5 Key Business Tactics for DJs

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Each year, thousands of entrepreneurs take the leap of faith. You did, remember? Dropping the full-time employment and beginning your DJ business was entwined with the hopes and dreams of obtaining financial success and independence.

With all good intentions, these new entrepreneurs begin working on a business model, creating a plan for sales and marketing, purchasing assets and diving head-first into business development.


But as a commercial lender for over 30 years, I have seen countless business owners try to take control of their financial future only to veer off on a path they had not intended—usually because of a lack of capitalization, financial discipline and a realistic understanding of what it take to be profitable.

The success rate of a small business is entirely dependent upon the owner ensuring that they take these five actions to ensure you’re making all the right financial moves.

1.Create an annual budget and manage to the bottom-line.

Knowing how much you make is the easy part, keeping track of what you are spending is what often causes a business to fail. For each event you book, gain a clear understanding of the costs associated with delivering your services for the event.

It’s not just limited to expenses related to the day of the event, but the costs leading up to securing the event, marketing, fixed costs to running your business, insurance, office operations and future replacement of equipment.

2.Plan for capital expenditures.

Save for the future by planning on putting aside 5 to 7 cents of every dollar in revenue, to ensure you have working capital for long-term growth. This also can be allocated for unexpected expenses, such as unanticipated equipment replacement or short-term cash flow during slow periods of the year. When an unforeseen expense happens, those who did not plan scramble to find cash, often at a high cost or ultimately close up shop because, in their own words, “They did not see that coming.”

3.Discounts, the exception and not the rule.

You set the price of your services based upon the budget you’re created at the beginning of the year. If you choose to discount, then you need to review you expenses and adjust them accordingly. Often we are more focused on winning the sale without evaluating the short and long term impact to the bottom line. An occasional discount will not have a significant impact, but long term can erode your profits quickly, resulting in a negative cash position of the business.

4.Financing that is too good to be true.

Small-business owners are primary targets for predatory lenders. Easy access to working capital is often deal too good to be true, right? Banks and credit cards with loan interest rates should be your primary source for capital. Preapproved loans from non-traditional lenders such as finance companies often result in rates between 20- to 25-percent and higher than average loan fees.

If you accept credit cards for payment of services, do not consider accepting a loan in which payment is based upon future credit card revenues. These loans are short-term in nature and with a fixed pre-determined monthly payment based upon historical credit card transaction volume. It translates into the lender taking up to 65-percent of your merchant receipts on a weekly basis with an effective interest rate exceeding 25-percent.

Accurate and timely financial records of your business will insure that applying for a traditional bank loan or credit card will not be a painstaking process.

5.Do what you do best, stick to your core business model.

Entrepreneurs are prone to adding other sources of revenue to grow the business and, in most cases, it can be successful. A pitfall to avoid is focusing solely on the revenue, and not assessing the overall impact to the bottom line. Spend time thoroughly investigating what it will cost you in capital to start up this new service, additional expenses to deliver the service, both from a fixed and variable cost and it will erode away from your core business.

For example, many mobile DJs quickly spend thousands of dollars investing in photo booths with the ambition of increasing profitability. The decision to invest was predicated on the sales pitch that you will add $10,000 or more to your bottom line. Focusing on the promise of greater revenues caused many to be blinded from the fact they did not account for the costs associated with earning this income.

Once many realized they were not making the money promised, the market became flooded with a lower price point, quickly turning it into a commodity. At that point, the business owner is simply trying to recoup their initial investment, and preserve the revenue from their core business.

Being a successful business owner takes planning, review, discipline and foresight to achieve your financial goals. As a commercial lender and business banker, the businesses that I have financed and grew to a successful brand, embedded these five actions as the core of their business model—and you should, too!

If you have any questions for Jerry Bazata or Business Line, please send them to djtimes@testa.com.