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Written by: Howard Tillerman
Howard Tillerman is the Chief Marketing Officer for Step By Step Business and an award-winning marketing professional.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on August 18, 2021
Investment range
$4,000 - $40,000
Revenue potential
$325,000 - $2 million p.a.
Time to build
0–3 months
Profit potential
$80,000 - $500,000 p.a.
Industry trend
Declining
Commitment
Full-time
Consider these crucial factors when launching your karaoke business:
You May Also Wonder:
How do I become a karaoke DJ?
You can make a good karaoke DJ if you’re a music enthusiast and can sing. Buy the necessary karaoke equipment, get your playlist ready, marketing your services, and you’re good to go.
What are some ways to stand out from competitors in the karaoke market?
To stand out in the karaoke market, offer unique and diverse song selections, create a welcoming atmosphere, provide exceptional customer service, and collaborate with local businesses. You can also host theme nights, contests, or live music events, and invest in high-quality sound and lighting equipment.
How much do karaoke hosts make?
The gross income for a karaoke host is $18,000 to $43,000 per year, according to Glassdoor. Even so, you can expect to generate $50,000 to $150,000 per year as a self-employed karaoke host.
How do you make a successful karaoke bar?
Some of the factors that can determine the success of your karaoke bar include the general ambiance of your space. Your bar should be clean, inviting, and comfortable. On top of that, you need to pay your staff well to keep them motivated.
How do you create a karaoke room?
While a karaoke room doesn’t have to be fancy, be sure to install state-of-the-art equipment, including a display screen, a mixer, a karaoke system, and enough four microphones to provide an excellent experience.
Demand is always strong, so karaoke is a great business idea. But will it work for you? To answer this, you’ll want to focus on the nuts and bolts of the business.
Whether you’re starting a karaoke company as a side hustle or a full-time occupation, there are several pros and cons to consider.
After a sharp pandemic-driven downturn in 2020, market analyst IBISWorld expects increased consumer spending to return the US karaoke industry almost all the way back to pre-pandemic levels by the end of 2021.
Hope is growing that the sector will recover as the economy starts to open up and bars and clubs gear up to bring customers back, while more and more people welcome big groups of friends and loved ones into their homes again.
Trends shaping the karaoke industry include:
Challenges in the karaoke industry include:
Starting a karaoke business can cost anywhere from $4,000 to $40,000, with an average of about $22,000.
The core of any karaoke service is equipment. Creating a delightful karaoke experience can be difficult without the right equipment. You’ll likely need the following equipment to get your karaoke business off the ground:
Other than commercial space, most costs go toward buying equipment and marketing, as broken down below:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Company incorporation, licenses, and permits | $300 - $2,500 | $1,400 |
| Insurance | $250 - $950 | $600 |
| Employee and employee-related expenses | $200 - $1,500 | $850 |
| Software | $200 - $2,800 | $1,500 |
| Promotion, advertising, and marketing | $500 - $5,000 | $2,750 |
| Karaoke equipment | $2,000 - $5,000 | $3,500 |
| Website | $250 - $1,250 | $750 |
| Bar renovation, furniture, decor, crockery, and utensils | $0 - $12,500 | $6,250 |
| Vehicle | $0 - $7,500 | $3,750 |
| Miscellaneous | $300 - $1,000 | $650 |
| Total | $4,000 - $40,000 | $22,000 |
The amount of money you can generate with a karaoke entertainment business depends on the type of karaoke business you’re operating, target customers, products, and services. According to IBISWorld, there are 1,540 registered karaoke bars in the United States, generating $1 billion in annual revenue, which translates to $650,000 per business.
If you open a standard karaoke bar, you might be able to make half the industry’s annual average revenue in your first year of operation. Assuming the industry average 25% profit margin, you’d make more than $80,000 in profit. If you can reach the industry average of $650,000 in your second year, you’d take in a tidy profit of more than $160,000. You could open a few more branches by your third year and reach $2 million in revenue and half a million dollars in profit.
If you decide, on the other hand, to start out as a mobile karaoke business, you would rent out your services to bars, clubs, parties, and special events, and have a much higher profit margin of about 60%. The average cost of a one-day, high-end karaoke machine rental, with amplifiers and special equipment, is about $200.
In your first year, with two machines, you might do 10 rentals per week, giving you $100,000 in annual revenue and more than $60,000 in profit. In your second year, you could add two more machines and rentals could double to 20 per week. You’d have to hire staff and buy the additional machines, reducing your profit margin to 40%. With annual revenue of nearly $210,000, you’d have a tidy profit of more than $80,000.
By your third year, you could expand your coverage, hire more people, and add 6 more machines, further increasing your rentals to 50 per week but decreasing your margin to 20%. With annual revenue of $520,000, you’d take in more than $100,000.
The karaoke entertainment business has moderate barriers to entry. The main obstacles include:
You now have a bird’s eye overview of the karaoke industry and have decided to pursue the business. The next step is about positioning your company to succeed. You can do this by answering the following questions:
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
The success of your karaoke business depends on your ability to explore and analyze opportunities and fill gaps your competitors fail to identify. Your quest to make inroads could begin by introducing your services to bars and clubs that don’t offer karaoke.
You might also stand out by offering innovative karaoke ideas, such as:
Karaoke is a highly competitive business, so you’ll need to decide early which services your company will offer. That way, you can narrow down your target audience and stand out from other karaoke hosts in your area.
You might also consider:
Your fee will depend on the services you provide, the quality of equipment, and your overhead. Unless you offer private rooms, karaoke is usually free at karaoke bars, so in that case you will earn money from drinks and food.
If a bar owner hires you to provide karaoke services, the standard rate is between $50 and $90 per hour. Most karaoke sessions last from about four hours, so you can charge $200 to $360 per session per night. For mobile services, prices will vary depending on the type of event, location, skill level, booking lengths, but with high-end equipment you should average about $200 per one-day rental.
It’s important to consider your audience, overhead, and competitor pricing to determine the best prices for your karaoke business. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Identifying your target market allows you to customize your product and services to your client’s needs, which leads to greater customer satisfaction. It also enables you to choose the proper marketing channels, use your resources more effectively, and maximize your profits.
The target market for a karaoke service includes:
Choosing a business location is a crucial step to the success of your karaoke company. Ideally, you’ll want to locate your karaoke business in an area with many bars and nightclubs. If there aren’t many karaoke bars in your area, you need to find out why. Is it because people aren’t karaoke fans? Or is it because would-be investors can’t see the opportunity?
You can find commercial space to rent in your area on Craigslist, Crexi, and Commercial Cafe. When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to karaoke.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your karaoke business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a karaoke business. You might also try crowdfunding if you have an innovative concept.
Starting a karaoke business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your karaoke business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You could use karaoke apps, such as Singa, KaraFun Player, and Karaoke Builder Player to build massive playlists and add animated backgrounds to songs, while software like Boomset and Whova can help manage your events.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your karaoke business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your karaoke business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a karaoke business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in karaoke bars for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in karaoke. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a karaoke business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
You’re now ready to embark on your entrepreneurial journey and turn your karaoke system into a profit-making machine. If you’re looking to open a karaoke bar, location is extremely important. You should operate in an area with high foot traffic or near restaurants and entertainment establishments. If you’re going mobile, having durable equipment is crucial.
Either way, it’s important to offer the latest technology in the karaoke business, such as the use of mobile phones in choosing the songs or ordering food and drinks. You should have the latest songs too. Now, you’re ready to start making mad karaoke money! Good luck!
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