Being a Successful Entrepreneur— Envision the Future

Posted on February 16, 2012 at 12:54 pm by
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When I was a doctoral student, I was in a class that had an assignment that asked us to think into the future twenty years and forecast what the music profession would look like.  I wish I still had that paper.  It would be fun to see how far off I was.  Anyway, one student was very frustrated with the assignment.  She just couldn’t get into it.  I remember one of her comments.   “What should we do?  Take LSD to help stimulate our imaginations?”  OK, it was the 60s.  But talk about inside-the-box thinking!   She was all about what was going on in the present and pretty short on imagination!

That student not withstanding, it’s kind of fun to think about future trends.  Here is a thought I had just today.  I have a student who is finishing his doctorate in jazz studies, and he is writing a dissertation.  I’m not his primary advisor, but I’m on his committee and so I have to read this document, make comments and edits and when it is in good shape I’ll sign off on it.  There are three of us on his committee.  As I read his dissertation today I thought,  “The content is great, but the delivery system is very antiquated.  It has a footnote about every other sentence, and because it is about music it has tons of musical examples.”  I’m thinking that this is the same format as forty years ago when I went through the identical process with my dissertation.  Why can’t this be done in an electronic format with links to the footnotes and embedded musical examples?  It would be so much more user-friendly.  The reader could hear the examples while looking at the music.  I know that the technology is there.  In our website, polyphonic.org, we embedded sound files in one of our articles two years ago.[i]  Maybe there is no need to do this for a dissertation (if you assume that it will never be read again except by a handful of scholars), but I will wager that ten years from now more books will be published in electronic format than hard copy, and that they will have all sorts of interactive add-ons available.  The publishing industry is already firmly headed in this direction.

In envisioning the future, I am reminded of this quote that is attributed to hockey legend Wayne Gretzky.  It’s a good one.  When asked how he always seemed to be in the right place at the right time, and consequently scored more goals than others, he replied, “I don’t go where the puck is.  I go to where the puck will be.”  Try to be like Gretzky.


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Being a Successful Entrepreneur— There Is No One Model for Entrepreneurs—Gain Experience First

Posted on February 2, 2012 at 6:48 am by
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If you have read my book, Lessons From a Street-Wise Professor, think back to Chapter 9: “Five Non-Linear Career Journeys.”  These are stories of very successful entrepreneurial musicians.  I chose to include them because they represent five different areas of the music business, but I had a secondary reason as well.  They all have reached their goals in different ways.  There really is no one single road to success in music.  If you gain experience, be observant, have good role models and develop an entrepreneurial mindset, your time will come.

Once a friend of a friend asked me what her daughter could do to prepare for a career in music.  Her daughter was then a high school student and was considering a college major in music.  Half-jokingly I gave her a flip answer. I said, “Tell her she should 1) get a paper route, because then she will know how many papers she has to deliver just to purchase one CD; and 2) get a ukulele, because she will learn how to harmonize tunes with just three chords.”  In other words, know the value of a dollar and work on your ears.  But, something was lost in my profundity: I forgot that kids haven’t had paper routes in 30 years.  Got to change that one.

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Being a Successful Entrepreneur— Don’t Be Embarrassed about Making Money

Posted on January 19, 2012 at 6:44 am by
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My previous blog referenced Grammy-winning composer Maria Schneider. In talking with her further, she had an interesting take on the stereotypical starving artist.  She theorizes that part of the reason record companies are able to make huge profits while the artists often make so little is because many musicians have the idea that being a starving artist somehow raises the value of their art.  Some have the attitude that commercial success equates to selling out, and the minute something is popular it’s devalued.  This becomes a “badge of honor” that some artists like to wear.  That attitude has played right into the hands of the business world.  Think about other occupations or professions.  Can you imagine a baker saying, “I don’t really want to make money selling my cakes.  I do it because I just love to see people appreciate how good my food is.  I don’t care if I lose money.”?  Nobody would ever do that in any business other than the arts!  The business world says, “Wow, we’ve got this commodity here, and we don’t have to pay much for it.  And as a matter of fact, they are happier if we don’t pay them for it!”  This may be a little extreme, but you get the point.

Maria goes on to say that it’s important to instill in people the idea that it’s possible to do incredible high-value work and be paid for it.  Music shouldn’t be free.  Yes, as musicians we are smart and lucky.  We do what we love and get paid for it.  It shouldn’t mean that because we love doing what we do we should do it for free.  We work very hard and we should be paid well for it.

 

 

 

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Being a Successful Entrepreneur— Don’t Dilute Your Product in Order To Make Money

Posted on January 5, 2012 at 6:41 am by
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Some musicians feel that they must dumb-down their music in order to be “successful.” I once had a conversation with Maria Schneider in which she made an interesting observation: many musicians who are focused solely on making money underestimate their audiences.  She commented that some musicians seem to think that if they write or present a particular kind of music, they will get a certain audience.  A dilemma can occur if they happen to get lucky and are successful in gaining an audience.  If they suddenly say “that’s not really who I am.”  “Let me show you what I really do,” they will lose that audience, because those fans were on board for what the artist was doing at the time.  They came to the concert just for that.

Of utmost importance is to be devoted to developing your own craft and your own voice.  If you follow your artistic calling with passion and belief, when your audience does find you, they will be getting the best of what you have to offer.   Be true to yourself.  Don’t pander.

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Someone is Stealing Your Stuff–Attitudes Toward Copyright are Morphing

Posted on August 17, 2011 at 7:13 am by
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If you’re an older person with copyrighted material you probably have a different view toward protecting and publishing your creative work than a younger person. Here’s an interesting blog from Andrew Taylor in Arts Journal that was posted on 6/7/11. It seems that times could be a changin’.
It’s a reasonable assumption that theft equals loss of income. After all, if somebody has stolen the thing you’re selling, why would they turn around a buy it? But there’s an increasingly contentious debate on that assumption, and its impact on physical products, digital content, and even scholarly work.
Recent studies on Japanese anime DVDs, academic publishing, and even designer handbags have shown little impact on sales, and sometimes an increase in sales, where piracy occurs. The logic is that when something is accessible, people can find it and sample it more easily. Then they are more likely to want more, or better. In the case of the designer handbags, the knock-offs seemed to serve as gateways to the real thing. Says the article:
For her doctoral thesis, Gosline immersed herself in the counterfeit “purse parties” of upper-middle-class moms. She found that her subjects formed attachments to their phony Vuittons and came to crave the real thing when, inevitably, they found the stitches falling apart on their cheap knockoffs. Within a couple of years, more than half of the women–many of whom had never fancied themselves consumers of $1,300 purses–abandoned their counterfeits for authentic items.
As arts and culture and all forms of creative expression struggle with copyright protection and theft, it will be a rather essential issue to understand the implications with some nuance. Some artists, like author Neil Gaiman (video below), have already changed their minds about rigidly defending their copyright. Others are wondering how much effort the battle is worth.
http://youtu.be/0Qkyt1wXNlI
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Tax Time–1099s and W2s

Posted on March 29, 2011 at 7:46 am by
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Let’s assume that anyone reading this knows that the sum total of all the money an individual earns is called the gross. It is reported by your employer to the Federal Government in the form of a wage and tax statement called a W-2, and a copy is sent to you each January for the previous year’s work. It shows wages earned and taxes taken out by your employer. In contrast, for self-employed income you receive a 1099 MISC form, but if you are a private music teacher, for example, you will receive no for and consequently you must keep track of your total income yourself. The person or entity who hires you as an independent contractor is required by law to send the 1099-MISC if he paid you $600 or more in the calendar year. Since you are not on his regular payroll, no taxes will be taken out, but nonetheless you will be responsible for them at tax time. It is a misconception that if you do not receive a 1099 and make less than $600 you don’t have to report it. As a U.S. citizen, income from all sources is taxable regardless of the amount and where it is earned in the world. Here’s a case in point.

A former student of mine took a cruise ship job right out of college. He worked on the ship the better part of a year. For some reason he didn’t receive a 1099 from the employer, but the income was reported to the Internal Revenue Service. (My guess is that the cruise ship line had an old address for this person and though it was mailed, the form never got to him.) Anyway—my student thought there would be no tax due, since he was “at sea.” Guess again, Sinbad. The IRS caught up to him and hit him for the tax due on his earnings plus interest and penalties! The amount was substantial and he had to make arrangements with the IRS to pay it back over time. In truth, he was lucky not to have been slapped with a fraud charge.

So, we all have our income reported to the IRS via W-2 and 1099 forms, with copies sent to us. Looking at the W-2 you will see in box 5, “Medicare wages and tips.” The number found there is the gross—the total amount you made from that employer. If you contributed to a retirement account such as a 401K or 403b, that amount will be deducted from your gross (box 5) and the remainder will be shown in box 1(wages, tips and other compensation). There are many benefits to reducing your gross income by contributing to a retirement account, because you get to pay less taxes and the money in the account grows tax-free. (But that’s a subject for another blog.)

In order for you to pay less tax (your goal) you must get your total income down to a lower level. Claiming deductions does this. Some deductions, such as moving expenses, student loan interest, certain retirement plans, etc., directly reduce total income. These deductions are called “adjustments” and after subtracting them from total income, the result is Adjusted Gross Income. Other deductions, like contributions to charities, mortgage interest, loss from fire or theft and medical expenses in excess of 7.5 percent of your adjusted gross income are available to all tax filers, and are called Itemized Deductions. While all taxpayers may deduct non-reimbursed employee business expenses, musicians tend to have more expenses, many of which are unique to them. Here are a few:

• Office in home

• Supplies—items such as drumsticks, reeds, strings, cables and office supplies

• Concert tickets

• Recording costs

• Accounting fees

• Lawyer fees (only business related or to produce income)

• Music books and CDs

• Subscriptions to trade magazines

• Internet access and email (subtract any personal use)

• Telephone—have a separate business line (Your primary phone line is not deductible, but features may be, like call waiting, messaging, etc.)

• Lessons and coachings

• Education expenses—things that will further your career

• Advertising

• Website

• Instrument repair

 

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Tax Time–Musical Instruments and Depreciation

Posted on March 24, 2011 at 7:06 am by
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Musical Instruments

When a musician buys an instrument or equipment that has a useful life of longer than one year, he or she can depreciate it over the tax life of the item—usually seven years. This has the effect of spreading out the deduction over time. An alternate course would be to expense the purchase (deduct the price paid) of the instrument in one year using Section 179 of the IRS tax code. This provides an immediate and one-time write off of the item. Whether to expense the instrument or to depreciate it is a question for your tax advisor, since there are conditions that must be met for both. For example, the Section 179 expense cannot be greater than total earned income.

If you sell something for more than you paid for it, you have a capital gain, on which the IRS requires us to pay tax. The good news is that, at least for now, the capital gain tax is generally less than the taxes we pay on our income. But, let’s say we bought a saxophone for $5,000, and over seven years we depreciate it down to zero. We decide to sell the instrument and we find that these instruments are in greater demand now than when they were new! They have actually appreciated, rather than depreciated! We are pleasantly surprised to find we can sell the sax for $7,000, which we quickly do. But as we walk away, counting our $2,000 profit, a thought stops us cold. We don’t just have a $2,000 capital gain on which to pay taxes. We have to add, into ordinary income, the total depreciated amount—$5,000. That results in a capital gain of $2,000, plus ordinary income (taxed at a higher rate) of $5,000. What’s more, even if the instrument did not appreciate and we sold it for $2,000, we would have ordinary income of $2,000, since we depreciated it down to zero.

Here’s another example of instrument appreciation. If you have old string instruments beware! In William T. Hunt’s excellent article on Polyphonic.org he writes:

In the past, the IRS has taken the position that old string instruments are antiques that appreciate in value and therefore are not depreciable. There have been several court cases involving this issue. The most recent rulings have maintained that antique instruments used in a trade or business are subject to the same wear and tear as any other property used in a trade or business, and therefore are deductible. Based on these court cases it appears, at least for the present, that all musical instruments, including old string instruments, are deductible as long as they are actually used in a trade or business (i.e., having the instrument in a display case or hanging on a wall would not satisfy this requirement). However, the IRS disagrees with these decisions and may still disallow the deduction outside of the judicial circuits where the cases were decided.

This discussion of depreciation has been from 40,000 feet. When you get down to street level there is much more to learn and absorb. For example, there are several methods of calculating depreciation. In my opinion, that is why you seek the advice of a tax professional.

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Tax Time–Musician’s Office in Home

Posted on March 15, 2011 at 10:47 am by
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Office in Home
In our homes or apartments, musicians all have a room in which they practice or teach, but for that room to be considered a home office and deducted on our taxes, it must meet certain requirements established by the IRS. For example, that part of your home must be used regularly and exclusively:
• as your principal place of business for any trade or business; and
• as a place to meet or deal with your patients, clients or customers in the normal course of your trade or business; and
• in the case of an employee, the home office must be for the convenience of the employer.

If the room is used for any other purpose like watching television, playing pool or entertaining, it will be disallowed. The space must be used for business purposes only. For the musician who has a space that is regularly and exclusively used for teaching there is little question. It qualifies as a home office. But for a performing musician who uses the
space as a practice room there has been some back and forth—yes, no, yes. At the present time musician’s practice rooms do qualify as home offices. Again on polyphonic.org William T. Hunt writes an informative article detailing the back and forth history that musicians will find very relevant.

A home office can be very benefi cial to the musician. Calculate the square footage of the office then divide it by the total square footage of the home or apartment. That will give you the percentage of the home that is used for business. Let’s say that 10 percent of your home is used as a home office. You can then write off 10 percent of your home expenses to your business. Things like:

• Mortgage interest
• Property taxes
• Casualty or theft losses
• Homeowners insurance
• Rent payments
• Repairs and maintenance
• Utilities

If you make a capital improvement to the offi ce by painting it or putting down a new carpet, those expenses can be fully deducted. Home offices are a good thing. Tax audits are a bad thing! Keep impeccable records and make sure your particular room qualifies as a home office. There are other subtleties beyond what we have discussed here, so consulting a tax professional is advised.

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Have Your Price in Mind

Posted on February 7, 2011 at 6:05 am by
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You should have a price in mind for the particular service that is under discussion. Different types of gigs will have different pay rates that are either set by the musicians’ union or are the going rates of the area. Many jobs pay scale and that’s it. A traveling Broadway show or an opera put on by the local company are examples. Union scale is the minimum amount that a union musician can be paid for a particular job, but there is no limit to the amount that can be paid over scale. When figuring the budget I usually start with union scale, then factor in costs for other things like travel, cartage of large instruments and percussion rental. If you have a string quartet, for example, and someone wants to hire you for a wedding reception, it won’t be so complicated. You’ll have a price, and there will be little back and forth discussion.

But money isn’t the only consideration. I have taken lots of work that didn’t pay well, on the hope that it would lead to something bigger down the road. Sometimes it does and sometimes it doesn’t.

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Don’t Make Money the Number One Objective—Learn To Wait

Posted on January 31, 2011 at 6:02 am by
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Presumably you’ve chosen music because you love it and can’t imagine yourself doing anything else. But, on the off chance that you are in music for the money, you’ve chosen the wrong profession. Sure, there are certain celebrity artists who make big, big money, but there is no doubt that the rank and file musician makes less money than the rank and file investment banker. Right out of college you probably won’t be buying that BMW.

Money can be a bad motivator for us if it takes precedence over our artistic standards. It has the potential to cause us to shift our focus off of quality and to take gigs just for the money. Good motivators, like developing a more secure technique or gaining a deeper understanding of the music we play, raise our level of musicianship. If you build your house on solid ground and put it up brick by brick, financial rewards will come. You will be noticed and people will be willing to pay you well for what you do. Careers are built over time. Of course certain events can occur that will catapult you forward or raise you to another level. You might get a new, more prestigious job or some of your works published, but by and large, after you have reached a level of excellence on your instrument, success in music is achieved by slow and steady work as you acquire knowledge and experience

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