Setting up a Small Online Business- How to Profit from Free – Part 2

Today we’ll continue where we left off last time. By the time you’ve finished reading part two, you will have a good idea of how to create a business model and ‘create profit from free’.


Someone recently said, “You would be amazed at the people I meet who are experts in their own mind on a particular subject. They have decided to move to another country and use the money they have to set up their dream business. However, after a short conversation about their business plan (what’s a business plan?) and the actual operations of their upcoming business, you discover there is no plan, method, process or idea of how things work. “These people are real time wasters; avoid them like the plague. They are the tyre-kickers who want to discuss their ideas, but baulk as soon as they know they will be charged a fee for professional advice.


Let’s look at the technical side. It’s a given that your musical offering has to be exceptional for the market niche you have chosen to reach. As a rough rule of thumb, around 10 000 hours of actual practice makes someone an outstanding specialist in their given field. And there are so many genres in music, so you need to specialise.


Specialisation brings us back to your marketing question. In your business model you will have recognised the niche you are aiming to service. In your strategy research, (I know you did extensive market research, didn’t you?!) you discovered the demographic that relates to your marketing niche. These people you want, where and how do congregate online? Facebook, Twitter, YouTube, Spotify? These are some major examples. You will have to spend time learning how these conversations flow, what language is used, what trends are being followed, etc. You can pick a couple of examples of how some artists went viral and search out all the references and resources they and their customer base used.


You should start putting up some free stuff on social media and join conversations to demonstrate your authenticity in order to build credibility. Tell stories that hit emotional buttons. You will also need to build a website, but most of your activity will be via social media because (I’m assuming) that’s where most of your market communicates.


So now that people are starting to talk and share your great free offerings, where do you go from here?


How do you actually make money?


The key element is that your customers (in any business) pay for scarcity. This is a really important point. Once upon a time—perhaps as recently as last year—you had scarcity because only people who bought your music could experience it—or they paid to go to a live concert and experienced it there. Or perhaps they bought a concert DVD to experience your music. Now you have to create scarcity in other areas. And in these lie the different business model options. These options can turn this growing interested groundswell into a model of scarcity that will see people perceiving value from actual purchase and use.


The first model is about 400 years old. Musicians like Mozart, Bach, Beethoven and Haydn would call for subscriptions before they would write a new piece of music and have it performed. Today we do the same sort of thing with crowd-funding. (Take Google’s Amanda Palmer Kick-starter campaign for an example)
Second, there is the simple album sale. A very small percentage of your customers will like your singles enough to buy your albums; but that may just be enough.


Those ancient musicians also had patrons or sponsors, which brings us to the third option: to offer scarcity through membership. Here you are in frequent contact with your most loyal customers who are willing to pay a subscription. They accompany you on the music creativity process through your tweets, postings and small excerpts for them to experience. They share with you the joy of success. This could be extended through an eBook course that people sign up for in order to help show your fans how to create music your way.


Ultimately, whichever model you use has to take into account the cost of giving away free stuff versus the return from a small percentage of your fan base—those who are willing to pay for something that is scarce. That’s what a proper business model and business plan will help you know before you start.


Graeme Stevens
CEO and Co-Founder
neXtep easy


neXtep Business Builder Community Pte Ltd
Singapore ACRA Business Registration Number: 201424522Z
80 Kitchener Road #09-09/10 Singapore 208539