How to Start a Radio Station

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Quick Reference

Radio as a medium is alive and well.  Most people still listen to the radio, mainly in their car.   Opening your own radio station could be a way for you to broadcast what you want, have fun, and make a living with your own business.

Business Overview

A radio station plays music in a certain genre or has talk shows or sports broadcasts hoping to appeal to a specific market and make money from paid advertising.

Industry Summary

According to IBIS World, the radio station industry size is $22.4 billion.  There are 4937 radio businesses in the United States.  The industry is expected to grow 10.4% in 2021.  Over the last 5 years, the industry has only grown an average of .1% per year due to competition from other mediums such as streaming music services.

Industry Trends

Country music is the most popular radio format, with 2200 stations playing country music, according to Statista.  With the lower costs and ability to broadcast from anywhere, online radio has become a larger part of the overall market.  Public radio stations are also showing an increase.

Target Market

Your target market will be those who love to listen to the radio.

Skills, Experience, and Education Useful in Running a Radio Station

There are several specific skills that you will need to open a radio station.

  • Experience.  Experience working in a radio station is valuable, particularly in management.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Costs to Start a Radio Station

Here are the typical costs you will face when you open a radio station.

  • Location purchase $250,000 +
  • Equipment including a radio transmitter, tower, antenna, microphones, audio mixer, encoders, etc. $10,000 – $500,000
  • Setting up control rooms $250,000 – $300,000
  • Initial marketing such as Facebook ads or search engine optimization for your website $500 -$1000

Steps to Starting a Radio Station

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your radio station should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect radio station name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

RelatedComparison of Business Entities

Step 4: Select your Location

If building a new AM or FM station, a construction permit application will be needed through the FCC. An online station will not have the same requirement as the station is run over the internet.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

The Federal Communications Commission (FCC) requires a broadcast license to broadcast on AM or FM radio.  AM and FM radio station licensing is strictly regulated, and considering the limited number of frequencies available, it can be difficult to secure the rights to broadcast.

AM 

Low-power FM (LPFM) – (1-100 watts of power – typically reserved for non-profits)

High-power FM – (typically reserved for commercial radio stations)

While internet radio stations do not require an FCC license, licensing is needed to legally play the music and avoid copyright infringement of the musicians. This licensing is referred to as a Radio Music License Committee (“RMLC”) or National Religious Broadcasters Music License Committee (“NRBMLC”).

In addition to radio station-specific licensing, there are general business registration requirements that may include business licensing, sales tax permit, and an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start a radio station is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total startup costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

A radio station will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a radio station include social media marketing and online advertising. Developing a website can be a significant expense, but it can also give your radio station greater visibility online.  You will be marketing to advertisers as well as listeners, and most of that will be done through direct sales calls.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A radio station needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You will need employees such as DJs to help you run your radio station.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your radio station is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Radio Station?

Your revenue will come from advertisements, so it will all depend on how successful you are.  The more listeners you have, the more you can charge advertisers.  Very popular radio stations make tens of millions in advertising revenue.

Things to Consider Before Starting a Radio Station

Running a radio station or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  You have to get listeners before you can get advertisers, so it will take time to get to a breakeven point and then start making a profit.

You will face competition, so you need to have a well-designed format.

It is expensive to start and run an AM or FM radio station, so you will be taking a big risk. Consider lining up some advertisers and sponsors so you can ensure revenue from the very beginning.

Talk to other business owners for tips on starting a business and do your homework to determine costs.  Research other radio stations to see what they offer and what prices they charge.

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