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Sound Reinforcement - Forums for Live Sound Professionals - Your Displayed Name Must Be Your Real Full Name To Post In The Live Sound Forums => LAB: The Classic Live Audio Board => Topic started by: Dave Guilford on July 10, 2018, 10:21:49 PM
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Hey guys, I was approached by a local venue today. Their current sound man who is been there for 20+ years is retiring and pulling out.
I know what I want to charge them for sound tech work. But I have never leased or rented a system to a venue before And so I’m not sure what appropriate pricing would be.
It’s a local Staples – original local musicians. And appropriate system would probably be something like a pair of SRX 815 and a pair of matching subs. 4 monitors, x32 or similar. Mic pack
I would some of you guys approach this? Do you charge per week? How much?
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Hey guys, I was approached by a local venue today. Their current sound man who is been there for 20+ years is retiring and pulling out.
I know what I want to charge them for sound tech work. But I have never leased or rented a system to a venue before And so I’m not sure what appropriate pricing would be.
It’s a local Staples – original local musicians. And appropriate system would probably be something like a pair of SRX 815 and a pair of matching subs. 4 monitors, x32 or similar. Mic pack
I would some of you guys approach this? Do you charge per week? How much?
What town are you in? In our rust belt market we would calculate the value of the system after 3 years then finance the lost value with 10% annual interest. Probably about 300 a month. Toss them a bone with free maintenance.
Then charge whatever you walk up rate is.
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Does the venue have an appropriate ASCAP/BMI license? It's not really your problem, unless and until the venue gets hit with performance fees it wasn't expecting/doesn't have budgeted, and it shuts down as a venue (leaving you stranded).
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Does the venue have an appropriate ASCAP/BMI license? It's not really your problem, unless and until the venue gets hit with performance fees it wasn't expecting/doesn't have budgeted, and it shuts down as a venue (leaving you stranded).
I sold a system and then got to buy it back for .10 on the dollar at auction. It's how I got my STX rental gear.
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Does the venue have an appropriate ASCAP/BMI license? It's not really your problem, unless and until the venue gets hit with performance fees it wasn't expecting/doesn't have budgeted, and it shuts down as a venue (leaving you stranded).
If it truly is local musicians performing all original music I don't think ASCAP or BMI would have a claim, would they?
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If it truly is local musicians performing all original music I don't think ASCAP or BMI would have a claim, would they?
I will defer to more recent knowledge but "back in the day" it didn't matter; as the BMI rep said "there's a reason it's called a *compulsory* license."
I recall reading little bar agreements in which the bands were made to promise to not perform any songs covered by ASCAP (or BMI, depending on which license the bar didn't have). IIRC, that any particular performer doesn't play any songs covered by the performing rights organization on a given night does not remove the obligation for the bar to obtain *all* the necessary licenses for public performance.
YMMV.
Public performance of copyright material has been discussed before on the PSW forums. An external search engine will probably find most of them and for Dave G's purposes, it's a red herring in the discussion.
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My apologies for introducing a red herring into the discussion. My only concern was that if, unlike Scott's sale, the OP was buying the equipment up front and then leasing it to the venue there is a not-so-obvious finacial risk there.
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Having done a very similar type of venture before, I would say try not to think of it as a lease program. If the venue is NOT going to keep the gear if you decide to quit or they cut you loose, then it is a services only gig. This means that you simply have to both agree to a number that is fair to the both of you.
Now consider the length of the agreement and the number of times per week / month you will be required to rent and operate it. You know you can't get a one off rate, so you have to mitigate between your time and the equipment's value and depreciation. This is where it gets hard to soak up the numbers.
If I walk in with a $10,000 PA system and I expect to get 5 years out of it before replacement, how much do I need to get from it to pay for it, replace it and make a small profit from it within that 5 years? Lets look at some ideas.
1. $10,000 / 5 = $2,000 per year to simply pay it off in 5 years.
2. $2,000 x 2 = $4,000 per year to pay it off and replace it with a new PA in 5 years.
3. 10% of retail is a good profit margin, so 10% of $10,000 = $1,000 for profit on initial investment only. If you want 10% per year that is up to you? You may opt to only retrieve 10% of the total investment at $200 per year. This is where you will bury money if need be.
4. So you should be drawing in $4,200 - $5,000 per year on just the equipment alone. This is equal to $416.00 per month at a $5,000 per year model.
5. What do you expect to make for your time? $100 per night is the low end and $150 per night is probably more realistic and appropriate. If you are there 3 nights a week, you would make $450 a week on average @ $150 per night in labor. This would be $2,220 a month after you average it out, of which $420 of it is simply for the gear.
Given that model, you have to decide based on how long your purposed agreement is for. If they have a short, 2 years and lets see where we are at, then you need to at least be able to pay that system off in 2 years and make your 10% profit margin. Forget about a replacement program at this point. If you can't make the equipment last 2 years, your fighting a losing battle. This means you need $5,000 per year + $1,000 for profit or a total of $6,000 per year to simply make the job pay for itself and take a little profit in. This makes the monthly rental cost $500.00 plus your labor.
As you can see, the long term and even the short term cost on the equipment only has about a $100 difference. This gives you a GREAT margin to play with. If you can collect $500 per month for gear cost, you can pretty much replace the PA every 1.5 years and for the last 1/2 year make $2,000 in profit off it!!!!!
The hard part is factoring the amount of usage vs cost to the venue. If you are only there once a week, the venue is looking at $1,100 a month for 4 shows or roughly $275 per night. This may not fit into their model? This is an absolute steal really, but if they have to pay the band at all, it is really hard. This means you will have to eat some immediate returns on the equipment, but the good news is it will last longer due to less use. If they are doing between 2-3 shows per week on average, I think the $500 per month model on gear will work and is fair. This means you make a reasonable wage for your time and the investment is repaid relatively quickly. I would say that regardless of show frequency, $400 is the lower limit of gear cost per month. At $400 per month on equipment, your ROI would be right around 2 years with no profit on it. The good thing is that after the two year mark, anything still in use is making money. It would take a 5 year contract at $400 per month to buy, replace and give you a 10% ROI profit. I think sticking the monthly gear cost between $450 and $500 is a good target, especially if they have shows more than once a week.
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My tendency would be to try and have the venue buy the PA outright and offer them a service contract.
You will be able to charge a simple fee to run the shows and not have to worry about depreciation and all that tax stuff.
If you have to carry the cost of the hardware, you better build in some real profit. If the PA is basically installed at the venue, then you are essentially financing the purchase amount. If you can use it elsewhere, that's a different thing.
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Having done a very similar type of venture before, I would say try not to think of it as a lease program. If the venue is NOT going to keep the gear if you decide to quit or they cut you loose, then it is a services only gig. This means that you simply have to both agree to a number that is fair to the both of you.
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{big ol' snip}
I think some kind of financial return on hardware should start immediately.
The opportunity cost of tying up ones capital means at the least that capital should pay interest until the costs of acquisition are fully amortized, at which time the actual ROI for a given capital item can be realized. Some business models treat interest as a general business expense rather than as a cost directly tied to an individual purchase but I tend to look at each major acquisition based on total costs regardless of how they're classified later.
My tendency would be to try and have the venue buy the PA outright and offer them a service contract.
You will be able to charge a simple fee to run the shows and not have to worry about depreciation and all that tax stuff.
If you have to carry the cost of the hardware, you better build in some real profit. If the PA is basically installed at the venue, then you are essentially financing the purchase amount. If you can use it elsewhere, that's a different thing.
One of the lessons we've learned after a few decades: serious bar/club operators have a budget for sound & lights & video. They're gonna buy everything they need and spend as little as feasible on maintenance, but ultimately they understand their business of selling booze runs on eyecandy and audio.
Everyone else is a broke mofo trying to do stuff on the cheap, without a supporting business plan, and they want to rent or lease because they don't have cash or real credit available. These are folks that tend to not pay their liquor taxes or rent or fines and get padlocked by the State Dept of Revenue prior to the auction.
There have been at least a dozen threads here at the LAB/Lounge about the various business and operating models in dealing with clubs, most of which boiled down to "if you didn't sell the rig outright to the club, i.e. meaning they owe you money or gear, you must be able to legally prove what is yours to regulatory agencies or a judge, who will decide if you can get your stuff back or if you'll be bidding at the auction..."
We had systems in a couple of places that went belly-up. One time was lucky, a part time employee of ours was driving past and noticed the landlord and a locksmith at the club at 10am. He called us and we were there with a truck and a copy of the rental agreement to show the landlord. We got our stuff. The club owner hadn't paid his bar rent in 3 months...
Another time we got a call from a bar employee. "Come and get your shit before the Dept of Revenue gets here." That wasn't nearly as pleasant but we eventually got all our stuff back.
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Another thing to consider is the times that system is not available and not earning money because it's installed. But it's not really being used because "it's only one acoustic guitar player" or "we just thought we'd play the TV through it" or "DJs don't count, do they?". Nothing pissed me off more than showing up unannounced on a non-show night and finding your system on, cranked up and every fader and knob out of place (pre-digital) because the bartenders friend, "knew what he was doing 'cause he works at Radio Shack."
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One of the lessons we've learned after a few decades: serious bar/club operators have a budget for sound & lights & video. They're gonna buy everything they need and spend as little as feasible on maintenance, but ultimately they understand their business of selling booze runs on eyecandy and audio.
Everyone else is a broke mofo trying to do stuff on the cheap, without a supporting business plan, and they want to rent or lease because they don't have cash or real credit available. These are folks that tend to not pay their liquor taxes or rent or fines and get padlocked by the State Dept of Revenue prior to the auction.
What he said.
Under that model, they are asking you to be their bank. If you're going to tie up that much of your own capital, spend it on gear that will bring you as many customers as possible to your business as a provider.
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I think some kind of financial return on hardware should start immediately.
The opportunity cost of tying up ones capital means at the least that capital should pay interest until the costs of acquisition are fully amortized, at which time the actual ROI for a given capital item can be realized. Some business models treat interest as a general business expense rather than as a cost directly tied to an individual purchase but I tend to look at each major acquisition based on total costs regardless of how they're classified later.
One of the lessons we've learned after a few decades: serious bar/club operators have a budget for sound & lights & video. They're gonna buy everything they need and spend as little as feasible on maintenance, but ultimately they understand their business of selling booze runs on eyecandy and audio.
Everyone else is a broke mofo trying to do stuff on the cheap, without a supporting business plan, and they want to rent or lease because they don't have cash or real credit available. These are folks that tend to not pay their liquor taxes or rent or fines and get padlocked by the State Dept of Revenue prior to the auction.
There have been at least a dozen threads here at the LAB/Lounge about the various business and operating models in dealing with clubs, most of which boiled down to "if you didn't sell the rig outright to the club, i.e. meaning they owe you money or gear, you must be able to legally prove what is yours to regulatory agencies or a judge, who will decide if you can get your stuff back or if you'll be bidding at the auction..."
We had systems in a couple of places that went belly-up. One time was lucky, a part time employee of ours was driving past and noticed the landlord and a locksmith at the club at 10am. He called us and we were there with a truck and a copy of the rental agreement to show the landlord. We got our stuff. The club owner hadn't paid his bar rent in 3 months...
Another time we got a call from a bar employee. "Come and get your shit before the Dept of Revenue gets here." That wasn't nearly as pleasant but we eventually got all our stuff back.
Since Tim brought up the auction thing again let me clarify. We sold 4 systems to a chain franchisee. We made money on the gear, the install, the subs etc. Then we entered into a contract to maintain those systems and staff the shows.
We made it a good three years before they went belly up. Not only did I get the subs back, amps, a really nice commercial BBQ, ladders, UPS's, a cash box, a safe. You get the idea.
It probably was a more than .10 on the dollar BTW. But still was a steal.