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Old 12-27-2012, 05:53 AM   #1
WesM.Vaughan
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Band Financing?

I am trying to figure out what percentage each band member should get based on what they invest or contribute to the band.

For example, someone will purchase a trailer and another person already has PA equipment. How do you rate the value of PA equipment that is so many years old?

Or for example say someone were to take out a loan for all expenses needed to get the band going. Would that person be entitled to a bigger cut from each gig? Since that person took the risk are they entitled to a certain bonus even after all equipment is paid off?
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Old 12-27-2012, 07:47 AM   #2
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The unhelpful answer is that you need to sit down with the band and make these decisions.

Usually if a member brings something to the band that they already own then you don't need to worry about the cost. They own it, it's their responsibility. If they leave the band they take it with them or sell it to the rest of the band for an agreed price split between all members.

If you need to buy kit for your own setup then you buy it. i.e. I wouldn't expect the rest of my band to chip in for an amp if I bought a new one.

If you want to buy something for the band (a van, a P.A. etc.) then split it evenly between all members.

I wouldn't go taking loans out really, but if you want to and the loan is to benefit the whole band then you need to decide on the repayments. Remember that loans will usually have monthly repayments and paid gigs might not be as frequent as that. I would suggest spliting the repayment between all members regardless of gigs etc. Again, I would also not suggest taking out a loan. Obviously, if they take out a loan for their own equipment it is up to them to pay it back, they should have budgeted before taking it out so they don't get any extra from band takings.
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Old 12-27-2012, 07:55 AM   #3
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Personally I'd say a band splits things evenly. It obviously needs to be discussed and agreed with the band members, but relying on income from the band to pay for anything is a seriously bad idea.

If one of the band members takes out a loan for his/her equipment, then it's that person's responsibility to repay it. The chances of a start-up band actually making enough money to pay back a loan are so slim, that the money you're going to earn through gigging will be little more than an occasional bonus for everyone.
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Old 12-27-2012, 08:05 AM   #4
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My 2 cents, and what's worked for me in bands:
-We don't take cuts, we put all the money from merch, door money, guarantees, and it goes into the band fund, which is then used later to buy more merch, repair equipment, buy new equipment, pay for gas to/from.

-Split all expenses evenly, if we CAN. Some people might have better/more steady jobs, and if they're willing, they may foot a bigger bill. But always try to keep it EVEN so everyone is equally responsible.

...if you're just an originals rock band playing out, you're never going to make enough money for it to make sense to even split it IMO. Even if we take home $100 from the door, which isn't typical, that's only 25 bucks per person. Might as well just keep it consolidated and use it for band purchases.

If you're making big bucks, then that might be the time to actually have a discussion about how to split it.
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Old 12-27-2012, 12:17 PM   #5
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My rule of thumb is that expenses get paid first.

So lets say we need a PA. Regardless of who buys it, the PA gets paid off FIRST, before any of us get a "share" of what we earn. It's then band property.
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Old 12-27-2012, 01:03 PM   #6
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don't pull together finances until you're worrying about touring.
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Old 12-27-2012, 06:52 PM   #7
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Quote:
Originally Posted by WesM.Vaughan
I am trying to figure out what percentage each band member should get based on what they invest or contribute to the band.

For example, someone will purchase a trailer and another person already has PA equipment. How do you rate the value of PA equipment that is so many years old?

Or for example say someone were to take out a loan for all expenses needed to get the band going. Would that person be entitled to a bigger cut from each gig? Since that person took the risk are they entitled to a certain bonus even after all equipment is paid off?


Just some basic run downs of expenses in my bands:

- Each person bears the expenses involved with their instruments. So the guitarists pays for his own guitars, guitar strings etc.

- PA; whomever owns the PA gets a share to accommodate for their contribution. So if there's 4 people in a band, and a payment of $100 would usually be split 4 ways ($25 each), if they use a member's PA for the gig, that $100 is split 5 ways ($20 each) with one member effectively walking away with $40. Another way to visualise it is that the PA is an extra member of the band.

- Accomodation/Travel; Not covered unless there is a substantial distance to drive or fly ie. a fair bit out of town/city. Paid off before any personal musical payments. For this reason travel should be organised to use as little cars as possible

- Van; is owned by the PA person, that's the PA person's expense. Petrol will be covered if it's a lengthy journey (see above). If that person does not have any way to move their PA otherwise it's their problem, perhaps it can be split up between multiple cars.

- Loans; that's not the band's problem. Whomever takes on the loan can pay it off. PS. Don't take out a loan.

- Get a job. It's a good way to get money to get the things you want.
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Old 12-27-2012, 08:02 PM   #8
WesM.Vaughan
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Thanks for the input.

Alan - so you are saying that the person that owns the PA has a van and that he gets an extra cut based on having a PA + Van? So that if he did not have a Van he would not get that extra cut because some one else would have to haul the equipment?

HotSpurJR - I agree sorta. If you don't have the money to purchase the equipment, some one has to take the initial risk of getting a loan and most have agreed they deserve a certain bonus.

This is for a cover band playing weddings, private parties etc.

Thank you for the answers!
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Old 12-27-2012, 10:12 PM   #9
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No the van is just a way of moving the PA. If you don't have a way of moving your own gear that's your own fault.

If a person's PA is used they get a share because you would have paid for hire of a PA anyway. It doesn't matter how the PA gets there. Person who owns the PA gets paid.
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Old 12-27-2012, 11:33 PM   #10
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However you decide to do it you should discuss it equally among the band members. There are a lot of things to consider...

Is everyone an equal partner? If someone does more in regard to the managmenet (booking gigs promotion etc) do they receive a larger percentage of the partnership in the band or do they remain equal partner and receive payment for the extra time as an employee of the band (thus they would be a partner and also an employee hired to do other work for the band).

How are decisions decided? Majority rules? Does every member have veto power? Do one or two members have more decision power than the others?

What are agreed expenses? When can travel be claimed and when not? What happens if a member can't make a certain gig? What kind of notice period is necessary? Do they cover the cost of a replacement player? Are they responsible for any losses to other members of the band if the gig does not go ahead because they didn't show up? What are the consequences of not showing up to rehearsals?

Under what grounds can someone be removed? What happens if someone leaves? What are they entitled to if they leave (voluntarily or otherwise)?

What is "band equipment"? How was it paid for (or how will it be paid for)?

The more of the hairy situations that can be covered upfront when everyone is on good terms the better. Everything should be as fair as possible and everyone should be able to agree on terms. You should put everything in writing and have it signed by all members.

If anyone wants to change things in the future or the band wants to buy something and someone decides to take out a personal loan on behalf of the band then any future agreements should also be documented as best as possible and signed by all band members.

All band members should be given a copy of any and all agreements.

This means that if you do enter into some kind of agreeement and things go south between members at a later date then it will be really easy for Judge Judy to sort it out when they decide not to pay and you have to take them to court. (or vice versa)

In other words - as long as you aren't ripping off the tax man then whatever you decide on in regard to such matters isn't too important. What matters is that you document your agreeements and all members sign to show their agreement and they all get a copy of that signed agreement.
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Old 12-28-2012, 12:46 AM   #11
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Some basic principles:

Anything that belongs to a band member stays property of the band member. Just because you bought a guitar amp with your money doesn't mean that anyone else in the band can lay claim to it because you bought it while you were in the band. That sort of thing.

Anything that everyone chips in for to buy for the band is property of the band. If everyone chips in for the guitar amp you need, and you quit, you can't lay claim to it because you're the guitar player and you're the one who uses it. This is why it is a good idea to keep band purchases to things that benefit the band as a whole.

Band assets need to have a plan for what happens when something happens. Usually, if someone quits or is fired, the rest of the band will buy out that person's share. Nobody relinquishes something for nothing. If the band breaks up, then assets are liquidated and the money distributed equally among the owners.

People who are not treated as equal partners cannot be expected to participate as equal partners. If member x is only "assessed" at 10%, then why the hell would he/she contribute equally to promotion, rehearsal time, personal energy and effort, etc? If someone else in the band is getting twice as much as me, why should I be expected to put in any more than half the effort? If you want people to be valued members, then they have to be made to feel like valued members. Otherwise, cut them a cheque after each gig for their $50 or whatever they're going to take home and don't ask them for anything else. Similarly, when the amount of time spent reaping a reward no longer seems worth it, don't be surprised when they jump ship.

The other thing you need to do as a band is to determine whether or not people rely on the band for income. If they do, you'll need to find an arrangement to pay people. Otherwise, they'll have to find some other band that will pay them what they need. Keep in mind, though, that when the band needs something, people may need to reach into their pockets, and then you'll have to figure out how that's going to work. For most people, this is not the case. Most people have another job.

The best bet is to pay the band into a band account and use that to reinvest into the band. If/when you need to, every now and again, make a pay out. Rather than $50 at a time, maybe every 20 gigs, pay each member $500. You can do something with that, and the other half of the money stays in the band account.

You CAN take out a loan as a band, but you'll need to register as a business, and apply for the loan as a business. Consider the conversation:

What assets do you have to secure the loan? (read: if you can't repay the loan, can we take your drum kit and a couple of guitars?)
What is your business income that you'll be able to rely on to repay the loan?
How long has your band been in business, and what kind of money does it make? (read: how much can your business reasonably afford per month to repay the loan, and what is the likelihood of the band not breaking up before the loan is paid off?)
Who owns the business? (read: who will we come after in the event the employees leave?)

If you think this conversation will fail in securing the loan for your small business, you'd best not apply for a loan.

CT
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Last edited by axemanchris : 12-28-2012 at 12:49 AM.
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