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Author Topic: From Hobby to Business  (Read 2519 times)

Tim McCulloch

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Re: From Hobby to Business
« Reply #10 on: January 30, 2018, 03:01:59 pm »

My title to this thread would be "From Money Pit to Semi-cost Recovering Hobby", or the reverse, take your pick LOL. Echoing Scott's comments, if you are a one man show and want to stay that way, you are going to want to chase your most lucrative market with guaranteed dates that pay the most, and you will lose potential one-offs as well as potential long term clients by having to turn down gigs due to conflicts with already-booked gigs in your calendar. Of the operators around my area, only one has multiple rigs, but he has been at it quite a while and sometimes covers 3 shows at once in a day...and it's still a "part time" business. It is a hell of a lot of driving around, pre-staging systems, collecting more than one system at the end of the night. etc. although he does have some trusted help who can sometimes take care of things. And at some point you will need to turn down those $200 or $300 bar gigs because they don't pay the nut if you are properly equipped and insured with crews that are worth a decent payday.

Chris-

This ^^^^^^^^^^^^ is the crux of the biscuit ;) .  Getting locked into the cycle Rick describes sucks for several reasons:  a) if you took on debt and rely on the gigs to make the payments there is huge pressure to take every gig offered in order to pay the tab; b) because the only way to take on a new venture is to "fire" your existing and loyal client; c) because your fee is probably tied to your start up expenditures, significant repairs or upgrades come out of your pocket as you're unlikely to raise your prices without offending that existing and loyal client - you can't grow your business from operations.

We can't send out an employee and a system for that price, even if we mostly give away the PA.  Employee earnings, employer payroll taxes, unemployment ins contribution, workman's comp and general liability insurance, shop & warehouse overhead, transportation costs... all mean that $200 gigs simply don't exist.

Finally, don't conflate your duties and wages as manager with your duties and wages as the guy at the gig, and above all don't consider your wages to be equity return on your investment - If you're not making money beyond wages, you're at the point where you own your job, but it's not earning a return on the money you spent on hardware, transportation, training & education, etc.

This gets back to "show me your business plan and pro-forma cash flow"....

Have fun, good luck.

Tim Mc
« Last Edit: January 30, 2018, 03:04:21 pm by Tim McCulloch »
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Roland Clarke

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Re: From Hobby to Business
« Reply #11 on: January 30, 2018, 09:51:08 pm »

Because you are in the states, itís not so easy for me to reckon, but Iíll have a stab.  I guess to make a reasonable amount there it would be around £50,000 a year, you wonít get rich but you might be able to survive.  You need insurance, investment, repairs, replacement, storage, occasional help, fuel, a truck or van, advertising, etc.  Iíll be kind and give it that you might be able to work from your own premises, perhaps you have a large garage, maybe a small barn, so take at the minimum another 50,000.  Thatís 100,000 a year turnover or more, drop below that and you could lose anything and everything from your house to your family.  2,000 a week every week, take 2 weeks vacation you need to up that, a few quiet weeks after Christmas when no one is doing that much.  A good week now needs to be 5,000 as a bad one will be one 400 dollar gig.  Most work is weekends, Mondayís and Tuesdays are slow, bars canít sell as much booze those days because people still have to work the rest of the week.

If you can average 3 or more gigs a week it may be viable, less than that you will start working for whatever someone will pay you as you will be looking to cover your bills.

I would carry on running part time, until your sound gig pays more than a decent wage, regularly then decide if you want to make the jump.  At the moment Iím sure you really enjoy it and you make some cash, if you go for it, keep in mind a contingency plan, just in case it doesnít work out itís a tough game these days.  Good luck!
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Steve Crump

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Re: From Hobby to Business
« Reply #12 on: January 31, 2018, 12:55:39 pm »



Does it make sense to start a business? If so then as a sole proprietor, LLC? What are the advantages and disadvantages?

I would appreciate any advice. Thanks in advance.

Chris K.
[/quote]



These are really questions for your accountant and an attorney. If you really are going to work for yourself these are going to be important relationships to have.

As far as the rest, that is really up to you. I have been working for myself most of my working life and I couldn't imagine having normal employment now. Of course, I probably wouldn't be fit for that regiment.

There is a lot of stress, but also a lot of pride in working for yourself. The main thing is having a solid understanding of your cost to be in business and an understanding of what your personal income needs are and what your short term income "realistic wants" are and what it will take to net those dollars.

Another item to consider and I have seen this go both ways because people are wired differently.
Some people can take something they love and make a job out of it and think it is the greatest thing they have ever done.
Other people take something they love and make it into a job and end up hating the very activity they used to love.

One of the biggest issues is hiring and keeping good people. Having an understanding that people are never going to be as perfect as you want them to be, they are human.

To take words from Kevin Smith, find people to surround yourself with who are the "why not" people, not that "why" people.

Starting to go off point, but I will say when it is a hobby it is so much easier to say no or to take a day off.

It is different things for different people, but once I started doing more and more sound reinforcement I realized that I wasn't enjoying it as much and I also realized I didn't want to do sound for bands with musical styling that I really don't care for
.
So, that end of my business definitely stays at a hobby level.
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Chris Kantner

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Re: From Hobby to Business
« Reply #13 on: January 31, 2018, 03:46:54 pm »

OP here

Wow you all gave me a bunch to think about. Just to clear the air:

-I don't want to make a million dollars doing sound,
-I don't want to quit my day job,
-I don't have a business plan other than I want to stay a one man operation, maybe with a helper every now and then that would work for free beer,
-I don't want to advertise my services,
-I just want to provide sound for my circle of friends and maybe a few select clients

I guess this is really my agenda below...well said Rick:

My title to this thread would be "From Money Pit to Semi-cost Recovering Hobby", or the reverse, take your pick LOL.

I do a handful of sound gigs a couple times a month and I am rehearsing with two bands and we are starting to think about gigging locally.  The "should I start a business" idea is to sort of legitimize my hobby, taking to the next level for protection of my gear and for general liability (insurance), maybe some tax advantages (depreciation, expenses), and reporting some income to Uncle Sam so they don't think I'm cheating him.

I have accumulated enough gear for 2 rigs in a bar setting or for a small outdoor setup, and my personal instruments collection(guitar/keys/basses/amps) is also building. I have a storage space/rehearsal studio that I am paying rent on. I am looking to maybe buying or renting a van or trailer in the future instead of loading up my family SUV. A business to encompass the "entertainment" part of my lifestyle.

That's it in a nutshell. I guess I have to talk with my CPA on this. Thanks all for the advice!

Chris K.
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brian maddox

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Re: From Hobby to Business
« Reply #14 on: January 31, 2018, 04:30:58 pm »

You received a wealth of fantastic advice, and you appear to have heard and heeded it.  So i think you'll be just fine.

I would only add this.  Doing sound as a "hobby" is basically like a Gateway Drug.  It's easy to think that if a 'little bit is a little bit of fun', then 'a Lot of it will be a LOT of fun'.  :)

Good Luck!
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Scott Holtzman

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Re: From Hobby to Business
« Reply #15 on: January 31, 2018, 04:32:46 pm »

OP here

Wow you all gave me a bunch to think about. Just to clear the air:

-I don't want to make a million dollars doing sound,
-I don't want to quit my day job,
-I don't have a business plan other than I want to stay a one man operation, maybe with a helper every now and then that would work for free beer,
-I don't want to advertise my services,
-I just want to provide sound for my circle of friends and maybe a few select clients

I guess this is really my agenda below...well said Rick:

I do a handful of sound gigs a couple times a month and I am rehearsing with two bands and we are starting to think about gigging locally.  The "should I start a business" idea is to sort of legitimize my hobby, taking to the next level for protection of my gear and for general liability (insurance), maybe some tax advantages (depreciation, expenses), and reporting some income to Uncle Sam so they don't think I'm cheating him.

I have accumulated enough gear for 2 rigs in a bar setting or for a small outdoor setup, and my personal instruments collection(guitar/keys/basses/amps) is also building. I have a storage space/rehearsal studio that I am paying rent on. I am looking to maybe buying or renting a van or trailer in the future instead of loading up my family SUV. A business to encompass the "entertainment" part of my lifestyle.

That's it in a nutshell. I guess I have to talk with my CPA on this. Thanks all for the advice!

Chris K.

I would make sure you have insurance, talk to your lawyer about the structure but an LLC with a Sub S election would probably work out for you.

If you find that guy that will work for beer and is reliable and sober enough to treat your gear right see if he will work for me!

Seriously, the big issue is going to be when you have two opportunities at once.  Your regular acts are going to want you all the time and not be happy otherwise.  When you actually have to pay someone to do the gig you find out quick how much money you are giving away. 

That van is going to break, the gear is going to need to be replaced.  You can ignore these realities and continue subsidizing the business in a manner that is emotionally acceptable to you but it doesn't change reality.  BTW I didn't come to the epiphany by myself, it was this group of people and my wife asking me how long we were going to support a certain act she didn't like that kicked me hard.

I still do a few bands, people I like that treat us right.  Our profitable business is much more mundane and we are headed into another election cycle! 

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Scott AKA "Skyking" Holtzman

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Jeff Lelko

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Re: From Hobby to Business
« Reply #16 on: January 31, 2018, 06:53:02 pm »

Hi Chris, here are two more things to add to the list of considerations:

Volunteer labor (or work-for-beer labor) - if youíre a hobbyist this is almost certainly fine.  If youíre a business however, the laws get tricky.  Aside from the usual labor laws you also have to deal with Workerís Comp situations.  This will vary by business but in my case my insurance/workerís comp doesnít apply to non-compensated employees.  In other words, I canít accept volunteer labor unless Iím personally willing to take responsibility for the outcome/consequences of their work.  Disclaimer - Iím not a lawyer and my company is an LLC.  That is how Iíve been advised for my situation but your situation may be different.

My second point picks up on what Scott is saying about your clientele.  Bars and bands are one thing, but if/when you move on to the corporate/municipal/political world you almost have to be a business.  The need for insurance at that point is obvious, but when youíre dealing with the budgets and reputations at risk with some of these events it can be a tough sell to basically say you do this as a hobby, even if you still have a day job like many of us do.  A handful of clients may also have difficulty writing a large check to an individual instead of a business, and likewise your bank may not like you using your personal account for business transactions. 

Lots to think about.  My thought would be if youíre just going to stay at the bar/band level to just purchase an insurance policy as a mobile entertainer and go from there.  Once you formally establish a business you need to deal with a lot more legal aspects which may be more involved/expensive than you anticipate.  BUT, these are all things to discuss with your lawyer and CPA.  Good luck! 
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Scott Holtzman

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Re: From Hobby to Business
« Reply #17 on: January 31, 2018, 07:19:55 pm »

Hi Chris, here are two more things to add to the list of considerations:

Volunteer labor (or work-for-beer labor) - if youíre a hobbyist this is almost certainly fine.  If youíre a business however, the laws get tricky.  Aside from the usual labor laws you also have to deal with Workerís Comp situations.  This will vary by business but in my case my insurance/workerís comp doesnít apply to non-compensated employees.  In other words, I canít accept volunteer labor unless Iím personally willing to take responsibility for the outcome/consequences of their work.  Disclaimer - Iím not a lawyer and my company is an LLC.  That is how Iíve been advised for my situation but your situation may be different.

My second point picks up on what Scott is saying about your clientele.  Bars and bands are one thing, but if/when you move on to the corporate/municipal/political world you almost have to be a business.  The need for insurance at that point is obvious, but when youíre dealing with the budgets and reputations at risk with some of these events it can be a tough sell to basically say you do this as a hobby, even if you still have a day job like many of us do.  A handful of clients may also have difficulty writing a large check to an individual instead of a business, and likewise your bank may not like you using your personal account for business transactions. 

Lots to think about.  My thought would be if youíre just going to stay at the bar/band level to just purchase an insurance policy as a mobile entertainer and go from there.  Once you formally establish a business you need to deal with a lot more legal aspects which may be more involved/expensive than you anticipate.  BUT, these are all things to discuss with your lawyer and CPA.  Good luck!

I should also add that I still have my day job.  I used to own a telecom business and I sold that last year with the intent to do the audio full time.  However benefits + manager pay is hard to walk away from and my "day" employer said I am welcome to stay as long as I wish. 

I am not a young guy (54) so every year worked debt free is very impactful on my retirement situation.  I am sharing this because everyone has a different situation.

I have a partner in the audio business and we also have another audio company as a strategic partner.  In addition we have relationships for staging, lighting and power.  This gives us tremendous flexibility to take on larger work with minimal additional overhead. 

In addition to my partner we have one other full time employee.  He does everything from advancing, scheduling, warehouse work and crews gigs.  He is guaranteed 35 hours but during season he often gets 80. 

Managing all of this and providing working capital takes quite a bit of my time.  I really enjoy it, I get to stay close to production world and work gigs on my terms. 

Again, good luck.
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Scott AKA "Skyking" Holtzman

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Steve Crump

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Re: From Hobby to Business
« Reply #18 on: January 31, 2018, 08:11:35 pm »

Chris,

Jeff's post made me think about another consideration, labor and injures. Being in construction and with the fact that my partner in the venue we operate is our state's longest running county attorney and has spend a good bit of time litigating, (meaning getting legal advice is easy for me when needed). Disclaimer, I am not an attorney and this is not legal advice. I would bet, even if you are a hobbyist that regardless of whether you compensate someone with beer or not, but you get them to help you and say that person is up on a ladder adjusting lighting and falls and seriously injures him or herself (or gets injured in another way) a lawyer will say that you are operating a business (you received payment) and hired this person to work for you. So, get liability insurance regardless, and if you are going to use help, get workers comp, or just get liability and work alone.....
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Re: From Hobby to Business
¬ę Reply #18 on: January 31, 2018, 08:11:35 pm ¬Ľ


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