You might decide to buy an existing label rather than start your own venture from scratch. Buying a going concern can mean that:
- the premises and business equipment are already in place
- there are established relationships with distributors, digital service providers, aggregators and record shops
- there is already an artist roster
- the business can generate income immediately
- suppliers have been identified and relationships established with them
- the business has a track record, which can help if you are looking for finance
- staff are already in place
- a business website has already been set up, possibly with the capability for selling music in physical and/or digital format
However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.
Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business is not too high.
Other matters to consider include:
- the state of the premises, fittings, equipment and so on. Will you have to spend money refurbishing or replacing assets
- existing staff rights
- how to retain key personnel and artists once you've taken over
- does the business owe money that you will be responsible for
- if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller
Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.