business Minded Questions
« Reply #15 on: September 21, 2016, 10:12:52 am »

Nathan,

To preface my reply, it probably includes a longer history than any ever posted on the original  LAB (Live Audio Board, which morphed into Pro Sound Web) who's first poster was the recently passed Monty Lee Wilkes, one of the  many excellent employees I had was privileged to work with back in the years of providing "Sound by the Pound" with Southern Thunder Sound, Inc. (STS).

Early spring of 1992, during a late night drinking session at the STS warehouse with a dear Welsh friend, I developed the prototype Maltese Horn, a very narrow dispersion conical pyramid shaped horn made from cardboard, with a "Keele like" secondary expansion.  Driven by a Radio Shack "Mini Amp", the horn did something like 85 dB at 25 feet in our 10,000 square foot reverberent warehouse. It is certainly possible my recollection or observation is off by an order of magnitude, but the damn thing was definitely loud and clear, using a 200ma amplifier with a 2" speaker, a cut up cardboard box and Nashua 357 duct tape. 

Over the later part of April through August the initial Maltese concept was developed into a three way nested horn within a horn within a horn speaker system. During this time I looked for investors, showing the concept and it's potential to a number of people, first having them sign a non-disclosure agreement. The Maltese system was based on the same virtual single source point concept later employed by EAW, CS&L, Renkus Heinz, and Tom Danley's Unity and Synergy designs. The (far) better executed DSL cabinets are currently selling quite well in the stadium installation business a few decades later.

I was convinced that all who heard the pristine high fidelity of a virtual single point source, with rigging capable of hemispherical arrays to fit any venue's coverage patterns, would feel compelled either to hire STS, or purchase a Maltese system for their own inventory, and thus become part of a global network, inventory scalable for any size event or tour. Sounds familiar now, but not so much in 1992, when consoles were analog, speaker cabinets were made from wood and steel, and men were made from iron.

My project obsession had made those in the know start to fear the company could not sustain additional losses through the winter, since I had already maxed out our revolving line of credit,
rather than paying it down during the busy season as was the usual routine.
I had used around $60,000 funding "Art Charter, Inc.", a sailboat charter company/tax write off scheme designed to be both a vacation opportunity for employees and a place to entertain potential.

After much overtime work, and a 26 hour "all nighter" , as the sun rose we loaded 4 three-way Maltese cabinets, and 8 dual driver Maltese high frequency horns onto the 45' semi-trailer headed to the "We Fest", a three-day outdoor country music festival featuring major internationally known artists playing for as many as 40,000 people each day.

60 Maltese units were still in various stages of the build que, but no more were finished during the 1992 festival season.

For those of you without elephant memories, 1992 was the year of the introduction of the L'Acoustics V-Dosc line array, the first commercially distributed "proper" line array.  Vdosc rapidly was gaining concert production market share, due to both good sound,  and the more important aspect  of "seeing" a show- it's narrow form factor didn't block the video screens that were starting to be a big factor in production, now everyone in the back rows could see their star's zits and nose hair blown up to the size of a VW bus with no pesky point source arrays interfering with the artist's visual presentations.

After literally seeing the "writing on the wall" when discussing the Maltese project with an old friend from my early tour days who had transitioned from tour manager for Dr.Hook & The Medicine Show (who opened for Sha Na Na when they were "big" after their TV show around 1977-78, on my first national tour) to "where the money is"- video, I fully realized that the Maltese system had little no chance of acceptance, a good concept released at the wrong time in history. This discussion happened during a busy Minnesota State Fair, where we were covering the Grandstand and a number of secondary stages (I hear Clair Global handles the Grandstand now, and Clair bought most of the companies that were competing for such gigs back in the day) as well as fielding a large  five week long corporate theater production, and our ongoing gigs at First Avenue, a large nightclub more famous for the place Prince's (RIP) Purple Rain was shot than for Steve McLellan who made the place the legend it is today, yet was summarily dumped by corporate chumps. Don't get me wrong, not all corporations are evil entities, but I 've seen my fair share of them, many purporting to answer only to the universal god of the perpetual tax shelter.

It was the end of an era.

I recently moved to Florida, and have begun another "new era" here.

Designing and building speakers, mixing live and recording continue to be my favorite work, I will continue them as long as possible whether well paid or not- my "work" is fun.

I still have no plans of providing "sound by the pound", and will continue to only book shows that I enjoy mixing, for clients who appreciate a job well done.

My thanks to the many ex-STS employees and friends, living and dead, who have kept in contact and provided moral support over the years, and to the many business associates that have also helped me through some difficult times.

Life is good, and after 8 years together,  Bonnie is still putting up with me, even though I still continue to hover around 20% "just plain nuts".

Art

Art,

Would you do it over again? It sounds like you might, as it was a fun journey.

I wish men (people) were made out of iron these days still; there's too much ease of life going on :P People are soft, if something bad happens most won't know what to do with themselves.

Are you a bit bummed that your Maltese system concept was 'stolen' in a sense? Or is that no the way you see it? Would you say it was the precursor to the Danley concept?


I did a google search for "Maltese horn" and this is the closest thing I could find to a "horn nested within a horn."
http://www.parts-express.com/Data/Default/Images/Catalog/Original/300-115_HR_0.jpg

Also, apparently there's a country 'Malta' that google thinks I'm trying to do research on; also, a knife. Doesn't google track that the only things I search are speakers and sound equipment?  ::)
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James Feenstra

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Re: Business Minded Questions
« Reply #16 on: September 22, 2016, 10:56:20 pm »

ROI: Again, the desired ROI depends on your specific situation. You want gear that pays for itself. Once it's paid for, then that's just pure profit. However, you need to make those gear purchases logically. Ideally, new gear will either expand your business into new events and clients that you were unable to previously handle, or will allow you to increase billing for your current clients. If both of those happen, AWESOME! If neither of those happen... well, you just blew a bunch of money for nothing. :(  If I look at my QuickBooks for this year, right now it says I lost money. But, that includes a pair of motors, 2 Worker WT-150 lifts, Radial mPress Press Box system, half a dozen new cases from Rock Hard Cases, and $58K of Harman lease for new I-Tech HD amps. If I hadn't spent that money, I'd have pulled a tidy profit for the year! This new gear allowed me to do some new shows that I hadn't done before, and the new I-Tech HD amps (replacing a bunch of conventional ones) are improving the reliability of my system. So, it's worth it to me. I have a trio of shows I am looking at for next year- same A1 for all three. First show is a repeat (2nd year for us); the other two would be new to us. Between them, with one in San Jose, one in Reno, and a potential in Pittsburgh, it's $50K of work. After travel/lodging/staffing, I'll put $30K in the bank. However, I have to buy a CL5 to handle them- here's a $30K purchase with Rios, snake, and case. Now my profit is gone. But, I'll have a board, paid for, that can do *other* work for me, and make money there. And then, in 2018, presuming we do them all again, well shit, there's $30K in the bank.
Long term you're better off depreciating large purchases over time, rather than taking a same year full deduction. It will minimize your taxes from the increase in business overall. Not sure how it works in the US, but here most A/V gear depreciates at somewhere between 20-55% per year.

So on a 10k purchase, year one I'd get a deduction of $2k (20% of 10k), year two, $1600 (20% of the remaining $8k in value), year three $1280 (20% of $6400), etc. This allows you to not take a huge tax hit as well when you sell gear after several years.

Say I own a 10k console for 3 years, then sell it for 6K. As I still have $5120 to depreciate on the asset, so my income from the sale that I have to pay taxes on is only $880. Still gives me $6k in available capital after the sale to reinvest, but I get a lower overall income for the three years I owned it.

Depreciation is a wonderful thing.
Quote
Inventory Management: I don't have one. Other then an Excel spreadsheet listing everything. There's lots of threads on rental management software; I will refer you to those. :) However, COME UP WITH A CABLE LABELING SCHEME NOW. And stick with it. A LOT easier to be consistent from the beginning then it is to change over at some point. And remember, "Buy Once, Cry Once." Get the best quality cables you can afford- they'll last a lot longer. As for the logistics of pulling shows, etc, I work off my invoice, to make sure everything I have listed there gets on the truck. I have pre-packed AC, speakon and XLR workboxes, so I don't have to pick those every time.
I 100% judge other companies I work for based on their road cases and cable. If they have these two things together (ie. 1/2 pack cases, 1/4 pack cases, 1/3 pack cases, organized label scheme, cases packed in a logical manner, etc) they probably are pretty good to work for. It's the simple things that impress me, and say a lot about companies

If you want an example of a company to copy in terms of cabling and cases, look at Christie Lites. They actually have a person on staff who's entire job is to make things more efficient. If they can save an hour or two of labor on every show (ie. loading trucks!) or in the shop, they do it.

Recently they added pin holders to all their 16" pin truss. The pins are permanently affixed to the truss, two per side, in a fancy little holder that not only stops them from loosing pins (which gets really expensive when you have a 14 offices loosing dozens of pins per week), but saves at least a case in every truck pack, and makes load ins/outs faster.
« Last Edit: September 22, 2016, 11:00:17 pm by James Feenstra »
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Nathan Riddle

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Re: Business Minded Questions
« Reply #17 on: December 01, 2016, 03:09:11 pm »

I 100% judge other companies I work for based on their road cases and cable. If they have these two things together (ie. 1/2 pack cases, 1/4 pack cases, 1/3 pack cases, organized label scheme, cases packed in a logical manner, etc) they probably are pretty good to work for. It's the simple things that impress me, and say a lot about companies

I'm trying to get there. Currently we have a good number of 'totes' from Lowes. I'm slowly working my way toward an all flight case solution for ease/efficiency.

Could someone expand on the label scheme? Why is this necessary? What are you labeling? That they are yours? The length? The type?
Can't people look at cables and know what type of cable and guess at the length, or is it more efficient to have them labeled in all aspects?

Who uses which labeling scheme most?

1. [name of company, phone of company, type of cable, length]
or
2. [name of company, type of cable, length]
or
3. [type of cable, length]
or
4. [length]

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On a different note, currently I'm having some difficulties regarding quoting customers.

I quoted something like $1.8k for an all day manned multiple musicians/act festival fundraiser event. Event said that was over budget as they usually pay around or less than $1k. Maybe I was a bit high, not sure. But I can't for the life of me figure out how the other provider in my area does it for so cheap when all his shows are exorbitantly over priced IMO. Perhaps it was a, 'this was one of the first things I did in my area to make money, and now I'm stuck with a cheap gig even though I've grown'.

I'm currently quoting for a two day event with full lights-sound-video-trussing-etc. setup. Small venue for ~300 people, but still needs (wants) a full show.

I've always done it in the past as a hobby and our most recent event pricing was $2k last year.

Included:
delivery-setup-teardown.
Thursday=loadin.
Friday=sound check 1st show
Sat = 2 shows morning/night/teardown.

Sound technician for all shows, and typically provided lighting technician & video, though some of it was volunteer.
Some loadin/loadout labor provided, some volunteer.

Here's a general gist of what they want provided.

Sound:
2x single speaker mini systems for other times throughout the weekend.
2x mains
3x subs
1x mixer
2x personal mixers
1x amp rack
4x wireless IEM
4x wireless HH
7x mixes (5x stereo)
1x snake
1x consumables

Lighting:
4x beam movers
4x zoom led movers
14x led pars
2x scanners
6x globe houselights

Video:
2x 55" mounted on trussing
1x 40" confidence monitor

Trussing:
6x 2.5m sticks
3x 4m sticks
2x St-132
5x stage decks

As you can see, just the basics for a band & show. Nothing too fancy.

I've looked at Ray's website for pricing (hope you don't mind). And Luke's post below.

I keep coming up with something like: [1-day/weeklyish] 1500/2400 for sound. 1200/1600 for lighting, and 500/750 for video&truss.

Ends up at North of $5-7k for labor/rental. Am I way out of the ball park, or is this typical?

If it is out of the ball park, what am I missing?

If this is typical, then how do I approach them to help them grow with me?

My other concern is that this is the first year they are bidding out to other companies and I might not get the gig. That would be disastrous as they have multiple events throughout the year and I was able to expand this from hobby to business with that sustained business from them.

Any insight would be appreciated :)

My gut feeling is keep it around $3k and explain/discount for repeat customer; I know this is not correct way of doing things, but I don't know what other angle to attack it with.

I usually go by this simple cost benefit analysis.

Are you asking for equipment that would cost more to rent than what you can bring in ticket sales?

Here is a general idea of cost for certain types of gear.

1. Speakers in general cost around $50 - $100 each.

2. Amplifiers almost universally cost around $50 each regardless of type or brand.

3. RF costs anywhere from $50 - $75 per channel.

4. Mixers are the big who knows, but a cheap digital desk can go for around $75 while a high end as much as $300+.

5. External FX and processing can go from $25 -$100 per unit.

6. Mics can cost anywhere from $10 to $50 each.

7. Let's not forget delivery fee's and taxes. Delivery fee's can be as little as $50 and I have seen as high as $150!

8. Backline is another who knows? Guitar / bass / keyboard amps vary from $50 to as much as $200+ for the amp and cabs. Drums go between $200 and $400 for a full kit.

As you can see, it adds up quick. This doesn't even factor in the venues running costs. An engineer is usually one of the more expensive persons on a venues payroll. At $150 - $400 per tech per day depending on the venue, there is a significant cost for that person to be there running around for your band to have fun.

But wait there is more. Many riders have food and drink demands too. Most food demands are ala carte and will require a person to acquire it, who also probably costs money to do so. Oh and Hotels / motels as well as travel. Yeah let's leave that alone for now. The list goes on. The big question is how much is your band truly worth in sales to the venue? You have to be worth significantly more than you cost in totality to start making demands.

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I think, now that some time has passed I've been able to figure out what I want to do with my business and life in general. Thanks again for those who have helped so much!

Hi Nathan,

You've got a great list of questions here! The first thing you need to do, though, is make a firm decision as to where you want the business to go-- stick with small bar/band gigs, larger festivals, touring concerts? Or do a lot of installs and maybe some retail? Then, you're going to want to develop a business plan. This is the blueprint for the boring stuff- all of the money things you asked about-- your goals and how you're going to achieve them. Take it from someone who didn't do a business plan- without one, you'll find yourself spending money on stupid shit.

I would like to do installs & small-medium sized gigs. With a good focus on Church/School (or smaller venues, subcontract larger installations & rigging.) work.

The first book to start with, if you haven't already, is the Yamaha Sound Reinforcement Handbook. I found a copy at a local used book store for cheap.

I'm glad that book that is becoming a standard. I read that when I was 9 I think. I should probably re-read it. I have so much reading to do!

Rigging/Flying: This all depends on what exactly you're doing. I hate giving a non-answer, but every case is different, as to whether or not you'll be needing to worry about riggers. Many times, a venue has riggers familiar with their facility that you're going to have to use, so if you are flying PA, then they will handle the actual attachment of your motors to their points. But, you'll still need to have someone qualified on the ground (part of your crew) that knows how to safely attach your load to the motor(s).

This keeps coming up for me, flying light bar at local church installation. Using hardware bought from Lowes. I've done enough research over the years that this shouldn't be done. But my original mentor(s) who has been doing this for far longer than I have say it isn't a big deal because there isn't much weight on the bar. I really don't know what to do in this instance. I'm going to put some all thread and bolt to the I-beam using beam clamps because I feel that is safer than 1/8" aircraft cable and non-forged eyebolts.

The other thing is the front light bar is using angle iron welded to I-beams to support it. No real math was used to calculate loads or weight limits or anything.

Should I highly encourage a structural engineer come look at our stuff?

I also calculate weight on trussing and stands and stay under the limits when flying over people's heads. Though I'll admit I'm usually pretty close to the limit on our ST-132 stands. I can't justify beefier yet because I don't have the income yet.


So let's take a sidebar: Crew and staffing is dependent on the size and scale of your shows. How large of shows are you doing now? Are you doing them by yourself, or do you have a business partner/friend/whatever that is helping you with the show? Are you paying them, and then are you billing this extra labor to the client? Do you find yourself getting worn out on shows because you exerted SO MUCH effort getting setup that now you can't do as good of a job on the show? And then you also have to load your gear out of there at the end...

I agree with this so much! I'm worried that I want to get there at the expense of undercharging/underpaying myself or others.

One realization I came to the past couple of years: When I would spend huge amounts of energy doing the work of three people on load in, all I was REALLY doing was making MY CLIENT richer at the expense of my personal health & well-being. In other words, by not hiring in stage hands to help with the set and strike, I was saving my client money, but it was creating a lot of high paced work placed on my shoulders- and trying to get a lot done in a short amount of time is a big cause of accidents. So, take a look at a job, and here's where you have to learn this on your own- know how to accurately determine how many people it will take to get everything done. And remember, you will have people on YOUR crew (your higher-paid skilled audio technicians) and then the stage hands (lower paid, minions, "please do this," and you move on to another task type people). A typical show may have 2-3 audio company techs onsite, and then anywhere from 4-16 stage hands to move cases, pull cabling, help rig PA together, and so on.

Electrical: Again, this is going to be dependent on the shows you do. Typically, venues have a house electrician that will arrange for the power. They'll have a "company switch," where you've got cams to connect there, and a switch to make it live. Allow the house electrician to throw that switch. METER YOUR SHIZZ. Trust, but verify. The first time you fail to meter power could be the last show you do, as all of your gear lets out the magic smoke. For smaller shows, you might have more responsibilities on this- make sure that your setup is safe, and following all applicable local codes to the best of your ability. Ensure that any needed permits and inspections are made, or if you're going to let the onus for this rest on your client's shoulders, make sure you inform them of what they need to know. For example, in Seattle, a permit and inspection is required for generators over 5,000w. They must be fully grounded. However, if you order from, say, Hertz or Sunbelt, they don't do this permit for you. They literally will deliver the generator to your job site and-- that's it. The permit, inspection and grounding is still up to the client. Also common is when the client picks it up from the rental company. It's not up to the rental company to check where you're going with the generator or what it's being used for. So, make sure you can knowledgeably guide your client as to the law and proper procedures. Checking with your city's Department of Planning & Development is a good start for asking about generators for Temporary Power For Special Events.

Can I wire up my DIY-distro to breaker boxes without electrician on smaller shows or is this just such a huge no-no? I've been doing it for years now, but I'm trying to get all legal and whatnaught.

All Money Things
Wages: That absolutely depends on your market and the skillset/experience of the people you're hiring. I could tell you how things are here in the PNW, but that might not be applicable for your area. I don't do low-end bar gigs, as they don't generally pay well enough for my business to support. I pay labor rates on the higher end of the pay scale, because I firmly believe in paying people well for a good job- I want to make sure we have a successful event AND ensure that my techs will answer the phone when I call them in the future. :) And perks are important. Of course, most soundcos will provide bottled water. I also have my RedBull fridge mounted in a road case- RedBull is a business expense for me, because it's a quick and easy way to perk my guys up as well as make friends with the stagehands. :)

I think mountain dew is going to be my provided drink. My stagehands/techs love that stuff. Me, well I drink water.

Incentive Fee: I really don't do them. In the business networking world, you help each other get new business because it's a collaborative effort-- I pass a friend to your business because he needs a new insurance broker, and then you meet someone who is planning a corporate party who needs sound & lighting rentals, and you give them my name and number. You don't expect a kickback for sending the insurance agent the lead.

Price Per Gig: Once again, that's something that really only you can answer. Some people line item most things, some people just put "here's your package price." I like line items because then if someone wants to change a console or number of speakers, there's a visual impact to their invoice amount. They know why the price went up or down, due to the change(s). Break out Gear Rentals, Labor Charges and Other Expenses (Travel, mainly) separately. Make sure the client sees what they're paying for the gear, and what they're paying for labor. (By having a specific gear rental price, that's the same price whether we deliver and run the show or you pick up from the shop and dry hire it. The labor charges on the invoice, therefore, is how we cover our staffing costs for a delivered/run show. And we're still making the gear rental charge.) However, many things on my invoice aren't charged for. They're listed to indicate they're included, but at no cost. That includes wired mics/stands/XLR cables, speaker cabling, fly frames, stage AC cabling and pop-up canopies. These are things that are imperative to the success of the event, but not things I charge specifically for. When a speaker system is listed, the speaker price includes amplifiers, so again, even though they are no-charged, my VerTec amp racks are listed on the invoice to show the client that they're getting those.

I sometimes have "packages" which include, say, 2-over-1/side of VRX, with FOH console, processing rack, and all mics/stands/cables. I'll list the console, at no cost, to show them what I am proposing. If they want a nicer board, then there could be an upcharge there, but for the most part, you can get one of my small Mackie analog boards, or one of my LS9s, included in that package price. It's a great value for a budget-minded event. As for the percentage per item cost- well, there's no firm hard rule. You'll hear 2-3% of the retail value for a day rate. Now, that means a Mackie SRM450 would rent for $12.50-$15.00 per day, and a Yamaha CL5 would rent for over $800 per day. Neither of those prices are realistic- the CL5, way too high, and the SRM450, way too low. (In the PNW, 450s are $40-$50/each/day, with stand, and CL5s are $425-$495/day, excluding Rios and snake.)

What are your thoughts to my listed items? I hope you don't mind, but I looked at your pricing on your site and used it to semi-line-item thinking about pricing. I keep coming up with something like: [1-day/weeklyish] 1500/2400 for sound. 1200/1600 for lighting, and 500/750 for video&truss.


That rolls into Discounts. There's two schools of thought for client discounts: 1) NEVER DO IT! and 2) Maybe help out deserving groups that you like. Dick Rees was fond of saying "Charge everyone the same, and if you choose to donate something back to the charity, do so after the show." (Paraphrased, of course. And maybe it's Bob Leonard who has said this. I dunno.) I have Community Sponsorship Discounts I will do for organizations that I like & support. On the tax end of things (WARNING: I am neither a tax advisor nor an accountant. This information is not to be construed as tax advice. For specific information on your tax situation, please consult an accountant or tax advisor.), when you charge a client money, that's taxable income. The cash donation you make back reduces that taxable income. There is (as far as I know) NO DIFFERENCE (from a tax liability point for view) between charging money-then-donating-money and just simply not charging the money (reducing the invoice fee). In my case, by charging money then donating, I would actually be on the hook for state B&O taxes on that invoice amount, so it is cheaper and more beneficial for me to reduce the invoice fee. Caveat: Some non-profits, when determining your sponsorship level, will penalize the reduced-invoice by calling it an "In-Kind Donation," and then instead of your $1,000 donation giving you recognition at the $1,000 level, you only get recognition at the $500 level.

What about transitioning 'cheap' clients on a budget into a better experience? Or a minimum gear required to pull things off? Like my situation?

The other discounts you will encounter are cross rental discounts. That's where you rent gear from another company, or they rent from you, and you provide a discount to the other company. The logic being that you can then mark the rental back up to a normal rate, and the client is paying the same where they rent from you or from the other company. This works as long as you're consistently shooting business back and forth-if you're always just giving a discount to the other company and you never rent from them, it's gonna seem like a bad relationship. :) Here in the PNW, cross rental discounts are typically between 25% and 40%. I see some 50% discounts, when it's older gear that doesn't get used much.

Thanks for the cross rental thing, really helped me understand our market when dealing with competition.

ROI: Again, the desired ROI depends on your specific situation. You want gear that pays for itself. Once it's paid for, then that's just pure profit. However, you need to make those gear purchases logically. Ideally, new gear will either expand your business into new events and clients that you were unable to previously handle, or will allow you to increase billing for your current clients. If both of those happen, AWESOME! If neither of those happen... well, you just blew a bunch of money for nothing. :(  If I look at my QuickBooks for this year, right now it says I lost money. But, that includes a pair of motors, 2 Worker WT-150 lifts, Radial mPress Press Box system, half a dozen new cases from Rock Hard Cases, and $58K of Harman lease for new I-Tech HD amps. If I hadn't spent that money, I'd have pulled a tidy profit for the year! This new gear allowed me to do some new shows that I hadn't done before, and the new I-Tech HD amps (replacing a bunch of conventional ones) are improving the reliability of my system. So, it's worth it to me. I have a trio of shows I am looking at for next year- same A1 for all three. First show is a repeat (2nd year for us); the other two would be new to us. Between them, with one in San Jose, one in Reno, and a potential in Pittsburgh, it's $50K of work. After travel/lodging/staffing, I'll put $30K in the bank. However, I have to buy a CL5 to handle them- here's a $30K purchase with Rios, snake, and case. Now my profit is gone. But, I'll have a board, paid for, that can do *other* work for me, and make money there. And then, in 2018, presuming we do them all again, well shit, there's $30K in the bank.

That's basically where I'm at, just at a much smaller scale. Slightly disconcerting to buy on credit based upon future work. But I think I can have everything paid off and then 20k in my pocket by 2018 through just doing the exact same gigs.

Advertising: Depends on your market. I know people who have no advertising budget or expenditures AT ALL and they're tripling their business year over year.

I want to do mostly organic some paid. Hopefully I can get slightly more business, but not too much.

Travel: As Scott mentioned, this is something that can and should be passed to the client. I'll give about the same radius from Seattle or Portland for free- 50-75 miles, but if we're going long distance, out of state, or needing to load in one day and the show's the next, there's a hotel involved. Per diems for food. I'll do mileage rate, plus either book the hotel or at least find out what the approximate charge will be, and that's what I quote the client. Don't forget a truck rental cost! And when you're renting a truck (and check into DOT number if you're going out of state. Depends on your state's rules.), you'll pay a day rate for the truck PLUS mileage PLUS the fuel you're putting in it.

Inventory Management: I don't have one. Other then an Excel spreadsheet listing everything. There's lots of threads on rental management software; I will refer you to those. :) However, COME UP WITH A CABLE LABELING SCHEME NOW. And stick with it. A LOT easier to be consistent from the beginning then it is to change over at some point. And remember, "Buy Once, Cry Once." Get the best quality cables you can afford- they'll last a lot longer. As for the logistics of pulling shows, etc, I work off my invoice, to make sure everything I have listed there gets on the truck. I have pre-packed AC, speakon and XLR workboxes, so I don't have to pick those every time.


Sorry to write a lot. Please lemme know if you have any other specific questions!

-Ray

Again, I appreciate all the thought from everyone.

I hope that my thread can help inspire others in my same or similar predicament and help them make decisions. Going into business for yourself can be scary, but is rewarding too.

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Ray Aberle

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Re: Business Minded Questions
« Reply #18 on: December 01, 2016, 03:47:04 pm »

I'll write more later. But, just looking at your pricing- around here (PNW) typical pricing for corp AV and video screens is $100 per ten inches of screen size. So, a 70" display is $700 (day rate); a 50-55" would be $500 or so. The smaller screens are starting to drop in cost, since they're so easy to purchase, but still... your video pack (pair of 55s, a 40) I would expect to see a day rate of $1,000 to $1,200.

-Ray

On a different note, currently I'm having some difficulties regarding quoting customers.

I quoted something like $1.8k for an all day manned multiple musicians/act festival fundraiser event. Event said that was over budget as they usually pay around or less than $1k. Maybe I was a bit high, not sure. But I can't for the life of me figure out how the other provider in my area does it for so cheap when all his shows are exorbitantly over priced IMO. Perhaps it was a, 'this was one of the first things I did in my area to make money, and now I'm stuck with a cheap gig even though I've grown'.
It's called "being a bottom feeder." Either never wanting to charge enough to really make money, or charging so little that no other legitimate company can touch it. If I was OK making $250 for a day including all gear and my time, well hell, I could work 7 days a week no problem. But, I'd never make a profit doing it, and I would soon die of exhaustion since I'd never be able to bring any labor with me.

Some companies will say, "Hey, hire our mobile stage and we'll include the sound for free!" Others will undercut by $5 or $10 your quote, just to get the show. Sometimes, you'll find politics in play. I bid one show where I was told the city's new attorney wanted them to bid out the event to "make sure they were getting the best deal." I proposed to bring a significantly better sound system than the previous vendor did, but ended up bidding $16 more. They got the gig, "the lowest price." The next year, I sharpened the pencil, cut some things, and came in about $10 under the other quote. Still lost the show because "the other vendor has more experience." So which is it? Price? Or experience? You can't have it both ways.

-Ray
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Nathan Riddle

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Re: Business Minded Questions
« Reply #19 on: December 01, 2016, 04:15:47 pm »

Thanks Ray, you know I really appreciate your time contributing and mentoring me through the interwebs.

Please do, I'm always interested in what people have to say :)

My first reaction is that I can't justify that kind of pricing when a 55" TV is selling for $300 at walmart. Yes I realize I'm providing interconnects and cabling to connect to source, but it just seems too high for a smaller TV screen. LED wall, sure. Projector, maybe.

I'll write more later. But, just looking at your pricing- around here (PNW) typical pricing for corp AV and video screens is $100 per ten inches of screen size. So, a 70" display is $700 (day rate); a 50-55" would be $500 or so. The smaller screens are starting to drop in cost, since they're so easy to purchase, but still... your video pack (pair of 55s, a 40) I would expect to see a day rate of $1,000 to $1,200.

-Ray
It's called "being a bottom feeder." Either never wanting to charge enough to really make money, or charging so little that no other legitimate company can touch it. If I was OK making $250 for a day including all gear and my time, well hell, I could work 7 days a week no problem. But, I'd never make a profit doing it, and I would soon die of exhaustion since I'd never be able to bring any labor with me.

Some companies will say, "Hey, hire our mobile stage and we'll include the sound for free!" Others will undercut by $5 or $10 your quote, just to get the show. Sometimes, you'll find politics in play. I bid one show where I was told the city's new attorney wanted them to bid out the event to "make sure they were getting the best deal." I proposed to bring a significantly better sound system than the previous vendor did, but ended up bidding $16 more. They got the gig, "the lowest price." The next year, I sharpened the pencil, cut some things, and came in about $10 under the other quote. Still lost the show because "the other vendor has more experience." So which is it? Price? Or experience? You can't have it both ways.

-Ray

I don't want to gossip, but I don't understand their business model. It's either overpriced to customers (imo) yet they pay, or silly cheap?  ???

My goal is to be in the middle with everyone else. I don't want to be a bottom feeder or overpriced either. That's my simple goal/struggle currently.

Thankfully I'm not yet into politics like that. I'm still very much in the how much can the market support/can I charge.

That seriously sucks though, to be in the middle of that sort of exchange. Why can't people just be logical?

In your situation I feel they can't say why* they really don't want to hire you and come up with excuses instead. I've had that happen to a buddy of mine a few times for some EDM gigs, just poor communication/social/confidence skills.
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