Secure financing. It takes money to start any business. If you've got the money to invest, you already have a foot in the door. If not, you will have to start with your bank to see if you can get a business loan. If the bank is a no go, consider pitching the Small Business Association (see Resources). Consider advertising in Rolling Stone or other music trade publications for investors. Getting the money to do business is the first step in creating any successful business.
Secure an office. Whether you rent an office or work from your home, you will need to have a regular place from which you will conduct the bulk of your business. In the beginning, you may find it easier and more convenient to work from home and certainly more cost efficient. Later, as you begin adding employees, you will need office space and office equipment.
Use an entertainment attorney to draft your contracts and other legal work. You might save money trying to do it yourself, but you risk headaches down the line. An attorney who specializes in the entertainment industry can save you money in the long run. There are too many legal forms involved in running a business to try and do it yourself. It's a full time job and worth the money you pay your attorney.
Sign bands. Keep it simple in the beginning. One or two acts at the most. Spreading your promotional budget too thin will result in less success for all of your bands. Put your money into no more than two bands you feel are worthy of promotion. Rent studio time and hire an engineer to record your artists.
Use the Internet to promote your company and your artists. Get a website and a domain name, preferably the name of your record label. Starting selling your label's CDs on the Internet first. It's a small start, but it will help bring in money you can put into the company.
Hire a PR person to work on getting your clients into record stores and on the radio. You will be too busy running your company to put in the time it takes to visit radio stations and hand out promo copies of your CDs. Getting airplay is still one of the most crucial success points in the music industry.