How to Start a Radio Station

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Quick Reference

How to Start a Radio Station

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 4,937 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 2,200 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.

Checklist for Starting a Radio Station

Starting a radio station can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.

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

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 the 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.

When deciding on which business entity is best for a radio station, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Select your Location

If building a new AM or FM station, a broadcast station construction permit application will be needed through the FCC. An internet radio station will not have the same requirements as a terrestrial radio station.

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 bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your 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

One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 9: Get Business Insurance

There are several types of insurance to consider when starting a radio station. A few of these include:
– 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.

The cost to insure a radio station will vary based on a number of factors. 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: Hire Employees

Depending on the hours of your station, employees such as DJs and sales staff will be needed.  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 the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a radio station?

Here are some of 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, broadcasting software, etc. $10,000 – $500,000
– Setting up control rooms $250,000 – $300,000

It is expensive to start and run an AM or FM radio station, which is a large risk. To reduce risk some, consider lining up some advertisers and sponsors so you can ensure revenue from the very beginning.

How profitable is 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.

Are there grants to start a radio station?

It’s extremely rare to find a grant to start a radio station. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a radio station?

The NAICS code for a radio station is 515112.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Resources:
Radio Advertising Bureau
RadioWorld

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