Re: Seeking to upgrade from a B rig to an A rig
Right on, I've seen a few people doing that around here and it always sucks (especially if I like the band). I try to live life based on the use of science instead of magic, but the temptation is always there and we all succumb to it occasionally.
About 15 or 20 years ago I had figured out how to make reasonably good sound on a consistent basis; I'm still learning to make a consistent profit as the nature of expenses change, the regulatory environment evolves (transportation & H.R.) and client expectations morph.
Get thee to your local bookseller and find something like "Cost Accounting for the Audio-Addicted". Failing that, My First Little Book of Cost Accounting.... 8)~
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Write a thorough business plan. Get a mentor from Service Corps of Retired Executives (SCORE, formerly a Small Biz Administration program). You need to know where your costs of doing business really occur, not simply where the cash gets spent and you need to have a reasonably concrete idea of where your gross revenue will come from and what you need to do to maximize it. The business plan, the cost accounting and a crusty old guy or gal who asks tough questions will be tremendous help.
Since Max brought up my blog post I think I should add a wee bit.... about debt. I've worked for different employers who had 180° attitudes about it. One grew the company exclusively on profits. That's great if are single & like ramen or your significant other has a great job & benefits, allowing you to put most of your earnings back into the firm. Another made extensive use of credit for operations and debt financing for capital equipment. That is risky on a good day, and when a previous economic downturn happened the ship was left high & dry.
That sounds pretty easy, simple, and more than a bit Calvinist. The reality isn't that simple. The pay-as-you go firm missed significant opportunities (my estimate is about $2 million over 5-7 years) because their capital equipment wasn't staying current. The firm that used credit started out okay, but in order to get market share they underbid by about 30%. They had shiny new gear and the event planners, festivals and concert promoters took notice so there was work, but they used credit to finance day to day operations while starting out. The owner thought that as long as inbound cash covered outbound payments he could stay afloat indefinitely. He had 3 or 4 bad months in a row and was running out of money, but had contracts for a good summer season. He sold "his" amp racks to a leasing company, trading "equity" for payments but getting a wad of badly needed cash, up front. It was 2000 and the dot-com bust was about to happen, followed by the events of 9/11. The 'tide me over' money included borrowing nearly 7-figures from the in-laws and the sale of more gear to a different leasing company. It ran out before the seasonal money came in, and then the planes hit the World Trade Center, the Pentagon, and a field in Pennsylvania. Everything in entertainment went to shit for months. This firm was out of business literally overnight. In the end they lost about $3 million. Oh, astute readers will note that I mentioned debt financing on capital equipment... and that "his" amp racks .... "equity"... there was no equity and a bank had collateral interest. The leasing company took their word that the amps were owned outright. That's all I'll say...
Lost opportunity has a cost just a surely as borrowed money is a liability. Business is about balancing those 2 concepts in order to provide a return on equity to the owners of the business.
