ROI For Musicians — What Is It And Why Do You Need It?
There’s a concept in business, called ROI. Here’s how it applies to music, and why you might want to think in these terms.
ROI stands for Return On Investment. If you invest money in something, and you get the money you put in back, plus some — the profit is your return. In general, most folks are looking for a return as big as possible, with as little risk as possible. So, they want to invest little, and get back big, for a high return on investment. You wouldn’t want to risk $1,000 to earn $1, right? But you’d gladly risk $1, for a possible $1,000 payoff.
There’s another factor too. What does the investment cost? There may be fees or other expenses involved. So, you balance the cost, the risk, the amount invested, and the potential profit.
So, how does this apply to music?
Well, most of us invest money in our careers, but there’s something else we invest. Time. And time, as we all know, keeps flowing like a river — to the sea. In other words, it goes away, and we can’t get it back. Time is probably the most important investment we make.
And the returns are different too. Most do-it-yourself musicians would like to make more money with their art, but there may be other payoffs. We might be looking for more fans, so the local shows are more exciting. We might want to break into a new market, or drive fans to sign up for our email list. Or follow us on twitter. Or buy our tunes on iTunes, or give us a spin on Spotify. Or get a song landed in a commercial. Or maybe we just want folks to think we’re cool. And there’s artistic satisfaction, which can be the biggest payoff.
We probably need to either trade time, or money, to get any of those things.
Give Your Time A Value
Here’s what most folks don’t do. They don’t give a value to their time. So, when deciding to take a gig, or follow a promotion strategy, they forget to account for their most valuable resource. I’ve certainly made that mistake.
My Least Favorite Mistake
Last year, I got offered a local gig. When I play out, if there’s a P.A. at the gig, I just take a guitar and an iPad (I play guitar, and sing, along with backing tracks that I record). This gig was so close that I walked to it. It only paid $200, but I didn’t have to split it with anybody. And I wasn’t doing anything else that night.
“What the heck,” I thought. “Why not just carry my guitar down there and play for a couple sets. I might get a few new fans.”
But here’s what I didn’t take into account. I had a set worked up, and a few extra songs. But I needed enough material for two sets. Not only did I have to record more new material (I record my own backing tracks, remember), but I had to learn new songs too.
Even though I enjoyed a lot of the process (enjoyment is a return on investment), learning cover songs to fill out a second set was not really central to my goal of being more successful as an original artist. I also used the gig as an excuse to push myself to finish a couple of originals. But I spent a lot of time doing things that didn’t get me closer to what I wanted to get.
What Was The ROI?
If you figured just the time I played, my ROI was pretty good. I played for a couple of hours, and my only expenses were a set of strings, and some posters. So — $0 invested, $20 in expenses, and $200 in income. 0 + 20 = 20. 200 – 20 = 180. $180 profit, on a $20 investment. That’s outstanding ROI.
But that’s missing an important factor — time. I probably spent (conservatively) 50 hours getting ready for the gig. If I valued my time at only $5/hour, I lost “money”! My ROI was negative.
Is It Central To Your Purpose?
You typically don’t get paid to go to medical school or to practice your instrument(s). But these are fundamental needs to succeed, if you want to become a doctor, or a musician (respectively). So, not everything you do is going to have an ROI you can point to. But if you want to be a doctor, going to medical school is central to your purpose. For musicians, it’s becoming good enough at playing, or writing songs, or whatever skills you need, in order to succeed.
So, once question I like to ask myself, when I’m unsure whether I should take a gig, or buy a music marketing book, or learn a song is, “How central is it to my purpose?”
The kicker on preparing for this gig was, that a lot of the time I spent was not central to my goals as a musician. I don’t really need two sets of material for other gigs. So, it took away time and set me back from accomplishing my musical goals.
Fortunately, though, it wasn’t without payoff. I’ve got a few covers mostly recorded. I can finish them and post them to YouTube — that fits right in with my YouTube strategy. And maybe some of them will end up on a CD, at some point. They could be useful in both earning money, and bringing some potential fans into the fold, who otherwise wouldn’t hear me.
But My Point Is This
Well, it’s a few points, actually.
- Know what you want to achieve in music — what things you want out of it
- Figure out some sort of relative scale for the value of those things
- Put a value on your time
- When considering how to spend your time, balance those values, and see if it makes sense
So, if you want new fans in your area, and want them to think you’re super-cool, you value your time highly, and earning money is way down the list, you’ll take that 45 minutes set in the new, chic club, that pays $50, over the kids’ party that pays $600 (but that you have to learn new songs for).
However, if your main goal is to get out of your job as a taxidermist, and you just love playing music, take the party, and turn it into more parties.