Financial Management In Event Management: Generating Income And Controlling Costs

Question 1

Event management can be referred as implementation of management in projects for the accomplishment of objective such indulging innovation in events and organisation of events, concerts and festivals. Financial management plays a vital role in event management, as it is a large scale project which requires a high budget comprising resources and funds (Said 2016). Further proper planning is required for the efficient management of resources and funds. The present study is based on the organisation of music event and concert on the life story of Chris Martin hosted by Story Events, an event planner in London which tells stories regarding the life of the singers through events. Further, a detail explanation relating to the methods through which revenue can be increased by the event management company has been provided. The report ends up with the critical analysis of Break-even point relating to the present forecasted concert with assistance of budgeted figures.

Events are a proven method of diversifying the revenue if the same has been accomplished in an appropriate manner. In accordance with views of Heizer (2016), as events are dependent on two main variants i.e. audiences and sponsors and it is harder to disrupt other revenue models. As per the views of Garvey, Book & Covert (2016) revenue can be increased if the main emphasis is put on these two variants and all the procedures and practices which are to be followed are developed with the objective of making strong these two variants.

A variety of methods through which revenue of the story teller company can be increased have been specified below:

• Ticket and passes: It is a primary source of earning in event management. This can be categorized in three criteria, platinum gold and silver passes. Platinum for the front rows, gold for the middle and silver for the back rows, the price will be set according to the row criteria. Story event must hire agents to sell tickets and passes to people and further they will get a commission in exchange for it in accordance with the no. of tickets sold. The company will sell tickets through online websites, as it will save management cost and subsequently there will be an increase in sell of number of tickets. By applying this strategy, it will able to attract online as well as offline users for the concert and will succeed in attracting a large crowd.
• Selling of sponsorship: It can be considered a great way to increase revenue in the line of event management is selling of sponsorship, it will not only generate income but also give large discounts from the sponsors (Kumar 2016).Event sponsorship assists in generating considerable ROI for events. The offering relating to paid sponsorship is easy yet beneficial to sell. Story event will sell sponsorship to a reputed company of any criteria like clothing, sports,etc., as the company will provide funds to the event planners and get advertising in exchange of this.  This will be done through show casting of their names and exhibit of their company logos at the venue, media or event in various forms
• Advertisement and Promotion:Posting of advertisements on event website is one of the ways to attract more people to join the concert, and this comes in several forms such as by posting videos or posters relating to concert (Shehata & Mickaiel 2016). Some of the ad space company can sell, enabling the advertiser to purchase a chance to contain promotional strategies like catalogue, pamphlet, free sample, etc. Story events require promotion as the means for notifying interested audience that their event is taking place. It is the best approach for attracting many more people, event promotion both exterior and internal. There are various ways to promote events like event branding, invitations, emails, media, direct advertising (magazines, newspapers, radio and television), banners, online, materials of event branding (t-shirts, bags).
• Connecting more people: Influencing current audience and connect new people is another way to increase revenue, as attracting and making a better relationship with the audience will help in connecting more and more people to the event project (Kulczynski, Baxter & Young 2017). For this purpose, famous song of Chris Martin will be performed by their great fans and rising talent or by some famous celebrities. This approach will provide popularity to the concert through which audience will be attracted to be a part of this concert.
• Creative and innovative strategies:In order to generate revenue event planner must consider creative and innovative approaches to a celebrity appearance, food and beverages sections, selfie zones these ideas will pull the attention of public and drag them to the concert. Story events will plan and prepare several fun activities and games that will be hosted by local artists and you tubers. It will include some quiz activities, fun games and music completion by considering the life of Chris Martin. Winners will get goodies and gift hampers from sponsored companies. The huge fan will also provide an opportunity to meet Chris Martin as a reward.
• Governmentgrants: For this event, getting government grant is easy as the event has a purposeful meaning. As it is demonstrating the life of the famous artist Chris Martin, which might increase the tourism of that particular region. With the help of government grants event, planners will able to get huge funds and promotions. Through this method company will be able to conduct the event with higher profits as a portion of the cost will be spent by government.
• Selling merchandise: Selling of products of the hosted company is merchandising. Merchandise of sponsored companies will be sold in the event so as to advertise company products and outlets. Considering merchandise as an option while registration process assists in generating extra revenue as well as offers a branding opportunity beyond the event period (Manners, Kruger & Saayman 2016). The same will also assist in ascertaining the expected figures and will ensure minimum wastage. The same will be done before few days of the concert in order to determine approximately participants interested in concert.
• Networking Party:In case sizeable audience, after –event drinks always work well. Usuallyleads are often generated from such casual set up and can easily be covered by a sponsor (Lopez-Calderon & Luck, 2014). Counters for food and beverages will be set up.;these stalls will be outsourced to local food agencies to earn rental income. Further, it will reduce management costs will increase ROI. Counters will have Fast food, dry food, combos that will be available for sale to the public. This move will enable the event planner to make their contact strong with customers as well as sponsors (Sekaran  & Bougie 2016).
• Volunteers as Staff: Temporary Staff is a significant part of man power cost Thus; educational institutions who offer hospitality courses would like their students to real-time working scenarios.  The cost of man power could be reduced through this method which would ultimately result in an increase in earnings.

Financial management can be referred as monitoring, forecasting, directing, managing and controlling of all the financial resources in an efficient and effective way in order to attain the goals and objectives of an organization. It is a technique to evaluate the management of future projections and assists in making an effective decision regarding procuring and investment of funds in a place which outcome is advantageous for the industry (Solomon 2014).  

The major purpose of financial management in event management industry is enumerated as below:

• Preparation of budget:

Preparation of effective and realistic budget is essential as it represent the whole frame regarding income and expenditure. While considering the ticket section event management must always apply concept of conservative in relation to the targets of ticket income. The budgeting of event is forecasting of revenue and expense incurred by the event on the basis of plans, information available and other facts relating to concert. It is vitally significant that the event planners are capable of forecasting with fair accuracy if the outcome of the venture turns out to be wiht profit, loss or breakeven (McKinney 2015).  This can be attained by determining and estimating all likely expenses and by adding up all predictable revenues. By making a comparison between all expenses and incomes, it will be easy to forecast and plan the financial result of the event. While developing all the stages of planning, the forecasting of financial outcomes is required to take place at the very beginning in the event. In accordance with analysis of Petty, Titman, Keown et al (2015) The setting of dates, venue booking or preparation of plans is of no use unless and until there are some efforts to identify if the event is feasiblefinancially.

• Financing sources:

Question 2

There are several ways to attain finance, as the event is based on purpose and will give a great message to people as well as contribute to increasing tourism. The government will provide grants to the company for the event. The company can take a bank loan in order to meet all costs and for the investment. Another available alternative is sponsorship; the sponsored company will help the event planners in more funds. In accordance with views of Quinn (2013) event planners can use several approaches like selling of tickets in advance, crowd funding,etc. so as to increase more working capital.

• Analysis of Passes fee :

While entering a proposed ticket income, it is must to ensure that how many tickets must be sold out to achieve the target desired. It is essential to consider any of the tax deductions, group bookings, Concession rates or offers and schemes along with their possible influence on the target. Include all taxes like entertainment tax, costs,etc. and frame the charges according to this.

• Evaluation of Financial statements and reports:

The company should prepare and maintain financial statements, reports and forecasts in order to prepare an accurate budget and preventing of problem before they take place. Profit maximization takes place when marginal cost is equivalent to marginal revenue; it is the main objective of financial management. As per the views of Getz & Page (2016) it is significant to make an appropriate evaluation of cost and sales. There must be proper planning, recording, controlling and monitoring in assessing the revenue and expenditures. The budget of the event must be in aligned with the goals and objectives of the event.  Breakeven and sensitivity analysis should be formed in order to ascertain the financial viability of the event (Qu, Wang, Sun, et al. 2014).

Being a qualified event planner, it is my responsibility to train and guide all the members, volunteers that will be able to answer any question regarding the event or can deal with problems in a proper and efficient way in order to deliver a satisfying yet incredible event. In addition to, event planner’s service delivery covers all significant aspects of scheduling, budgeting, parking, transportation, attaining of essential permits, selection of venue, speaker arrangements, (MC) master of ceremony or security, food catering, decorations, artists and emergency plans. In a situation where the achievement benchmark is fulfilled, or even better there is the hallmark of the event.Being a professional event planner, it is vital to ask the clients and customers that where they want the event to be held and they will be able to pay (Pinkerton, Pickett & Motahari 2015).  The feedbacks and reviews collected could be an achievement indicator as allowed by event organizers

Pricing strategy must be considered as an essential element while taking the decisions regarding the market position that relies, to a great extent, on the marketing plans and strategies for the business. Pricing is one of the primaryaspects for event planners and must done in an appropriate manner for the event management planning. Price charge must be adequate, but not more than the budgets of customers. In accordance with study of Brigham & Ehrhardt (2013) the Higher price is usually not accepted by the customer in an easy manner and everybody will question the ability if there is low price. If there is the high setting of prices, then the business might suffer from the questions on its skills and abilities and it will be difficult to make consumers with high prices too. Proper research and planning must be done before setting of prices, as every project is planned and priced separately. The organization might prefer experimenting to find out what will be most effective for its niche. The objective in price products and services is to set up all the operating, material and labour cost adequately in order to cover all expenses and accomplish a satisfactory profit (Jones 2014). Event managers must be concerned regarding setting up fair and reasonable rates for their services and products. It is important to realize about the service charges.

Question 3

Event management must consider all the expenses and costs before setting of price. Initially estimation regarding the paying capacity of client and then evaluation of costs for supplies and labours further adds commission and make a presentation of the overall fee regarding the service to the consumer. There are various expenses to consider like venue rent, tools and equipment rent, parking, signage, publicity, service fees and licenses.

Fixed hourly rate: By evaluating and analysing celebrity charges and event costs, hourly rate will vary from $30 and up on the basis of platinum, gold and silver tickets by considering how much time client is staying at the event. With fixed hourly rate, event planners will get paid for the hours (Petty, Titman, Keown et al 2015). In addition coordination between hours relating to performance and other activities should be coordinated in order to prevent future issues relating to settlement of payments. The final objective which can be accomplished through way to pricing the project is to change per an hour, in addition, to cover all expenses and costs.

Venue charges: By reviewing the needs and requirements of clients event planner must reassess their existing settled price (Jones 2014). This approach can be referred more appropriate because clients are known about what they are going to pay. However, if event planner is not good at this approach, they will suffer from low profits and revenues.

Profits percentage: It is mostly applied for the type of payment regarding to a person or company who work to raising funds by events. The total fee is charged on a percentage according to the group raises. Thus, companies have to do their best in order to Housefull their event projects and fill their all seats, several event planners use the percentage normally between 15 to 20% of the overall event cost, as they will be able to know what they made despiteascertain the no. of people attended the concert.

Commission: Some event professional’s payments are based on their receiving of the commission from agents, hotels or venues. Although, this could be profitable as it is not only you who is paying the same (McKinney 2015). However, some customers are awareof these advantages and might look down on obtaining revenue from two various sources, for the same service. Since, event managers pay commission to those sell their tickets out in bulk to clients such as to agents, and advertisers.

Behind pricing, everyone has a psychology. For example: Making use of bundle pricing or knowing the client, in which price is ascertained after knowing their interest  as well as other facts relating to customer such as they prefer luxurious or inexpensive prices. After setting of a complete pricing strategy for the event and taking in for the action, it is essential to monitor the sale of tickets. By observing the demands of the event, increasing or decreasing depending on the changes in price made compared to other events. If there is inconsistency, don’t worry, else detect the problem and find ways to resolve it.

Every business requires a financial investment before the business begins its operation. However, even after the business operations are initiated, it takes some time and sales before attaining profits. The point at which the business operations are conducted with no longer loss but have yet to earn a profit is referred as a Business break- even point. Break Even Analysis assists in ascertaining a number of sales whether monthly or annually, for covering the cost of doing business (Grant 2016). The same is also known as the break-even point. Break even analysis table ascertains comprises the calculation and evaluation of margin of safety for entities based on revenue generated and associated cost (Sekaran & Bougie 2016). The break-even point ascertains the total amount of sales required by the business to make before profit can be earned. If the same is assessed in a closer manner, it also assists in identifying excessive fixed cost. As BEP is directly correlated with fixed cost, thus reducing and controlling these costswill assist in attaining a lower BEP (Break-even point) for quicker profitability.

The break-even point is ascertained by dividing the fixed expenses relating to business by its margin. For determining the margin, total variable expenses are reduced from the total net sales amount. The margin represents the percentage of revenue that remains back after reimbursing all the expenses.

Critical analyses of CVP analysis for ascertaining the number of the customer to break even has been explained below through an estimated budget relating to a concert:

The above cost will be specified as fixed cost as the same will be spent and the same has no relation with no. of participants. The below cost will be specified as variable cost as the amount will differentiate or will alter in accordance with no. of the participant.

It has been assumed that company charges $25 from each competitor as entry fees.

Break Even analysis assists in ascertaining the minimum no. of participants required for recovering fixed cost. The above calculation depicts that 350 participants are required for organizing the event with no loss yet no profit too. Rather, it can also be said that it the minimum essential required no. of participants for actually organizing the event.

Conclusion

In accordance with the present study conclusion can be drawn that financial management plays crucial role in event planning. With appropriate financial planning, funds can be utilised in an efficient manner in order to attain desired objectives. Story teller can generate sufficient revenue from above described income sources and by preparing budgets they can achieve financial goals. By making effective use of breakeven sales, company can set target for each sub division of event to ensure that all costs are recovered and sufficient arrangements are made for desired revenues.

References

Brigham, E.F. & Ehrhardt, M.C, 2013, Financial management: Theory & practice. Cengage Learning.

Garvey, P.R., Book, S.A. & Covert, R, 2016, Probability methods for cost uncertainty analysis: A systems engineering perspective. CRC Press.

Getz, D. and Page, S.J, 2016, Event studies: Theory, research and policy for planned events. Routledge.

Grant, R. M. 2016, Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Heizer, J. 2016, Operations Management, 11/e. Pearson Education India.

Jones, M., 2014, Sustainable event management: A practical guide. Routledge.

Kulczynski, A, Baxter, S. & Young, T., 2016, Measuring motivations for popular music concert attendance. Event Management. 20(2), pp.239-254.

Kumar, R., 2016. Break Even Analysis: A Glance. International Journal of Research in Finance and Marketing, 6(2), pp.175-193

Lopez-Calderon, J., & Luck, S. J. 2014,  ERPLAB: an open-source toolbox for the analysis of event-related potentials. Frontiers in human neuroscience, 8.

Manners, B., Kruger, M. and Saayman, M., 2016. Managing Live Music Performances: A Demand and Supply Analysis. Event Management, 20(2), pp.147-163.

McKinney, J.B., 2015, Effective financial management in public and nonprofit agencies. ABC-CLIO.

Petty, J.W., Titman, S., Keown, and et.al. 2015. Financial management: Principles and applications. Pearson Higher Education AU.

Pinkerton, M., Pickett, S. & Motahari, A., Risk Management Solutions, Inc., 2015. Computer system for catastrophic event management. U.S. Patent Application 15/129,397.

Qu, Y., Wang, J., Sun, Y. and Holtan, H.M., Aol Advertising Inc., 2014. Systems and methods for generating expanded user segments. U.S. Patent 8,655,695.

Quinn, B., 2013. Key concepts in event management. Sage.

Said, H.A., 2016. Using Different Probability Distributions for Managerial Accounting Technique: The Cost-Volume-Profit Analysis. Journal of Business and Accounting, 9(1), p.3.

Sekaran, U., & Bougie, R. 2016. Research methods for business: A skill building approach. John Wiley & Sons.

Shehata, E.A.E. & Mickaiel, S.K.A., 2016, FBEP: Stata Module to Estimate Financial Break-Even Point Analysis (BEP). Statistical Software Components.

Solomon, M.R., 2014. Consumer behavior: Buying, having, and being (Vol. 10). Upper Saddle River, NJ: Prentice Hall.

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