You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your recording studio. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a recording studio?
E-Home Recording Studio has a free guide to starting a home studio. Below is a list of the basic equipment needed to start a recording studio business with a home studio (budget is less than $1,000):
- DAW/Audio Interface Combo
- Connectors and Cables
- Studio Monitors
- Microphone Stand
- Pop Filter
Below is a list of the essential equipment needed to start a professional recording studio business with a commercial studio (budget $25,000 to $50,000):
- DAW/Audio Interface Combos
- Connectors and Cables
- Cable Snakes
- Patch Board
- Studio Monitors x 6
- Amplifiers x 4
- Crossovers x 4
- Speakers x 8
- Headphones x 10
- Microphone Stands x 15
- Microphones x 15
- Pop Filters x 5
- Mobile Sound-Dampening Panels
- Digital Mixing Board
What are the ongoing expenses for a recording studio?
Staff expenses and equipment payments typically use about half the revenues. Rent is usually 20% of the gross revenues. This leaves about 30% of the gross revenues as profits before taxes. In this example, the profits would be $48,780 per year.
Online, there is a real example of income and expenses for a six-figure home recording studio showing slightly smaller numbers for its operations during 2014.
Typical day-to-day expenses include electricity cost, rent, overhead, and staff costs. Running lots of equipment and air-conditioning represents a major electrical expense. Marketing expenses are ongoing, and include paying to go out to clubs, attending concerts, and music festivals to meet musicians. To find new business, it is important to have staff post ads on Craigslist, review freelance job postings, and to contact advertising agencies and production companies to find work. Be sure to have enough property and casualty insurance to cover equipment and damage to facilities in case of a total loss.
For security and protection of the valuable recordings, pay ISPs to store at least two real-time, backup copies of all work and work in progress, at off-site, fireproof facilities in different geographical locations. Read this article for details about maintaining secure backup copies of the work done at the recording studio.
Who is the target market?
For music recording, the clients are musicians. For animation voice-overs, the clients are television and film production houses. For translation dubs, the client is any commercial enterprise with videos online that wants to expand marketing efforts to include foreign languages. This is an excellent niche for a freelance worker with a home recording studio because jobs are readily available and posted on freelance systems online.
How does a recording studio make money?
Clients pay standard rates for studio use, charged by the hour and sometimes for the equipment used during each recording session. Additional hourly charges cover support technicians, which consist of at least one qualified audio engineer with expert knowledge of how to operate the equipment. Session players and background singers are usually available for an additional hourly rate per person. Discount rates exist for extended rental periods.
Products created in the studio sell online at competitive prices. iTunes downloads of songs retail for an average of $0.99 per song download, with about $0.70 commission paid for each sale, if the songs go on iTunes through a qualified digital distribution company such as Tunecore. Tunecore charges fees for its services. There is a one-time administration fee for the music publishing and a set annual distribution fee for each song or album. Music CDs sell through websites, eCommerce systems like Shopify, and on Amazon. The sell for an average price of $8 to $10 plus S&H. Here is a beginner’s guide for selling on Amazon. Profits for selling music CDs online are $2.50 to $4.50 each after deducting fulfillment costs. Downloads sell more easily than physical CDs.
How much can you charge customers?
- Hourly rates for a decent professional recording studio start around $20 per hour with discounts for booking and prepaying blocks of time. Discounted monthly rates to reserve an entire studio are usually also offered.
- If the recording studio books someone to work on a project, the recording studio takes a fee that is a portion of the hourly booking rate charged for an individual. This fee charged by the recording studio is about 10% to 20% of the hourly rate. This deduction from the hourly rate goes to the recording studio and the balance goes to the individuals.
- For example, if a session musician is booked at a $15 hourly rate by the recording studio, the musician gets $12 per hour from the $15 available, and the recording studio gets a 20% commission or $3 per hour for that musician’s work.
- If a recording studio books a top music producer, the recording studio gets a booking fee of 10% of the amount the producer charges. For example, if the producer’s fee for the project is $100,000 and the recording studio found the job for them, the recording studio gets a 10% ($10,000) commission from that producer’s fee.
- The booking rate for a professional audio engineer starts at $15 and goes up to $45 per hour. The booking rate for session musicians and background singers is about $15 per hour. Booking rates for talented music producers start at $50 and go up to $150 per hour. Top producers, who are hit-makers, command hundreds of thousands of dollars.
How much profit can a recording studio make?
Successful studios operate at 50% or greater booking of paid studio time. This means at least 12 hours each day and 94 hours per week, with the average “all-in” studio revenues of $37 per hour. This generates $13,505 in gross revenues each month or $162,060 per year.
How can you make your business more profitable?
The key to success with a recording studio is to keep overhead low and earn revenues from multiple sources. Revenues may come from doing recording work and projects for others, creating products that sell, and teaching others how to use the equipment.
A sideline business for a recording studio is to provide sound reinforcement rental systems, such as amps, speakers, microphones with stands, and a mixing board for live performances. Offering both live and in-studio services increases contact with potential clients, which helps to grow a successful recording studio business.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your recording studio is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: 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.
STEP 6: 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.
State & Local Business Licensing Requirements
State permits and licenses may be needed to run a recording studio. 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, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
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.
Know your copyright laws. Here is an overview of what to be aware of so that you avoid copyright infringement and potential lawsuits.
Certificate of Occupancy
Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to your business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build your own space:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your recording studio will be in compliance and able to obtain a CO.
STEP 7: 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.
STEP 8: 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.
How to promote & market a recording studio
This is a “people” business, so the best marketing results will come from having lots of contact with potential clients in person, asking for their help in spreading the word about your recording studio, and using online social media as well as free postings on Craigslist. Traditional paid advertising is not generally effective for this type of business. Donating services to charitable events and participating in local community activities are two other great options for attract new clients.
Competition in the music recording business is intense, so reputation is everything. Many recording studios become successful by becoming the focal point of an emerging music genre. Use of a recording studio by successful musicians attracts others.
Promotional efforts may include discovering hot new talent, and then producing and recording them. If they become successful, this is a great way to promote a recording studio.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
STEP 9: Establish your 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.
Start A Recording Studio In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
People who love music and like to be around music typically gravitate to this business. It helps to have computer skills and to enjoy working with music recording software and electronic equipment.
What happens during a typical day at a recording studio?
The activities of a recording studio include:
Marketing Efforts to Find Clients - A recording studio needs a steady flow of clients to be profitable. A professional recording studio needs to generate revenues at least 50% of the 24-hour day to be successful. The equipment is under-utilized if there is less than this amount of activity. This is why recording studios offer discounted “block-time” bookings of multiple recording hours during the least-used times of day in order to create steady cash flow.
Marketing efforts include:
- Going out to meet musicians and bands
- Posting ads on Craigslist about the recording studio’s services
- Contacting advertising agencies and television or film production companies to get work assignments
- Seeking paid freelance jobs by replying to freelance job posts on online freelance systems (advertising jingles, audio dubs for videos, and other recording or sound editing work)
Conducting Recording Sessions – Setting up the studio for a recording session by placing/positioning microphones on stands and setting up amps and monitors as needed. Checking to make sure all the equipment is operating perfectly. Booking any audio engineers, background singers, and support musicians as required for the session and making sure that they arrive on time for the session. While the recording sessions are in progress, the important job is to take care of all the client’s needs.
Marketing the Output of the Recording Studio – This includes sales efforts for any creative product produced at the studio, such as music CDs, song downloads, ringtones, and training materials. Examples of this effort include uploading music for digital downloads to iTunes and posting products for sale on Amazon, and then managing order fulfillment.
Conduct Training Sessions – A recording studio is useful for teaching classes in audio engineering in order to create extra revenues when the studio is not booked for recording sessions.
Maintaining the Equipment and Facilities – Equipment needs to be in good working order at all times. The facilities need cleaning each day in order to attract paying clients.
What are some skills and experiences that will help you build a successful recording studio?
- The most important skill is to be a “people” person, who enjoys contact with many people. This helps immensely to create a “scene” that becomes the attraction for using a particular recording studio.
- The special skills needed for music recording include having a love for music, a good ear for music, and the technical skills necessary to operate the equipment and computer software.
- Audio engineers may have a degree from a university or a technical school; however, talent and competence using the equipment matter more than degrees. Many recording engineers are self-taught.
- Managing the accounting for the business is done using small business accounting software such as Quickbooks combined with time management/time-tracking software such as Toggl.
How to improve your skills?
- There are continuing education and training courses for new equipment and new releases of digital recording software such as those offered by Pro Tools, which is a very popular audio recording software program. Certification in Pro Tools is available.
- Check out educational videos on YouTube, such as the classes and instructional videos offered by Vince Casas.
- Audio engineers can join the Audio Engineering Society (AES) to network with other professionals in the field and attend conferences for continuing education.
What is the growth potential for a recording studio?
Some musicians, such as Justin Bieber, started with a modest home recording studio. He posted videos on YouTube, was discovered by talent manager Scooter Braun, and then became internationally famous. This is rare, but it does happen.
A recording studio may be part of a record label that promotes certain musicians, music styles, and bands. An example is PayDay Music Group that is an amazing success with the DanceHall and Reggae music styles.
A freelancer may be very happy and make a nice income by using a simple home recording studio setup to make voice-over recordings for animation or translation dubs for videos.
The largest facilities for recording studios are the ones that cater to recording soundtracks for major motion picture films. These studios are massive and can record live full orchestras. There are not many of them, but the ones that do exist have annual revenues in the millions of dollars.
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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.