Business Savvy: Managing Risk In Business
What is your tolerance quotient?
Many of you have dealt with the ups and downs of the pro audio industry
for many years and understand the constant ebb and flow of risks and opportunities.
Others may be new to the business, working part time, or on someone else’s
payroll. Still others may be planning to go on their own or “quit your
day job”. In any case, you are managing risk in some way.
What’s at risk in business? How do you feel about risk? Are you ready
to pursue live sound full time on your own from a business standpoint?
ASK YOURSELF THIS...
It’s a fact: any business involves risk. Risk is the possibility of danger,
loss, or some other negative consequence. In any business whether you
work for yourself or someone else your time, money, reputation, and
self-esteem are at risk. Let’s look at each of these briefly.
• Time. You may spend a lot of time learning new skills (technical chops, business chops), establishing relationships, and working at the audio business before you achieve your financial or creative goals. How much time do you have? Can you afford to take time away from other things? Are you patient or impatient by nature?
• Money. Starting and operating any audio business requires working capital cash. Do you have enough? Are you willing to put your own money at risk? If yes, how much? If no, where are you going to get the money?
• Reputation. Your reputation is what others say about you, your character, and your accomplishments. When you operate a business, whatever you do both in your business and in your personal life is subject to public scrutiny. How do you feel about that? Are you open to praise and criticism on a regular basis, or are you more private?
• Self esteem. Your confidence is an asset that needs to be protected. I’m not referring to vanity, arrogance, or exaggerated self-importance. I am referring to the need to have a positive feeling about yourself and what you do. In any business especially a subjective and creative field like audio your self-esteem is always at risk. Some people are “thick skinned” or more resilient than others.
Some people are very comfortable taking risks. Others are “risk averse”;
that is, they consciously avoid risk and are willing to accept lower returns
(like less money or notoriety) as a result. Where do you fall on the risk
spectrum? Let’s do a brief exercise to start thinking about the topic
more concretely.
In the table below, simply check the boxes in each category that make
the most sense to you. Remember that there are no right or wrong answers,
and that only you will see them, unless you choose to share the information
with anyone else. Also keep in mind that you can change your mind over
time as conditions change. Here we go.
What’s your risk quotient? If all of your check marks are in the first
column, you are risk averse. That’s OK, but indicates that you should
look for work on someone else’s payroll. If your check marks are spread
across the three columns, you have more options, including going into
business for yourself.
DERIVING ANSWERS
As you analyze risk and develop your business plan, there are additional
considerations to address before you quit your day job. Ask yourself these
questions:
• Is anyone buying what I’m selling?
• Is the market for what I want to do big enough to support my career in live sound?
• Can I get enough facts about the size of the market to satisfy my risk tolerance?
• Is there anyone else who is doing what I want to do successfully? Can I learn from them?
• Where will the money come from to live on and/or invest in my business until I’m getting paid enough to do sound full time?
• Who will handle the business aspects of my audio career: marketing, sales, accounting, and business management?
Many live sound people try to do it all, on their own. Some are content
and successful, others end up getting frustrated.
Does this scenario sound familiar? “I own a sound reinforcement rig that
I rent out for local and regional events. I handle my own bookings and
promotion. If my client needs an engineer, I go with the system. Then
I’m also the roadie and troubleshooter. I maintain my own gear and go
to trade shows when I can. I balance my own checkbook, and trouble-shoot
my computer when it goes down. In addition, I work a real job to support
my habit.”
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Think about the live sound or music people that you admire or aspire to be like. Do they do everything themselves? |
Relatively few career engineers, performers, or rental company owners
handle all of their own booking (sales), management, and accounting. Excellence
requires full time focus on what you do best.
Here’s the point. Someone needs to take care of each of the essential
elements of your audio business. That takes time, and if you are working
multiple jobs, you are unlikely to have enough time to 1) get good at
everything and 2) keep your sanity.
What are you best suited for? What feels right? How can you make the best
contribution? How can you have the most fun along the way? Addressing
these questions is part of your risk analysis. Now, on to the important
question.
QUIT THE DAY JOB?
If you are doing something else to make a living and would like to focus
on live sound full time, this is the important question. If you are already
doing audio full time, the conditions below are still valuable to review
and put in perspective.
Here are three conditions to be met before you can “quit your day job”
with confidence.
1) You have a business plan written down and ready to share with
others. (Planning is a primary subject in my book listed in the bio at
the end of this article.)
2) You have funding to cover both business and personal expenses
for at least one year. Once you have drafted your business plan and budget,
you’ll know how much money you need. Why one year? Because shorter than
a year is not long enough to work your plan in most cases. You are likely
to have revenue much sooner than a year, but having the financial support
up front provides the confidence to move ahead and the cash in case a
problem or opportunity arises.
3) You are comfortable taking the risk. Some people handle risk
easily, others don’t. There is no rule on how much risk to take, so don’t
feel that one or the other is the best way. Just determine how much risk
you are willing to take, and proceed from there.
If one of these three elements is missing, you’re probably not ready to
do audio full time. Don’t quit your day job prematurely
It helps greatly to have family and friends who are comfortable with your
live sound business idea too. Getting that emotional support is likely
to make things go a lot easier, especially on the home front.
Why did you read this article? How did you get to this point? It’s probably
because you want to get ahead by some means other than trial and error.
Just like practicing your musical chops, developing your “business chops”
helps you deal with the important decisions, and keeps you focused on
your path to success in live sound.
John Stiernberg is founder and principal consultant with Stiernberg Consulting, the Sherman Oaks (Los Angeles) CA-based business development firm (www.stiernberg.com). He currently works with audio companies and others on strategic planning and market development. His book Succeeding In Music: A Business Handbook for Performers, Songwriters, Agents, Managers, and Promoters is published by Backbeat Books. Visit www.succeedinginmusic.net for complete details or contact John via e-mail at askjohn@succeedinginmusic.net
September 2003 Live Sound International