Author: Gregg Holmann
I recently attended the Mobile Beat DJ Show in Las Vegas and had the opportunity to chat with DJs from across the country. I am from New Jersey and network primarily with DJs from the Northeast, so it was particularly fascinating to meet business owners from the South, West, Midwest and even Canada. I was struck by the number of successful DJs at the show. Even more fascinating was the realization that there is no single path to success in this business. There are an endless array of business models and niches that can create a successful DJ enterprise.
The purpose of this article is to list and explore the popular business models in the DJ industry. This article will appeal to those who are new to the business as well as to those who are contemplating a change in their business model. The article concludes with a list of seven power strategies for DJ business success!
DJ BUSINESS MODEL TYPES
1) The Solo Operator
In this model, you simply begin booking yourself out to DJ parties or bars/clubs. You gain initial jobs through friends, family and putting the word out across town. The solo operator business model works particularly well for those with steady Monday-Friday jobs (hopefully with benefits). Weekend jobs represent supplemental income and a nice sideline business.
As a solo operator, you’ll need to purchase equipment, a legal music library and liability insurance. Without the benefit of having worked for others, you’ll need to figure things out on your own. Thankfully, there are many free online resources (such as offered by Mobile DJ Tips) to assist you in this regard.
Solo operators seeking to grow at a fast rate or go full-time in the business will need to invest time and money to expand. Key initiatives include a top notch website, successful marketing/advertising campaigns and a strong social media presence. A limitation of this business model is that as demand for your services explodes, you’ll need to turn away prospective clients for those dates that you’re already booked. These prospects will become customers of other DJ companies. Another limitation of the solo operator model is that you don’t have a team to back you up should you become ill.
Compensation as a solo operator can be good to excellent once you are able to pay back your initial investment in equipment and music.
I started my own DJ career as a solo operator back in 2003. At the time, I had a lucrative Monday-Friday job in finance, and was able to successfully balance the two jobs – at least for a time.
A quick word about solo operators focusing on bar/club/karaoke. These types of DJ jobs can be an excellent place to start, working in a fun and low pressure environment where you can beef up your people and emcee skills. Befriend customers and employees and it won’t be long before they are referring you for private parties. Bar wages, even in glitzy cities like Manhattan, tend to be low, but these positions can be gateways to better paying private events. Weekly bar gigs are also helpful in stabilizing your cash flow through seasonal lulls.
2) The Multi-Operator Employee
Another entry into the business is working as an employee at a multi-op DJ entertainment company. Multi-ops are those big DJ companies in your local market who boast large staffs of DJs, Emcees and Dancers. They often have professional office space and warehouses.
Advantages to working as an employee at a multi-op include (1) you can receive proper training often through a formal training program, (2) you don’t need to invest in equipment and can use the company’s gear, and (3) a busy multi-op can provide you with plenty of work. You don’t need to hunt for your own jobs or be concerned with running a business.
Disadvantages to working as an employee at a multi-op: (1) you typically must work exclusively for the company (i.e., no sideline jobs), (2) the pay scale is relatively low, and (3) if you decide to leave later to open up your own shop, you are typically bound by a non-compete clause from your employment contract that forbids you from soliciting business in a specific geographic area for a specified period of time. Also, you can’t steal clients from your former employer.
I mentioned relatively low compensation. This is initially the case, although employees who climb the ranks into successful entertainers/managers can come to command very handsome salaries. But it will take some time to climb the corporate ladder.
3) The Independent Subcontractor DJ
For those DJs who excel at their craft and are looking to pump up bookings, the independent subcontractor DJ model can be a solid choice. In this model, a DJ can have his or her own business, but also supplement these bookings by working on a non-exclusive basis as a subcontractor for other DJ companies.
This model is particularly appealing to those who are great entertainers but poor business people. They want to work, but have trouble attracting bookings or the right types of clients. By working under a DJ company with more marketing savvy, it can be a win-win situation for both parties.
Requirements for the independent subcontractor DJ include liability insurance, a professional sound system and up-to-date legal music library. You’ll also need to be great at networking and building relationships with other DJ companies. DJ associations and conventions are excellent places to rub elbows with DJ business owners.
The pay scale for talented independent subcontractor DJs is generally good to excellent, with the company paying you a fixed dollar amount or percentage of the total fee.
The main disadvantage of working as an independent subcontractor DJ is that you lose your brand identity. You are a hired gun and bound to the brands who hire you.
4) The DJ Agency Owner Model
This business model features a company owner booking out independent subcontractors to perform under the company’s masthead. These DJ subcontractors cannot be exclusive to the company (otherwise they would be considered employees as per the rules of the U.S. Internal Revenue Service). The subcontractors are presented with 1099 tax forms each year, and are responsible for paying their own taxes on this income.
This business model has characteristics of the multi-op business model, but offers greater flexibility. The business owner can provide some direction to its subcontractor entertainers regarding the company’s standards (note: under the IRS rules dictating the definition of an employee versus subcontractor, companies can’t “control” the work of the subcontractor). This direction should include a policy that states that at jobs, subcontractor DJs must represent your company only and not pass their own personal business cards. This structure is more tax efficient in that the subcontractors receive income that is not subject to a host of withholdings that would prevail if being compensated as an employee.
The DJ agency business owner now has a network of entertainers with diverse specialties. Commissions earned on booking out entertainers can help to pay monthly overheads. More DJs in the field also means more repeat business and referrals.
Subcontractor DJs are expected to own state-of-the-art gear and carry their own liability insurance.
A challenging aspect of this business model is finding and retaining DJ entertainers who will work with you as team players. To maintain loyalty and drive positive customer outcomes, it is recommended to offer attractive payouts. Otherwise, money hungry subs will view your underpriced work as filler only.
A constant risk of this business model is that government regulators could take a closer look at your business and determine that your subcontractors should have been classified as employees, subjecting the agency owner to penalties and back taxes. Those interested in this business model are well-advised to consult with a lawyer and accountant to ensure compliance.
Author and Multi-Op Company Owner Mike Walter writes in his book “Running Your Multi-Op,” “So my best advice is this: classify your DJs as Employees. Pay them as such, take out the proper taxes and file the proper forms. Building in an additional 10% of so that it costs to have an employee rather than an a subcontractor to your business and then you can truly sleep soundly at night knowing if you do get audited, you’ll have nothing to hide.”
5) The Multi-Op Business Owner Model
Owning a multi-op DJ company offers the highest possible compensation and a chance for a million dollar business, but requires an immense amount of business savvy. Owning a multi-op also requires substantial financial capital to fund various overheads that can include office and warehouse space, capital equipment (DJ systems), marketing, advertising, insurance, showcases, continuing education, middle management, professional associations and benefit plans for the owners/employees.
The owner of a Multi-Op who enjoys performing will either need to curtail his or her performances or else bring in a General Manager to run the business on a day to day basis.
By offering a high quality training program, multi ops can create a standardized style of entertainment and build a brand. If properly executed, a multi-op company will come to eclipse the reputation of its owner DJ. This sets the stage for an exit strategy, where the owner can sell the business. The new purchaser would inherit a well-oiled machine with a strong brand name and all of the required systems in place to earn a financial return from day one. The other business models previously mentioned don’t generally offer an exit strategy other than the liquidation of a DJ’s equipment. Such equipment sales are typically done at pennies on the dollar.
Challenges for the multi-op owner include staff retention, quality control and managing business downturns. Another risk is that star employees may decide to leave and start their own companies. Even if a non-compete agreement was signed, these can be difficult and expensive to enforce.
For those contemplating building a multi-op, I suggest the following two books:
1) The E-Myth Revisited – Why Most Small Businesses Fail and What to Do About It – by Michael E. Gerber (available on Amazon.com)
2) Running Your Multi-Op – by Michael Walter (available at http://www.trainingyournextgreatdj.com/book/)
About the Author
Gregg Hollmann is the owner/operator of Ambient DJ Service based in East Windsor, New Jersey, a former President of the New Jersey Disc Jockey Network, and the author of “The Bride’s Guide to Selecting the Perfect Wedding DJ ”(available on Amazon.com). Follow him on Instagram at “AmbientDJs”