A solid business plan is the foundation of any successful retail business, and a music shop is no exception. But what happens when that foundation is shaky?
In this blog, we’ll look into the common missteps music shop owners make when creating their business plans. When you understand and avoid these pitfalls, you can dramatically increase your chances of success.
Let’s get started.
19 Music Shop Business Plan Mistakes To Avoid
Making a business plan for your music shop is important because it:
- Provides direction: A business plan is your roadmap to outline your goals and strategies, and how to achieve them. It keeps you focused and organized.
- Secures funding: If you need loans or investors, a solid business plan is a must. It demonstrates your seriousness and provides financial projections.
- Identifies potential problems: The planning process anticipates challenges and develops solutions before they happen.
- Manages resources: From inventory to staffing, a plan allows you to distribute resources effectively to make sure your business is running smoothly.
- Measures success: With a plan, you can track your progress, measure your success against your goals, and make adjustments as needed.
- Attracts partners/employees: A well-structured business plan attracts potential business partners or key employees who share your vision.
Here’s the bottom line: A business plan increases your chances of success by providing structure, clarity, and a strategic approach to owning and operating your music shop.
To help you avoid common pitfalls, here’s a breakdown of critical mistakes music shop owners make when creating their business plans.
Market Analysis
- Misjudging the market: Just because you think you need every guitar pedal on the market, don’t assume the public will want it, need it, or be willing to pay for it. Ask as many people as you can for their feedback. A clear inventory plan early on saves you time and stress later.
- Not knowing who your customers are (or what they want): Find out who your customers are through surveys. Before investing time, energy, and money into your inventory, confirm what products are most popular among your customer base with their feedback.
Organization and Management
- Poor compensation plan: If you want to get the most out of your sales staff, consider a compensation plan that rewards the entire team. You have to set clear expectations, train your staff, and give salespeople the information and tools they need to feel empowered.
- Strained vendor relations: This has improved in the music products industry. Some vendors will drop you for not selling enough, but you can overcome these challenges. Call your vendors when business is in a slump. Don’t wait for them to call you.
- Ignoring legal aspects: After you determine the steps necessary to start your business, hire competent legal counsel to make sure you’re following the appropriate laws and regulations, especially for proper employment and liability issues. Ask for recommendations from people you know who’ve employed lawyers for their business.
- Operating as a one-man band: As a music shop business owner, it’s important to delegate where you can. It’s not beneficial to do everything as the owner. Make your store self-sufficient by cross-training your staff, so it can run without you. Empower your people.
- Improper work/life balance: Many employers today recognize the value of a healthy work/life balance. Get your staff involved in this approach. Share your hobbies and projects outside of work and encourage your employees to pursue theirs.
Technology
- Non-integrated accounting software: You should have software that tracks your rentals, inventory, and accounting all in one platform. It’s important to have software that lets you easily print a balance sheet and profit and loss (P&L) statement at the end of the month. You shouldn’t have to pull from different places.
- Outdated technology: Be aware of what’s coming, and don't get left behind. Soon, everything will be cloud-based. There won’t be any servers for backing up your data. If you don’t have a verified backup and continuity plan in place, you won’t have a business.
Related Read: 5 Successful Music Store Strategies You Can Steal Today
Service and Product Line
- Excessive inventory: Avoid carrying too much inventory. Focus on moving stock within 30, 60, 90, or at the most, 120 days. You reduce your risk of excessive inventory if you can sell that inventory for a profit before payment is due.
- Using the wrong accounting methods for rentals: Improperly accounting for rental income can be misleading on financial statements and lead to issues. When rental instruments are purchased and the rental income is booked upfront, it creates problems. Rental income must be reported for the year you receive it. This method results in insufficient funds and incorrect tax filings.
- Aging rental receivables (A/R): Collections aren’t fun, but they have to be done. With rental businesses, instruments are often at stake. Find a member of your staff who’s patient and personable with customers. Print out a list for collections every month and attack it.
Marketing and Sales
- Accurate revenue and direct cost reporting: If your P&L statement looks too good to be true, it’s often due to reporting. On a properly formatted music retail income statement, all revenues and all direct costs should be shown.
- No budgets: Successful music shop business owners have a budget and a plan. You wouldn’t build a house without a blueprint — why would you manage a business without a budget? Create a monthly budget, refer back to it, and do your best to stick to it.
- Infrequent financial review: If you don’t have a P&L statement, you can’t guide your business. Profitability is much more important than cash flow. You can’t borrow money without being a profitable business.
Funding Request
- Mismatched financing: Picture your balance sheet. Good financing means matching cash flow coming in with money going out to pay for certain assets. The music shops that make it often have very little debt. Although you may think you don’t need a bank. The time to get a banker is when you don’t need one. Even if you can afford to purchase assets outright, take out a loan, especially for rental assets. It helps establish a relationship with a bank and will be beneficial in the long run.
- Excessive debt: Debt can be a good tool — if it’s the right kind of debt. The "right kind of debt" is generally considered to be low-interest, fixed-term loans used to invest in assets that directly generate revenue. But excessive debt gets retailers in trouble and can put them out of business.
- Miscalculating the capital required: It’s true what small business owners say — it will take twice as much money as you expect and twice as much time. You’re constantly putting money back into the business, especially early on. And if your needs exceed your cash or available credit, your business most likely fails. Plan for more unexpected expenses.
Financial Projections
- No tax planning: Experts see this issue all the time — luckily, it’s easy to solve. Before the end of the year, talk with your accountant. Your accountant is your partner and helps you strategize the best tax plan for your business.
Implement Your Music Shop Business Plan With Music Shop 360
Building a comprehensive music shop business plan is the first step toward success — but even the most well-thought-out plans require the right tools to come to life.
This is where Music Shop 360 becomes your invaluable partner.
With its robust suite of features tailored specifically for music retail, Music Shop 360 helps you order products with integrated vendor catalogs, and market to customers with included email, text, and e-commerce tools. You also benefit from integrated repairs, lessons, and rentals.
Our software’s tools and integrated systems help you avoid common business pitfalls like excessive inventory, outdated technology, and poor visibility of financial responsibilities.
Ready to take your music shop to the next level? Schedule a demo today to see firsthand how Music Shop 360 helps you achieve your business goals and transform your music shop business plan into reality.