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Many radio stations choose to specialize in a specific kind of format, such as music. The revenue model for radio stations depends on making money via advertisements, so it is important to cater your programming to the specific demographic you are trying to appeal to.
Who is this business right for?
Running a radio station is definitely a job for a “people person,” as you will eventually be hiring a wide variety of different personalities to work different shifts and hosts different programs, so it's important to be able to relate to a diversity of people. The job is also good for someone who is a “jack of all trades,” as running a successful radio station involves skills in management, advertising, and programming.
What happens during a typical day at a radio station?
In no particular order, your daily activities will include holding meetings with different individuals and teams, interviewing prospective employees, representing your radio station within the community, and creating and editing blocks of programs while managing the station's budget.
What is the target market?
A radio station doesn't have typical business customers so much as it has listeners. The preferred listeners are those who listen continuously and often to your station. As such, your best clients will be commuters who are on the road a lot and looking for entertainment. In a different sense, advertisers are also your clients, as you want to attract them to your station in order to make more profits.
How does a radio station make money?
While there are a handful of other ways you can eventually make money (ranging from running community events to the syndication of any of your programs that become popular), the main revenue for radio stations comes from advertisements that are broadcast throughout the day and mixed in with the daily programming.
What is the growth potential for a radio station?
There is modest growth potential for radio stations, though these businesses may have to be a bit more streamlined than radio stations you knew growing up. For instance, future projections show stations shifting to having fewer (but better educated and trained) announcers and leaning more on broadcast technicians (something that becomes more important when you factor in non-traditional delivery methods such as online radio).
What are some skills and experiences that will help you build a successful radio station?
Because being a radio station owner and manager means being a jack of all trades, experience in any of its key fields can help you be successful. For instance, experience in advertising will help you craft customer advertisements for clients, while experience in sales can help you find the best clients and help your team deliver the best pitches. Finally, any kind of prior experience with broadcast radio will be helpful as you begin your own station.
What are the costs involved in opening a radio station?
The costs involved with starting a radio station depend greatly on the type of station you want. For instance, you can start an internet radio station for almost nothing by using equipment you already have—the only cost comes from the time and money spent creating programming. You can also create a low-power FM radio station for under $15,000, which includes all of the equipment you need. The problem with both of these approaches is that they are non-commercial, so you won't see a return on your investment aside from getting your material on the air.
Commercial radio stations are much more expensive, starting with the equipment. For instance, the radio transmission systems (including the Digital Capable Analog Transmitter and IBOC transmitter) cost approximately $515,000, and buying a standby generator adds a minimum of $10,000 to this cost. Radio test equipment, including Digital audio test set and laptop, is approximately $18,000. The cost to set up an on-air control room (including all equipment and labor) is appropriately $164,000, and the cost of a production control room (including audio console and editing system) is approximately $105,000. Finally, the cost for a news control room is approximately $12,000. Note that these costs do not include the cost of buying land and building facilities, both of which will vary based on region and facility size. A fuller breakdown of the individual equipment comprising these costs is provided in the links below.
Read our radio station purchasing guide to learn about the materials and equipment you'll need to start a radio station, how much to budget, and where to make purchases.
What are the steps to start a radio station?
Once you're ready to start your radio station, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your radio station is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your radio station keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a radio station?
One good tip to jumpstart your business is to specialize in a niche that is not really provided by other stations in your area, such as offering an alternative music radio station in an area that primarily has country or pop music stations. Another is to look at smaller stations for inspiration—discovering what kinds of music and programs are a hit on college campuses can help you stay abreast of what is trending and possibly be the first to bring it to your area. Finally, hire the best broadcasters that you can afford so your business really hits the ground running.
How to promote & market a radio station
To some degree, a radio station markets itself, as new customers will still discover you by scanning for stations as they drive. For additional marketing, you can barter agreements with other stations to promote each other's programming, and you can create a social media presence as well as a professional website powered by SEO. You can also do traditional advertisements via radio, television, and newspapers, and make sure your debut is covered by local news stations.
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How to keep customers coming back
In addition to the advertising methods described above, one tried and true method of advertising is to have contest giveaways that encourage listeners to tune in at certain times for key contest info. Try to have local guests on your shows that matter to your community, as this will help draw them in and keep their interest. Finally, try to have a relatively diverse array of programming, as this ensures that you have a broader appeal (though the trick is to try to stay within the broad parameters of the niche you have established for yourself).
How and when to build a team
Unlike some business ventures, the need to have programming throughout the early morning and into the late evening necessitates building a team right away. You may decide to grow that team if you are expanding your programming or simply need more sales and support staff.
Read our radio station hiring guide to learn about the different roles a radio station typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a radio station. Learn more about licensing requirements in your state by visiting SBA's reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, check out our informative guide, Sales Tax for Small Businesses.
In order to play music in a business setting, permission must be acquired from the composer or license holder. Typically, it is possible to obtain a “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP or BMI.
How much can you charge customers?
The exact amount you can charge clients depends on the size of your own audience (more people tuning in means you can charge advertisers more), but a typical cost for a sixty second advertisement is an average of $50, with less popular stations charging closer to $20 and more popular ones charging $80 or even more.
What are the ongoing expenses for a radio station?
The exact cost of ongoing expenses depends on the size of your station, your team, and how much original programming you create. One small radio station, however, can easily cost $900,000 or more a year in ongoing expenses. This includes creating programming, the cost of broadcasting, fund-raising, and paying for management and a relatively small staff.
How much profit can a radio station make?
The exact profit of your radio station will obviously depend on factors ranging from audience size to programming cost to the amount of advertisers. However, the most popular local radio stations in the country are able to make over $60 million in ad revenue each year. While your station is not likely to hit those numbers any time soon, this helps represent the potential of revenue via selling advertisement space—the amount you charge will only go up as your number of listeners grows while your operating expenses are relatively fixed, so a station that grows in popularity is a very good investment.
How can you make your business more profitable?
One way to make your business more profitable from the very beginning is to try to buy an existing radio station rather than build one from scratch, as this will be cheaper to start and possible cheaper to maintain. Another tip is to adjust the cost of advertising on your station as it becomes more popular. Finally, try to develop a good working relationship with various businesses so that you can design advertisements for them. This gives you a chance to charge for creating the ad as well as airing it, and it's also a chance to really impress the owner so that they become a repeat client.