Starting a small business questions

Factual Questions
1

I’m thinking about starting about starting a DJ business. The hardware costs would be very low, a couple of grand tops. I would also be keeping my day job, so I’ll have health insurance and a regualr income besides this. This would be a weekend thing. But I am concerned about a few things.

I would expect not to have employees, and to own all my own gear. What kind of insurance coverage would I need?

I have thought of a company name, which upon Googling, is also the name of a Colorado band that plays music of the same genre that I would be playing. In there any site where I can look up to see if a term is trademarked or copyrighted or whichever? Do I even need to worry about it since I know at least that it isn’t a national name or used in this area?

Do I need to worry about paying artist royalties? Some kind of generic ASCAP fee?

I’m completely clueless about marketing costs. I have one big advantage in that I’m paid to be a DJ ay my own employer’s (a hospital) parties, so I get a lot of exposure, and it was suggestions from co-workers that led me to consider this. I haven’t yet looked into what the company policy is on promoting your own business in the workplace, though I know several of the janitors operate housecleaning services on the outside and most of their customers are other employees.

I’m concerned that the market might be saturated. Using Yahoo’s yellow pages, I came up with 85 DJ services within a 50 mile radius of my home. Which brings up a few questions. Is there somplace I can get some population data that would correlate to that radius? All the places I can think of divide population up by political boundries.

And what other kind of indicators can I look at to tell me whether I can sustain a business?

What other stuff haven’t I thought of AT ALL?

2

Many of the answers to your questions might be more along opinions than anything else. I’ve got a small business (or two) that aren’t even scarcely related to yours, but I’ll take a first stab and others will come in to correct or reinforce my replies.

Aside: I don’t know if there are any trade groups for DJs, but if so, this might be a good place to search for some of the answers you’d like.

Insurance: easiest way to handle this is to call a couple of insurance agents and ask what coverages they’d recommend or might be required. You always have some form of liability, even if it’s just that you might run into somebody on the way to a gig. Or maybe you’re lights catch fire and burn down the place you’re playing. You can probably opt out of worker’s compensation insurance, as long as you don’t expect to go deaf or get a repetitive stress disorder. You might need to change your insurance to commercial car insurance: ask your agent.

Company name: you’re probably okay, but I’d take an attorney’s opinion over mine. There are probably a zillion duplicate company names out there. If you incorporate then that name must be unique in the state in which you are incorporated, and you’ll probably do best to steer clear of names that are similar and whose services could potentially be confused with yours. In Florida there is a state run business website you can use to check for other companies’ fictitious names. Wisconsin may have the same.

Absolutely no clue on the royalties thing, again an attorney or trade group could help.

Marketing costs: I’d personally keep them low to start while you get your feet on the ground. Have some cards to give to people at your events if they’re interested. Then figure out what your target market is: territory plus events you’ll cater to. House parties? Weddings? Bar Mitzvahs? That will tell you a bit how to market. If want to do weddings you’ll probably want to find wedding organizers and network with them. If you want to do parties maybe fliers at the local university. Are there other party oriented venues in your area. Talk to the people at the desk there and find a way to get your name out. An ad in the yellow pages is expensive, generally, although there are discounts for new businesses. Don’t forget that unless you hire someone there is a practical limit to the amount of business you can do so don’t spend more on marketing than you can bring in. In my businesses I assume about 10-20% marketing and advertising costs. It’s higher in the beginning and then as you become established you can spend a lower percent (although hopefully a higher whole number).

Population: check in your library for a business atlas. This will tell you some cool demographic information in your area. It may not give you population in a fifty mile radius, but it should show you population centers, incomes, amount spent on certain categories (entertainment), etc. As for whether your market is saturated, if you’re good I might not worry about it. For one thing, 85 djs might not be that many. Call a couple of DJs and ask them who their main customers are. Ask them about their availability. You’d be surprised what your competition will tell you.

Questions you haven’t asked: what legal structure will your business be (I’d guess sole proprietor, but it could be different)? How will you do banking, accounting, taxes? How much cash do you need to realistically sustain you when you first start? How many hours a week are you willing to put into your business? What will your transportation costs be? How seasonal is your business? Do you need any licenses or permits? What forms of payment will you accept? How will you will you communicate with clients? What if you get sick and have to DJ? (Contigency plans) How will you handle sales in general? What is a fair market price for your service? Do you have a business plan? Do you have a budget? What costs do you expect to stay current, maintain equipment, etc?

That’s a bit of a start. Good luck!

3

Great! Lots of stuff to chew on here. Some of your points I had thought of and didn’t bring up, but some I hadn’t considered before at all. Transportation costs was one. I wrote if off as essentially 0 because I already have a vehicle capable of handling the gear. But of course that’s nonsense…

What I want is the least complicated structure within which I can legally operate. I will be the owner and sole employee for the forseeable future.

I put in calls to 4 DJ servces today to get estimates, but I’ve only got one so far. I am heartened, however. $150/hour plus a $50 setup fee. If that turns out be average, I could undercut that by a lot.

I just realized I’d like to make some decisions by the end of this week, if practical, so I need to see a lawyer fast. There is a key date - August 20, which is the last in a series of events the hospital has asked me to dj (the music collection is mine personally, which is why I use the term “asked” rather than “assigned”). I would like to have some business cards in hand and a template contract by that date.

Any ballparks on incorporation costs? Also on my wish list is buying a home, and I need to decide if I have the resources to do both. My feeling is that if I put aside the busuness idea for a home, it’ll be a LONG time till I’m able to finance the business. The business could in theory ultimately contribute a lot toward a home, but delay it for a long time if I have lots of expenses to pay off before I start putting back the cash.

4

It probably won’t be an issue, but for a start you can check the United States Patent and Trademark Office web site to see whether there is a trademark covering the term. Even that isn’t necessarily a problem, depending on what the trademark owner uses it for. It can get complicated, so if it is indeed trademarked you may need to consult a trademark attorney.

I don’t know how things work in the US, but here (in Australia) applying to register a business name solves most potential problems. If you get past their checks you are usually OK.

5

IANAL (or accountant), but incorporating, possibly as a Limited Liability Corporation (LLC) or an S Corporation (look it up or ask a lawyer), could have significant advantages in terms of taxes and in case something goes horribly wrong.

In the first case you may be able to keep more money by declaring yourself an employee of your corporation and paying yourself a salary. Talk to an accountant, and do that first, because what he/she tells you may affect the corporate structure you settle on.

In the second case, and this is more important, if your sound system catches fire and destroys a dance hall, I believe that as a sole proprietor you could be sued for everything you own: your house, your car, everything. If you’re incorporated, they can only go after the assets of the business.

I’m sure there are plenty of Web sites and books that describe why and how to incorporate. Filing articles of incorporation is not hard or expensive. You can probably find sources for boilerplate documents that will cost less than $100, and the filing fees are probably no more than that. (Many corporations file in Delaware because of its favorable laws.) If you have a little more to spend, a lawyer can draft something tailored more specifically to your needs that will offer moderately more protection.

6

I always find the best way to answer small business questions is to go to another area, and find a similar small business, and invite the owner for lunch.
Prepare a list, and just ask every question you need to know.
They get a free lunch, get to have a few words (people love to talk about themselves), and you’ll get valuable information. :smiley:

7

I’m surprised you’re taking all this so seriously at this stage, but maybe that’s cos the sue-everyone mentality you have in the US is not prevalent here?

In my experience, most small businesses start as a hobby - you imply that’s pretty much what it is now. I think you should just work up sowly, rather than invest your life savings in to it all at once. I base this recommendation on the kinds of questions you’re asking.

Some of the answers are only going to come to you with real-world experience in your area. If you have money to burn, then go nuts. But if you cannot really afford to loose the few grand it’s going to cost to set up completely, maybe some caution is a better idea.

So, find the job from friends, ads in local rags, etc, then hire the PA gear you’ll need. You already have the music and presumably the skills, so you’re pretty set there.

Once you have a few jobs under your belt, you can look at getting some of your own gear, tho IMO gear is not what makes a DJ, it’s their skill and music library. You can get gear anywhere, probably better gear than you can afford to buy now, and plenty of companies will even deliver and setup as well. You may be able to cut a deal with a small PA operator if you put all your work through them, as well.

A few other things… There are forums (ie, like the SD here) for pretty much any topic you can imagine. Look for some on DJ’ing. I’d presume most DJ’s are solo operators, which means they will be “all rounders” when it comes to running a business: the kinda of people whose brains you need to pick.

You say you can undercut $150 per hour, but if that’s the median of what other people in your area are charging, you should not undercut it too much. Businesses usually set their fees based on real world conditions, things that you might not be aware of.

Sure, you like DJing - you’d probably do it for nix even - but what about buying new music? Repairing your PA? Lost / stolen gear or music? Tax, accountants fees, legal fees, vehicle maintenance, advertising, insurance, a cell phone and associated costs, record crates, needles, I dunno… these are things your competition has to pay for, and to some extent you will as well.

Maybe you can cut some corners, by starting out as a hobbyist (here in Oz, you can earn around $5000AU a year from a hobby, and not have to pay tax on it - there’s pribably something similar in the US?). But don’t forget you want some profit as well.

So, just some ideas. I started a small biz as a hobby, and now I employ heaps of people and make a heck of lot of money. I don’t think I could ever work in a “real” job again: it’s great, and I hope it works out for you.

But start slow, is basically what I am saying. G’luck!

abby

8

Your heading for failure with the approach you appear to have. Your a one man band, literally, so keep it that way, simple. The simpler the better. And keep your overheads to nil, meaning Lawyers and Searches are out. Call yourself anything you want, if someone objects then change the name. Trading names are unimportant for the first few years- its your personality that matters. Personality, appearence, and the X factor. The X factor is the added ingrediant that only you can come up with and which makes you distinctive. Memorable.

If you have these qualities fine, if not, no matter what you touch will collapse and fold. Success creates success, failure the opposite. With failure you obtain the added bonuses of family friction, arguments, unpaid bills, unwanted equipment [Did i really pay $3000 for that useless junk syndrome] and clinical depression.

You will find maybe that your people handling skills are not that great, that people will promise you all sorts of deals and not deliver, and you might discover that you yourself are an headache to deal with. That it is you that his unreliable and ruining your own business by simply not turning up, by not having great faith in yourself to deliver. Did you know many funtion Managers won’t book new acts because of the headaches involved. In the USA they might call this He has No Street Creds.ratings. A word on protecting your ears. Many ex D.J have serious hearing problems at age 45 on. Digital Hearing Aids cost at present about $1750 dollars each - so add into your calculations x 2, and what jobs will you obtain when deafness impedes your ability to work. Go and speak to used intrument sellers, ask them for advice, and what goes wrong in most cases advice. And on that unhappy musical note i wish you well.

TRUE-BRIT.