In the first blog, I introduced the idea of creating metrics to help increase your value as an entertainer of various kinds, be it individuals, groups, or curators. The two ways I saw to do this were to quantify your progress through two high level metrics, defined as Active Value, and Passive Value. Passive value, as I see it, is quite a bit easier to quantify. It’s simply the money your entertainment brings in, or if we’re talking business-like, gross income or returns.
The simplest way to start quantifying this would be to record your income as an entertainer, per gig. The more gross income you can generate, the better off you’ll be. There’s of course going to be an argument that net is really what’s more valuable to track, and it is, but it’s also quite a bit more complicated to track. For the sake of simplicity, gross income will be used, at first.
Steps to measuring Passive Value
Create a spreadsheet, and define each metric as the column header, then start with defining the columns as such:
||New Years Eve Gig w/ [band1][band2][band3]
||Bartenders Ball w/ [band1][band2][band3]
||Valentines day gig w/ [band1][band2][band3]
||Kellz Irish Pub
||St. Patty’s day gig w/ [band1][band2][band3]
||Yoshi’s Knife Room
||April Fools gig w/ [band1][band2][band3]
||Memorial Day Gig w/ [band1][band2][band3]
Now, using this method is only effective to a point, because at the end of the day, you want your NET income (gross income less expenses) to be growing, and that’s done two ways, reduce expenses, and increase gross income. I highly recommend focusing on the latter because it’s limitless, you can only do the former so much before you’ve maxed out. The reason I pick exclusively gross income, is because it’s a good starting point, and it’s easier to track on a day to day basis, than the net income. Net can involve many date overlaps, for example, if you have a gig in 3 months, and spend a budget on marketing for that, do you include that budget at the time of the expense? or once the gig itself is done? That’s for you to decide at the end of the day, but gross income can easily be tracked. Below is the data in the table above, charted out. The dotted lines are trend lines, the goal is to have them heading in the upper right hand corner, as steeply as possible.
We can also see from the chart that merch sales could use room for improvement. This kind of charting, and data collection is what will be useful to help improve your Passive Value amount.
The level of details tracked can be adjusted to whatever you’re most comfortable with. Want to know day to day changes? Sure, but it’s that much more work, and is it really that valuable? Perhaps week by week? Month by month? Whatever the interval is, it should have a resolution such that you can clearly see a pattern. Personally, I’m nuts and like to track almost day by day so I can have the most detailed information, but that takes a lot of time, so balancing out what’s appropriate time-wise is important too.
I’ve found the easiest way to track this is to set yourself up as an LLC, then get a business bank account, and use that account exclusively for all expenses in and out. Any time you get a cash, or check, immediately deposit it into the account, and let the bank software keep track of your ledger. Then you can generate reports (hopefully if the bank is sophisticated enough). If the bank is NOT sophisticated enough, then a free tool I use (and completely swear by) is www.mint.com. This website is the final boss of free finance tracking stuff. It doesn’t have every bell and whistle, but if you’re looking for an easy, free way to track your business finances, and generate great reports, and see trends, this site has it all. You can eventually use it with Quicken and all that later because it’s owned now by Intuit, and they have all those resources ready for you when you’re ready to make the switch. Plus, depending on the bank, you can also set up all of your financial obligations, or contract based employees (Hired musicians) as bill pay recipients, and your bank will mail them checks for you.
For example, if you set up John Smith, with his address in your electronic bill pay for the bank, and set it up to pay him out. You can even test this by putting your own name and address into the electronic bill pay system, and mailing yourself a check for $5 or something. This does take a bit to get the check mailed out (and you can see just how long when you mail it to yourself), but you can always rely on it to be delivered, and it saves you time having to do it yourself. The checks mailed are like cashiers checks, as in they are worth the value printed on them, and they take the money out of your account at the time you request the check sent, so there’s no balancing your account, or waiting for checks to clear. Also, there’s always those apps like square cash (as a bonus, if you want $10, put in the code VXGPTWT, and you’ll get $10 sent to you, just trying to be helpful), venmo, paypal, but they take a cut if you’re a business, and to set them all up with your business accounts can be tricky if you also want to have your personal accounts on the apps. I’ve found it’s best to snag an old smartphone, one you don’t have connected, but then just use it like a tablet, only connecting to wifi, and get all the apps sync’d up to your old smartphone. Works just as well!
The hardest part with this metric is that it’s no fun for the most part. You’ll now have adult harder to make sure all your finances are in line. Now the interesting part is you can start to use these numbers to start devising strategies on what’s working, financially, and what’s not. If you use your gross income to try and find patterns, you’ll begin to see which gigs are more valuable than others. From here, focus on the 80/20 rule (80% of your income comes from 20% of what you’re doing) so find the most lucrative 20% and focus on that. That is the entire purpose of the passive value metric, it’s to enlighten you to the patterns you’re creating to focus on the most lucrative methods.
The other major benefit of tracking this metric is it will show you your weaknesses. You’ll clearly be able to see that perhaps merch isn’t bringing in as much as you thought, and you’ll want to revamp that to see if you can increase that. You can use other tools like square register and whatnot to keep track of what items are selling the most, and focus on those, and also which are selling the least to either cut them, or revamp a strategy on them.
You’ll be able to see what gigs are the paying out the most too, and focus on those. Once you plot this over time, your goal is to see a steady movement upwards as time progresses. If you don’t, it’s time to reevaluate your strategy.
I hope this information gives you some brain food, please comment below with any feedback you may have on this, I’m hoping to think more about all aspects of this.