Structure Your Rates For Maximum Success (Music Producers)
Today I wanted to chat with you a little bit about pricing and rates. I get a lot of questions, you know, how much should I be charging? You know, I get these questions from guys who are just starting out, and guys who’ve been in it for awhile.
And there really isn’t a right answer, and I’ll go ahead and tell you up front, I’m not going to give you the exact number to charge in this video, but I’m going to give you some things to think about.
The first thing I’ll say is that, you know, every project, at least in our world, with my company, the song writing team, I can only speak on my experience, you know, every project is different. You know, clients need different things, different levels of hand holding, different levels of communication, some people want to be on Skype with us every other day, some people don’t need that, so we kind of price accordingly, how much back end work are we going to have to do to complete this project, or is it something simple?
So we don’t really have one kind of fixed rate for what we do.
Now I’ll tell you kind of what our strategy has been for production and recording here at our studio. And again, we’re primarily doing production tracks for people, or writing lyrics, you know, top lining, some mixing stuff, things like that.
So we don’t run a traditional studio where there’s a band in here, necessarily, but this will still apply in many ways, but it’s more for the guys who produce tracks and song write and things of that nature.
It’s important to start with kind of what you picture the end game being. You know, is it — do you want to build a company? Are you going to be a freelancer, kind of what do you want that to look like? And that’s important because there’s a couple of different ways you can go, but you need to know where you’re goal — what your goals are and where you want to end up. You know, I think a lot of us want the big, you know, get the big gigs, do one or two of them a year, or one a month, and that would be the dream.
You know, that’s fine, that’s what a lot of people want to do, unless something radically changes, my goal for my company is slightly different, and that’s what I want to talk to you about.
So I kind of stole this little chart here, and I know it’s like, super boring looking, I didn’t dress it up or anything, but I have to credit Ramit Sethi who’s kind of a business coach, entrepreneur guy, and he has this chart for — he calls it a demand matrix where you’re coming up with ideas and sort of where those ideas fit, but I noticed that, I was like, “Hey, this is kind of a clause to rights and pricing.”
And there’s four sort of main things here, you’ve got labor of love, which is low price, few customers, so that’s kind of your hobby. That’s a hobby. That’s where a lot of us start. When I was a teenager, I’d have some work here and there, it wouldn’t be very high paying work, it was a labor of love.
The other one here is Mass Market, so you know, think kind of Wal-Mart, low price, many clients.
Then you have High End, which is high price, fewer clients, and then finally, you have golden goose, which is high price, many clients, so think like, the iPhone would be a golden goose product. It’s a pretty high price point product, and also has many customers.
When generally talking about freelancers and rates, you hear kind of these two. We all start here in the Labor of Love, but you hear mostly about kind of this mass market approach in High End. Do you want to do — have low rates and work with a ton of people to kind of make that whatever budget or whatever goal you’re trying to hit financially, or do you want to do it high end? You have a higher price point, and fewer clients.
Both have their benefits. I think in general, a lot of us want to get into this high end, these are the guys you think of that are, you know, label guys, are doing big productions where they could do one song and it would pay what the rest of us make in a year. [laughs]
But what’s been a little different with my approach and my company, we’ve been ultimately trying to get to kind of the Golden Goose.
Now the High End is a good place for if you’re a freelancer kind of solo guy, but there are other options. There’s ways to get into this kind of golden goose quadrant up here, and that’s essentially sort of how I have tried my best to direct our company, which is by attracting higher end clients over time, and hiring more people.
So when I started, it was just me, I was like a lot of you guys, it was all me. I did lyric writing, I did production, I did mixing, I did all of the stuff, and then over time, it got busier and busier to the point where I needed to hire folks, but I also wanted that price point to go up. I sort of imagined it being like, “Hey, if we can get the price up from, you know, $500 to produce a song to $3,000 to produce a song, and do 30 of those a month, that’s great, have a couple of different guys that I’m developing under me.” That doesn’t have to be your goal, but for those of you who kind of are curious as to how this Golden Goose quadrant works, like what that would look like, that’s kind of where I’m trying to go.
A lot of the goals — or a lot of you guys will have the goal of kind of being in this High End area, and then expanding from there if you want, but let’s get back to kind of what to charge, or how to price your services.
Again, I can only sort of tell you what my experience has been, and we kind of went into this zig zag right here, so from one, to two, to three, to four, that’s why I’ve numbered it that way.
Obviously start as a Labor of Love, and then moved into Mass Market, so I was like, “Okay, so we’re not the highest priced yet, but the price is steadily going up, and we’re getting a lot of work,” and it’s a delicate line that you’re balancing, because if you’re hiring other guys, if you’re an independent man, you can only do this for so long, the Mass Market stuff. It’s going to wear you out.
And most independent guys don’t stay here too long, so unless you have a business model to where you can take on that much volume at a low price, without killing yourself, great. That’s kind of what we did.
The reason now — and I wouldn’t say we’re in this high end yet. I’d say we’re kind of medium price with many clients. So we’re — maybe I should’ve added another box here, but we’re not High End with fewer clients, we’re kind of medium price point I’d say on average, while retaining a high amount of clients.
And that’s been good. That’s how we can meet those big numbers every month between the three, four, five people working on our projects.
The strategy that I used to get there was kind of similar to you know, what cell phone companies and cable companies do. On-boarding, essentially, so when it was just me in the first kind of year and a half to two years, I was really cheap, but I worked like I was getting paid, you know, five, ten times as much, but in reality, I was very cheap, and I brought on a lot of clients that way.
It was tough, it eventually got to the point where it was like, “Man, I’m wiped,” and that’s kind of the make it or break it, you know. Once you have clients that you’re — the struggle of running a business isn’t over. You have to continuously be growing. If you’re not growing, you’re dying.
So it was important for me to kind of make a decision at that point where to shift, you know? And I decided that instead of kind of — you know, making some money but being dead all the time to make less money personally and bring on a partner and hire other people.
Now, because of that, because we did a good job at a low price point, we slowly increased our rates over probably like year three, we more than doubled it from when I just started solo by myself a couple of years before that.
Year three we pretty much doubled our rates, and we did lose of course some, but that’s kind of the on-board strategy, you’ve got to realize that you’re going to lose some, but you’re going to retain a high amount because of the service you’ve provided.
So if we — and I wish I had an exact number for you, I’d have to go back and do some data, but I’d say we retained probably 75% of our clients. There was about 25 that just said, “Hey, I love what you’re doing, but I can’t afford it,” and we knew that was going to happen.
So we retained about 75% of our clients at almost double the rate. Then we’ll probably do the same thing probably towards the end of this year, again, we’ll lose that 25%, and it’s just this slow climb, so my goal is to — if I was freelance, if I was independent, then probably getting to this high end, say, “Hey, I charge a lot, and I only need to do one project every two weeks to make a living,” and that’s totally great.
The way we’re trying to head with this on-boarding process and kind of repeating that, is heading towards this Golden Goose. It’s my strategy to try to get our company to where we’re a relatively high price point, that again is all kind of based on opinions. I’m talking about working with independent companies and independent artists here, so hell, if we get up to, you know, many clients at you know, a quarter million dollars a track, that’d be wonderful. [laughs]
Who knows. But at this point, our big focus is working with independent artists and we’re trying to push that high price point, but also have many clients, and the way to do that is to structure it like a business, where you have multiple guys that you’re developing and working underneath you.
So there you have it, that’s just kind of a quick rundown on what’s worked for us. Again, I don’t have any exact numbers for you, but you know, look at this matrix here and kind of decide, “Hey, where do I want to go? Where am I at now and where do I want to go? Am I still at this Labor of Love kind of lower price point few customers? Am I at the Mass Market? I’m getting a ton of clients, but I’m not charging a lot? So I may be getting money, but I’m doing a lot of work, or am I at this High End?” You know, kind of decide where you are now and where you want to go. I guess the other one could be, you know, in the middle. Let’s say you’re kind of medium priced, and you have few customers, and that, again, that doesn’t fall into this matrix, but I know a lot of guys that are kind of there. I have a kid I mentor who’s kind of mid-priced, kind of similar pricing to us, but way less clients, and he gets by. I think at some point, there will be a shift. He’s just making it a different kind of sacrifice to get — he’s kind of going from Labor of Love straight up to High End, and that’s where I’m confident that he’ll ultimately end up. He’s a solo guy. He’ll get that price higher and kind of have, again, fewer clients.
So different kind of sacrifice than jumping over to this Mass Market, and then going up here. You know, you may make more money in the Mass Market thing, the low price, many clients, but it’ll be way more tiresome as where he may not be making a ton of money, but he’s got it to where there’s enough for him to live and he’s not totally, totally swamped all the time, he can make sure that he’s putting in enough effort into his craft, and learning, and getting better, and promoting himself, and doing all the stuff that we have to do.
So that’s his story. You can kind of go from Labor of Love straight up to High End, you can try kind of going over to Mass Market first. I will say the Mass Market thing, it definitely wore me out, and there was a point where it was absolutely affecting the product and the quality of the product, which is a problem once you start realizing that, you need to make that shift quickly, and that’s why kind of immediately, upon discovering that, I pulled in a partner that was three times as good as producing, because what it did do was it allowed me to have some capital to leverage.
Say, “Hey, we get a lot of work, we get a lot of clients, and it makes pretty good money, do you want to come work with me?” And I don’t think I’d want to be in that position if I was doing the kind of medium price, low customer.
So a couple of different paths there. Now I’m just talking in circles, but just make an assessment of where you’re at and kind of where you want to go, and base your prices on that.