AIM (Association of Independent Music) have created a useful PDF with tips on how to open your own record label. As you've heard in the media, many signed artists are unhappy with their current labels, due to the lack of control and unfair percentage cuts, and are now opting out to start their own. You can find AIM on myspace. They're one of my top friends in www.myspace.com/polkadotrecords.


Here is an extract from the 8 page file:

HOW TO START AN INDEPENDENT RECORD LABEL

A BRIEF OVERVIEW
Owning your own record label. It's the dream of many of us, from the artist
that wants to get their music heard, to the manager, producer or promoter
that has found the next big thing. Sometimes it seems like the only
alternative to securing a release with another label, although it can become a
destination and brand in itself. Here I offer some suggestions to get you on
the right track with your plans, but the exciting thing about the music
industry is that despite the rules and regulations there is lots of opportunity
for us to come up with innovative new ways of doing things. In fact, as with
any business idea, a music product that is high quality, that people want,
that is exciting and original, stands the best chance of success.

Funding your label
In a survey the 5 most common ways of financing music businesses were:
1) Capital or personal savings of owners (77% use this sort of finance)
2) Bank Overdraft 19.7%
3) Loan from Family or friends (15.8%)
4) Loan from Bank (11.9%),
5) Loan from Owners or Directors (10.3%).

There are small pockets of public funding available, in the form of grants and
loans. These tend to be limited to economically deprived areas, or for
businesses that have been turned down for bank finance. More often support
tends to be available in non-financial form such as office space, training or
business advice (see Business Plans section for more on where to access
funding and advice).
Where this funding is not available, a typical way of raising cash is from
running another music business; club promoters, DJ's, or former artists are
all amongst those who have turned their industry knowledge, brand name,
and the cash they have built up into successful labels.
If you are not in the position to put in a lot of capital, one way some labels
start up on a very small budget is to get one or more partners to put in a
start up sum, say £250 or £500 each. This could be paid into the label fund
over time, say your first six months while you continue to work at your 'day
job'. These funds could enable you to record and release some product. The
key to the survival of this type of company will be making your money back
(breaking even) on every product you release.
The low budgets may mean that you cannot afford extensive marketing of
your products, and will probably have to get out there and market them
yourself. If you can't raise the money to get your first release out that way,
you could look into getting a bank loan. This is obviously only going to be a
good idea if you have a business idea that will make back the money plus
interest (plus hopefully some profit) within the time of the loan. This is the
essence of running a business, and starting small and building a track record,
contacts and experience will enable you to leverage more money and
support in the future.

Income and Expenses
When calculating your budget, consider the following sources of Income and
Expenses, it is not exhaustive, and unfortunately unexpected costs seem to
arise much more often than unexpected sources of income!

Income
• Record Sales (from selling your physical product (CD's, Vinyl) in the UK,
and via export deals which can include the budget market, singles market
or compilations or artist albums market)
• Broadcast Income (Income from having your recordings broadcast on
radio or television, or played in public places. This will be collected for
you and paid to you when you join Phonographic Performance Limited –
See below for more about collection societies)
• Licensing (Giving a licence to other record companies to release your
recordings on compilations, or under an exclusive licence for a whole
album, for which they pay you a licence fee or royalty on the records
they sell)
• Secondary Licensing (getting your music licensed by the producers of
advertisements, computer games, films or television programmes - also
known as Synchronisation licensing as it involves the synchronisation of
your music with their pictures)
• Merchandise, Touring, Fan club, Website, Branding, Sponsorship (if these
are part of your deal with your artists, you can sell concert tickets, tshirts
and other items, and can do so on behalf of your label if it builds a
brand name of its own)
• Digital sales & ringtones (still tiny compared to record sales at on
average under 5% of revenue, but a growth area of the business that
some have made profit from).
• International broadcast and licensing income from international airplay
and from companies who have exclusively licensed a piece of music for
their country (territory).

Expenses
• Overheads (rent, electricity, business rates, telephone, computers,
insurance, office equipment and furnishings, stationery)
• Staff Costs (Including accountancy and legal advice)
• Taxes such as VAT and National Insurance
• MCPS bills (Publishing)
• Recording, mixing and mastering recordings
• Producers Fees
• Artists advances and expenses
• Travel expenses
• Manufacturing costs (or digitising costs for digital downloads)
• Artwork and Design (including pack design, photography, websites,
logos, promotional materials)
• Videos
• Radio and TV promotion for records or videos (plugging)
• Press (PR)
• Advertising (above the line) and Direct Marketing (below the line)
promotion of your product
• Distribution Fees and Sales Costs

*Note that some of these are fixed costs, meaning they will have to be
met and are unrelated to how many records you are likely to sell, for
example the overheads. On the other hand, if you get the promotion of
your record at the appropriate level for your release then hopefully your
sales and other income streams will increase relative to the amount you
have spent on promotion.

Keeping fixed costs as low as possible will help your label deal with
successful and less successful times. Also, remember that costs are often
payable well in advance of the related income (for example manufacturing
bills may be payable months before record sales income, or radio
promotion payable in advance of broadcast income), so you must make
sure that your cash flow doesn't dry up before you can
from your activities. It's a tricky balancing act.



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To read the rest of the article from AIM check out...

http://www.musicindie.org/clientdocuments/information/AIMStartALabel.pdf