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Author Topic: Automate Hire/Production Business  (Read 2674 times)

Lee Wright

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Automate Hire/Production Business
« on: February 21, 2018, 05:51:58 am »

Not sure if this is the right place to post or not.   I run a hire business that does about 70% production & 30% 1 day dry hires.   It's not a bad business but it's quite labour intensive even when I contract out all the work.    For example on a $500 production job I'd clear about $100 gross towards my fixed expenses like electricity insurances etc.   If it was just a matter of taking a phone booking then that would be sweet but I find that there's a lot of emails back & forth to:
-sell the job
-plan logistics, equipment, stage plots, staff etc
-do the billing
It probably works out to easily 2 to 3 hours of planning work per event.     When you consider it costs me $25K a year in fixed expenses that's 250 events to break even & 750 events to make $50K income.   I can tell you being responsible for 750 events is an impossible load.   We probably do about 250 now & that's a lot.   The only reason I make a living is that I do some of the events personally so I get the full fee.      So my question is this:   How can I make the business more of a passive income source.   I know it will never be like shares or mutual funds but what could I do to simplify things so I've got an automated system rather than having to do the work over & over?    One thing I thought of was focusing on multi-day events.   It's the same amount of work to plan a 3 day event as it is a 1 day.   Last year we did a sweet job where an international performer hired our 4 x Bose L1's for 3 weeks.  Easiest $5 grand I've ever made!  Unfortunately that was a strange exception.  No matter how I slash prices we never get the long events.    Doing in-house sound for venues seems to be the domain of the very large suppliers.   We did have a wedding venue where we were their preferred supplier.  That was pretty good as I just had a box in the warehouse ready to go & when they rang & I just had a standard package & a regular contractor but the venue closed down.   Another thought was to have an online shop front where people book in their dry hires.   That's OK but I only make about $40 on a pair of party speakers.    Would love to hear anyone's ideas on automating my business more.
Thanks.







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David Simpson

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Re: Automate Hire/Production Business
« Reply #1 on: February 21, 2018, 09:29:23 am »

Based on the information you provided, it appears that you have more of a cost problem when delivering the service, or an overhead problem. 250 events to break even sounds like something in the business plan is out of balance. I do not think automation is where you are going to find your cost savings. It is still a business about people and relationships. If you rely only on the info a client provides, you will likely not be adequately prepared. You will still need to do the calls and leg work to make it all come together.

~Dave
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scottstephens

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Re: Automate Hire/Production Business
« Reply #2 on: February 21, 2018, 09:36:20 am »

Lee,

     I've been doing this for about 25 years now and I can tell you that "slashing prices" is NOT ever going to work. You are not selling clothing. There isn't enough volume to make up for that very poor business model.  Also, I only know of a couple of people that became "wealthy" by providing sound and production services and that was because the groups they were providing sound for became famous.
    I'm not sure exactly what it is you want; if your goal is to get rich and not really work, try politics or community organizing. If you want to do even less work, try gambling.  I'm not trying to be a smart ass, but you have to put in the hours, days, weeks, months and years to build up a loyal client base and even then they might sometimes look for the lowest bidder. You have to concentrate on service first, good help second, good gear third and then maybe a few other things and then, and only then, will profits follow.
   As far as automation, I think there are several decent programs for rental inventory and contact information, but you still have to work the contacts.  Maybe other folks will chime in here and give both of us more ideas. Good Luck.


Scott
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Jeff Lelko

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Re: Automate Hire/Production Business
« Reply #3 on: February 21, 2018, 05:45:12 pm »

How can I make the business more of a passive income source.

That depends on what you want out of it.  If you're just looking for a monthly cut of the profit, I'd wager to say you're in the wrong business if you want to make something substantial.  Or...hire a full-time or part-time (depending on the amount of business you do) office/shop manager to handle your day-to-day happenings, which would of course eat into your profit but also reduce your effort.  I don't depend on my business as my primary source of income, so thus I enjoy getting out and actually doing the work - that's why I'm in the business.  I also have a number of assistants I can hire as needed should the job or my schedule require it. 

I agree with David though - if you seriously need to play 250 jobs each year just to break even then something is wrong.  I only play a fraction of that each year but still make decent profit.  Every job is profit for me.  If it won't make me money I don't take it!  Naturally shop work and equipment purchases need to be factored in, but that's what your business plan is for.  You should know how much you can spend each year on inventory and then phase your purchases accordingly.  Hope this helps!
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Lee Wright

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Re: Automate Hire/Production Business
« Reply #4 on: February 21, 2018, 07:26:04 pm »

Based on the information you provided, it appears that you have more of a cost problem when delivering the service, or an overhead problem. 250 events to break even sounds like something in the business plan is out of balance. I do not think automation is where you are going to find your cost savings. It is still a business about people and relationships. If you rely only on the info a client provides, you will likely not be adequately prepared. You will still need to do the calls and leg work to make it all come together.

~Dave

Hi David,

Thanks for your insight.   You're right about not relying on what the client says.  You do have to really probe to find out what's really required.   As for cost structure.    It's basically 25% commission to me for getting the job & project managing, 50% to the contractor that does the work & 25% to the provider of the equipment.   For example a typical job might be to deliver & setup a pair of speakers, wireless mic & mixer for a corporate event.   I'd charge $440 inc 10% sales tax so $400 net.  I get $100, the contractor gets $200 & the equipment provider gets $100.    It's probably about $4K worth of gear so I'm paying 2.5% of cost - that seems pretty good.  I'm not sure I could do much better owning the gear myself.   As for the contractor, by the time they pick up, transport, setup & return it's probably about 4-5hrs work so $200 seems OK.   The contractor fee is not exactly a fixed percentage so it improves as the job gets bigger.  For example for a $1,000 full-day job I'd probably pay them $300 for the day.   As for fixed costs.  I operate from home & charge a percentage of rent as home office/storage.   It's probably closer to $20K per year rather than $25K.     So I'm not sure if I can do much better with my cost or overhead.   Oh I should mention I'm in Australia where labour costs are pretty high.

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Lee Wright

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Re: Automate Hire/Production Business
« Reply #5 on: February 21, 2018, 07:38:57 pm »

That depends on what you want out of it.  If you're just looking for a monthly cut of the profit, I'd wager to say you're in the wrong business if you want to make something substantial.  Or...hire a full-time or part-time (depending on the amount of business you do) office/shop manager to handle your day-to-day happenings, which would of course eat into your profit but also reduce your effort.  I don't depend on my business as my primary source of income, so thus I enjoy getting out and actually doing the work - that's why I'm in the business.  I also have a number of assistants I can hire as needed should the job or my schedule require it. 

I agree with David though - if you seriously need to play 250 jobs each year just to break even then something is wrong.  I only play a fraction of that each year but still make decent profit.  Every job is profit for me.  If it won't make me money I don't take it!  Naturally shop work and equipment purchases need to be factored in, but that's what your business plan is for.  You should know how much you can spend each year on inventory and then phase your purchases accordingly.  Hope this helps!

Thanks Jeff.   I should clarify.   The 250 jobs to breakeven would only be if I contracted out everything but since I do probably 1/3 of the jobs I get the full fee & it's usually my gear too.  A true scalable "business" as opposed to a contractor would be one that you'd contract it all out.    I must admit when I do a job myself it's not bad money because you're getting all 3 income streams i.e the sale, the doing of the work & the equipment hire.   $400 for a half days work isn't bad.   As you alude to, maybe it's the type of business where when you split it 3 ways it's too tight to make anything.
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Lee Wright

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Re: Automate Hire/Production Business
« Reply #6 on: February 21, 2018, 07:47:00 pm »

Lee,

     I've been doing this for about 25 years now and I can tell you that "slashing prices" is NOT ever going to work. You are not selling clothing. There isn't enough volume to make up for that very poor business model.  Also, I only know of a couple of people that became "wealthy" by providing sound and production services and that was because the groups they were providing sound for became famous.
    I'm not sure exactly what it is you want; if your goal is to get rich and not really work, try politics or community organizing. If you want to do even less work, try gambling.  I'm not trying to be a smart ass, but you have to put in the hours, days, weeks, months and years to build up a loyal client base and even then they might sometimes look for the lowest bidder. You have to concentrate on service first, good help second, good gear third and then maybe a few other things and then, and only then, will profits follow.
   As far as automation, I think there are several decent programs for rental inventory and contact information, but you still have to work the contacts.  Maybe other folks will chime in here and give both of us more ideas. Good Luck.

Scott

Thanks Scott.   No the goal is not to get rich but to have a business where it could pay a manager to run it then still make $30K profit on top.   Then it becomes a saleable business. Until then it's just a job - not a bad job but nobody wants to buy just a job.    I agree about software automation.   I couldn't find anything on the market I like so I wrote a system in MS Access which works pretty well for managing bookings.   Maybe there's better software on the market now.   I tried Current RMS but it seemed very clumsy at the time.     
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Jeff Lelko

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Re: Automate Hire/Production Business
« Reply #7 on: February 21, 2018, 08:18:06 pm »

As you alude to, maybe it's the type of business where when you split it 3 ways it's too tight to make anything.

I think you hit the nail on the head there. 

A lot of it comes down to how large a pot of money you're starting with, but at least in my area of the United States $400/job isn't very much, especially with the business model you're using.  I happen to own both my company and the inventory to play 85% of my gigs, renting in only for the very large or very unique.  In that case, the $400 small corporate gig would be 100% "profit" to me given that I'd play the job myself.  I quote profit because my inventory is still depreciating, consumables still cost money, etc., but I'm doing much better than pocketing only 25% of that money...more like 90-95% after factoring in depreciation and consumables.  Still not enough to get rich on but also not bad for a day's work. 

Have you considered purchasing a rig that'll cover 80-85% of your work?  Even with the figures you quote you'd pay for that system in less than a year and everything after that is a substantial improvement to your money in pocket.  The rig will also last much longer than a year if done right.  In fact the majority of my loudspeakers are pushing 10 years old right now - made their money back in year one and have been profiting ever since!  Hope this helps!
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Ray Aberle

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Re: Automate Hire/Production Business
« Reply #8 on: February 22, 2018, 10:11:51 am »

Lee,

Sounds like you need to revisit your business plan. Or write one, if you never did.

Here in the PNW, a "small corporate gig" like the one you mention, with a pair of powered speakers, small mixer (analog or digital) and 1 to 2 channels of wireless, with a tech to deliver, setup, run, and strike the show, is going to run the client between $500 and $700+tax, depending on the length of the work day (and so if the tech is hourly+delivery charge, or is on a day rate).

The equipment COST of that setup depends on the gear deployed- speakers could be $1000 for the pair, for a pair of basic Mackies, up to $2500 for the pair, if a higher end powered box like the JBL SRX812P. Mixer could be anywhere from $300 (basic analog) to $1500 (LS9-16, x32). Wireless (for me) would be either Senny ew100 G3 for $600/channel or QLX-D for $1,000/channel. That means you have a spread of $1,900 for a basic mix/Senny RF 1 channel to $6,000 for SRX812P with digital mixer and 2CH QLX-D. Probably $500 in AC, XLR cables, rat tails, maybe a DI box for backup.

You're right that recouping 2.5% of your purchase price per rental is a good metric. However, that's not always the case. Powered "speakers on sticks" - SRM450s, DSR112s, etc, can get $40-$60/speaker/day, which for the 450 is over 10% of your dealer purchase price. Wireless- that $1,000 QLX-D is going out for minimum $75/channel/day, which is 7.5%. Corporate (good corp) can get $100/channel. That basic analog mixer, that's only $300-$400? You can line item that for $50 to $75! "Panel Breakout Rooms" are a gold mine because of this. You're throwing in a mixer, 2-3 wireless combo (lav & handheld options) packs, pair of speakers, a 3-5k projector and a tripod screen in there- maybe $6k of gear- and charging upwards of $700 to a grand per day.

So, if you don't have the gear (like Jeff mentioned) to cover 80-85% of your needs (and relying on subrentals to make up the other ones) then you should step back and look at that. With this gear pack, even if you Go Big and get the $6,000 option, 60 rentals (at that $500/day setup, which is still pretty low) will pay for it. Then, you're putting $200 in your pocket for each of those shows thereafter, not $100. If you can finance that purchase with a zero interest option (some big box retailers like Guitar Center, Sam Ash, Musician's Friend, Sweetwater) will have Same-As-Cash payment options so you can pay for your new gear over 6 or 12 months, with no interest as long as you pay it off by the due date. So, now you're able to pay for it *as* you're making the rental income!

Now, this is all predicated on your "contractor" being actually a technician that's taking your gear (or rental gear) to a show and working it under your company name. (That may legally make them an *employee* and not a *contractor* but your labor laws in Australia might be different than they are here in the United States, so I won't delve into that too deeply... but you probably want to ensure that you are following the law and correctly defining those who work for you. Unfortunately, here in the US, being an "employee" as opposed to a contractor means more paperwork on the employer side, but that's the price we pay for living in the US. :))

The contractor/employee's pay *should* be loosely based on what the client is paying you. So, if the client is paying for a standard delivery/setup with 3hours of tech time, the tech shouldn't be making a full day rate. Conversely, if you are charging the client a $350 tech day rate, then the tech shouldn't be getting paid $17/hour for what ends up being maybe 8 hours of work. Every company is different in regards to rates of compensation, but I am a firm believer in paying well, and paying promptly. [It is unusual for my techs to leave a show and NOT have a check in their pocket that they can cash when they get home.] I also believe that labor shouldn't be something I make a profit on. I need to cover payroll, and the associated employment taxes/fees, but beyond that, I like to make sure that just as much of that money as possible goes to my team.

Re pricing in general: it was hit on the head that slashing prices won't fix your situation. In fact, that'll typically make it worse, because now you have to book MORE events to make the same amount of money. On the corporate side, clients may look at that and think that your prices are TOO low. [Often times, Price = Quality in their minds.] A 10% INCREASE in your rates may attract higher end clients who are willing to pay that extra to ensure their event goes off without a hitch. At the same time, you might find that some of the lowest-end events, that want to bicker about every detail and every line item on your quote "to save money" might go elsewhere. That probably produces a larger drag on your time than anything else.

There's quite a few threads on here with other pricing, employee versus contractor, and general business minded questions that would be well worth the read.

-Ray
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Tim McCulloch

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Re: Automate Hire/Production Business
« Reply #9 on: February 22, 2018, 12:52:49 pm »

Lee, when you tech the show yourself you are not "making full profit".  What you are doing is NOT paying yourself as the technician and instead diverting the money to your "equity" as ROI, which it is not.

You need to consider the value of all parts of delivering your services - whether technician, manager, repairman; the value/cost of the funds you have invested in gear, transport & warehousing, and any training; the cost of permits, licenses, insurance and other indemnifications; depreciation on your gear; etc.  While I know you've done this, it's wrong because you're not bringing in the needed revenue.

I've a feeling your business plan is at best incomplete.  Do a new one.  Seriously.

As Ray points out, cutting your fee will not make you more money - at best it makes for more expenses (labor, depreciation, insurance) while reducing the per-event revenue.  Raise your rates at least 20%.  You're not running a consumer retail business so lowering your prices does not correlate to commensurate increase in sales volume and, as Ray also mentions, it sabotages your image to the clients most able to pay MORE, not those wishing to pay you less and less.
« Last Edit: February 22, 2018, 12:55:53 pm by Tim McCulloch »
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eric lenasbunt

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Re: Automate Hire/Production Business
« Reply #10 on: February 23, 2018, 12:09:50 am »

If you are only making 20% per gig on average you need to be doing higher price tag events. Iíll take 20% of a $10k gig all day. 20% of you $500 gigs, no thanks.

I would say either purchase your most common gear setups or get into higher end work.

If you want to ďautomate and create passive incomeĒ then service businesses donít tend to work great.
Read Tim Farrissís 4 hour work week, itís all about how to do that.

If you want to stay in this business Iíd recommend another book, the Pumpkin Plan by Mike Michaelowicz.
Itís about becoming more profitable by eliminating time and resource draining customers and adding better ones.

I donít think you have an automation problem, you have a profitability problem


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Nathan Riddle

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Re: Automate Hire/Production Business
« Reply #11 on: February 23, 2018, 12:14:22 pm »

That all said. & I agree.

I haven't used it, but look into LASSO for automation.
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Roland Clarke

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Re: Automate Hire/Production Business
« Reply #12 on: February 23, 2018, 02:01:35 pm »

Thereís a great movie called the founder about a Ray Kronk the founder of McDonalds (well as we know it).  He was struggling until someone explained that he had his business model wrong.

You are making the same mistake.  If you want to run a business as you describe it, small regional stuff isnít going to do it for you, itís far too competitive and the margins are small.  However, even without knowing the market you are in, the prices you are talking about are not feasible.  Your example of a 400 dollar job with three people involved is pointless.  In the U.K. a couple of speakers on poles will cost you £80 + vat (20% in the U.K.) if you pick them up.  Thatís about 160 dollars.  Companies are paying 200 - 360 dollars for engineers.  I would never supply an operator at my cost.  Your 400 dollar job should be providing you with between 25-50% all day long.  If it isnít, look at what you are spending out on and work out what you need to be doing to change that.
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