Who wants to cancel a concert? Canceling a gig is never a particularly pleasant experience for a lot of reasons, but sometimes, calling off the show just has to be done. On the "how much drama, headache and expense is this going to cause me" scale, canceling a gig can mean disappointment, unpleasant conversation and moderate expense on an indie/smaller scale level and can go all the way up to multi-million dollar lawsuits on the arena tour level (though hopefully there is some insurance in place to help deal with all of that if you're headlining arenas).
Let's assume, however, that for our purposes, we're talking about canceling a smallish club gig that you either booked yourself or that you booked with a promoter, with or without the help of an agent. Here's what you need to do to make the best out of a bad situation. These steps should all happen as soon as you know you can't make the show:
Call Your Agent: If an agent booked the show for you, they will almost certainly want to handle all the communications with all of the relevant parties about calling off the show. They may handle most of the rest of these steps for you.
Look at The Contract: If there is a contract for the show, chances are it says something about cancellations. It may spell out how you need to let the venue/promoter know about the cancellation and what financial liability you are left with. If you signed it, well, there you have it. You may be looking at paying out promotion costs and venue hire costs. Ideal for you? Well, no, but then, you not playing can leave some people holding the bag who really shouldn't be, so it is kind of fair enough. Mind you, the lack of a contract doesn't let you off the hook for these expenses - it is just that a contact may give you a prescribed method of coping with a call-off.
Call The Venue/Promoter: AS SOON as you know you will need to cancel the gig, call the venue and/or the promoter, contract or not. Obviously, this is important information for them to have, but this is also your chance to mitigate the fallout from the cancellation. Whether or not you have a contract that specifies your responsibilities after a cancellation, maybe the venue or promoter will be willing to work with you if you can offer a date to reschedule the show - as in, maybe you won't have to shell out the full promo/venue costs if you can move the whole shebang to another night.
Likewise, if your reason for cancellation is a legitimate emergency, then you may be able to appeal to the good nature of the venue/promoter to be understanding, especially if your cancellation isn't that costly for them. Anyway you slice it, be calm, courteous and apologetic when you deliver the news. Don't expect a good reaction. A cancellation - especially a last minute cancellation - is a blow to venue and/or a promoter. It can have repercussions you may not have even considered, such as staff at a club who were counting on a night on the clock being sent home with no pay because there is no show. If you are met with a major freak out, do your best to keep your cool. If communication is not really clicking, apologize and say you will call back tomorrow to iron out the details. Emphasize your willingness to do everything you can to make the situation right.
Alert The Media: If you know the show will need to be called off in time for the local paper/radio station to help spread the word, great. If not, you should still let any media member who was sent information about the show know that it is not happening. Pay close attention to anyone has requested a guest list spot. The last thing you want is someone who has agreed to come down and check out your show to go to the venue and find out then that the show is off. One caveat - if the promoter has handled all of the PR, they may wish to be the ones to follow up with the press - ask them, and if they want to do it, don't step on their toes.
Talk To The Fans: Use your website, social networking platforms and mailing list to let your fans know that the show is canceled. If tickets were pre-sold, announce how they can get a refund or if their tickets will be good for a rescheduled show. Note that it is important to coordinate that announcement with the promoter/venue. Don't make promises to your fans that aren't sure you can keep.
Contact Your Fellow Musicians: If you arranged for the support act(s), let them know the gig is off. If the promoter or venue booked the openers, they may want to handle this step themselves.
Likewise if you had session musicians who were going to be taking the stage with you, let them know ASAP. Remember that all of these musicians - from your opener to your live keyboard player, may be out of pocket because of their involvement in the show. Consider covering their expenses or offering them some compensation for their time and willingness to help you give the audience a good night. In addition to financial compensation, consider making it a point to get these same musicians involved in future show.
Those are the steps you need to take in the short term. What can you do in the long term? For starters, honor any agreement you had with the promoter/venue to compensate them for the cancellation or to reschedule the show. Beyond that, put the event in perspective. If you are active on the live circuit, there is a good chance that sometimes life will get in the way. People get sick, people have family emergencies, bands break up, planes get delayed - it happens. As long as you are not making cancellations a habit, then after you've apologized and done everything in your power to make it right with the promoter, venue and fans, there isn't a lot left you can do but make sure your next gig is a good one.
Learn more about playing live, from booking shows to dealing with promoters and having a smooth show night, check out Playing Live 101.