Background of Timebased Events Limited and Amazon Launch Event
In this report, the assistant financial manager of a profit-making event management firm organises various events for different types of occasions in London, UK. Thus, Timebased Events Limited is chosen as the event management organisation, which collaborates with the visionary brands of elevating ideas. It is considered as one of the leaders in event production and corporate event planning in London and other global places (Timebased.co.uk 2018). The organisation has numerous clients, out of which Amazon is selected for this report. It is assumed that Amazon is planning to launch 30 new products for which it would conduct an event to draw the attention of the potential customers. This event would host few renowned movie and sports personalities where it would be possible for the common individuals residing in London to attend the event through payment of entry fee.
Timebased Events Limited has different venues for carrying out various events. The major venues that the organisation has in London include “Conde Nast College of Fashion and Design”, “Design Museum” and “Royal Opera House”. The major services of the organisation constitute of launching events, brand event management, international events and awards ceremony production. Hence, the current report would concentrate on brand event management of the new products of Amazon to be launched.
Timebased Events Limited has arranged some similar events in the past and it has gained adequate amount of profit from such events, some of which are illustrated as follows:
Vogue Festival 2015:
Vogue is a global fashion brand, which intended to drive its inspirational fashion festival for capturing imaginations along with transporting the festival goers into a new world of fashion. For conducting such public event, Timebased Events Limited had relocated the festival to two new venues, which were “Royal College of Art” and “The Royal Geographical Society”. These two venues have been designed in such a manner that they fit to carry out the global fashion elite (Draper, Young Thomas and Fenich 2018). The editor of Vogue has appreciated the work of the organisation after completion of the event regarding design and looks concept. This implies the commercial viability of the project.
H&M swimwear launch:
For arranging the new swimwear launch of H&M, the organisation has arranged Shoreditch House for hosting the event, since David Beckham was the chief guest of H&M for the event (Fragkogianni 2018). In the poolside, branded campaign displays were designed with the help of a striking feature of rain curtain. In addition, Timebased Events Limited had developed a stylish showroom for displaying products along with the private lounges for global press and list of celebrity guests. It has received huge appreciation from H&M for conducting the event in a successful fashion, which signifies that the event is commercially feasible.
Alternative Funding Sources for Timebased Events Limited
The alternative funding sources that Timebased Events Limited could have for financing the event comprise of the following:
Angel investors:
Timebased Events Limited could access websites such as Angelsden in order to connect the potential investors with the help of personal introduction or pitching events for a fee. The website contains 13,000 angel investors having 90% success rate (Barr and McClellan 2018). The other ways of finding investors include approaching the existing contacts or specialist investment groups. For example, as Timebased Events Limited is planning the launch of new products in Amazon, it could approach the sports firms to place advertisements on the chosen event venue.
Bank loan:
The bank loans are not provided easily in the current era, since the banks are unlikely to make profit for financing an event. However, since Timebased Events Limited has global records of achievement, it is possible for it to seek the bank loan option. Conversely, it could seek bank loan, if it mortgages a business asset. Before mortgaging, it is necessary for an organisation to be aware of the event success before taking into account bank loan as an option (Bekaert and Hodrick 2017).
Advance ticket sales:
Event-ticketing platform such as Eventbrite could be used before selling advance tickets of the planned date of the event. This would help in evaluating the popularity of the event proposal, since working capital base could be increased (Brooks 2015). Hence, the processing of payment in the context of Eventbrite would help Timebased Events Limited in applying for advance payment before the date of the event. This processing enables the organisation to gather a part of advance ticket sales, as the same would be supplied with important cash flows to kick-start the project.
Sponsorship:
After the event is completed, the sponsors often tend to arrive. Their motive is to obtain information about the expected audiences to attend the event, venue and event timing, event agenda along with the marketing plan of Timebased Events Limited. Thus, it would be essential for the firm to obtain core finance or individuals participating in the event before they tend to approach the sponsors. Moreover, sponsorship packages need to be finalised by providing a clear explanation of the benefits about the advantages to be provided to the sponsors.
There are certain main purposes of financial management within the events industry of UK, which are described briefly as follows:
Estimation of capital requirements:
Financial Management in the Events Industry
The assistant financial manager of Timebased Events Limited is required to project the capital requirements of the firm. This would depend on the projected costs and profits coupled with the future programs and policies of the firm (Eldenburg, Krishnan and Krishnan 2017). Hence, the assistant financial manager of the firm needs to carry out projections effectively for increasing the overall earning ability.
As soon as the projections are made, the assistant financial manager of the firm is required to determine its capital structure. In this context, Finkler et al. (2016) remarked that both short-term and long-term valuations of debt and equity are needed. This would depend on the portion of equity capital a firm holds and additional funds that would be obtained from the outside parties.
Selection of financing sources:
In order to procure funds, a firm has a number of alternatives such as angel investors and loans to be sought from the banks and other financial institutions coupled with the public deposits to be accumulated as bonds (Fox and Madura 2017). Each factor needs to be chosen based on relative advantages and limitations of each funding source and period.
Fund investment:
The assistant financial manager needs to assist the financial manager of Timebased Events Limited to determine the fund distribution into profitable events. This would enable in minimising the overall investment risk and timely returns where possible (Gatzert 2015).
Surplus disposal:
The assistant financial manager of Timebased Events Limited could help the finance manager of the organisation to aid in making net income decision. This procedure could be conducted in two ways:
- One procedure is the declaration of dividends, which comprises of the rate of dividend and other advantages like bonus.
- Another procedure is retained earnings where the volume is required to be ascertained depending on diversification and innovation plans of the firm (Matthew 2017).
Cash management:
It is the duty of the assistant financial manager of Timebased Events Limited to undertake cash management decisions. Cash is essential for various purposes like salary and wage payment, electricity and water bill payment, clearing short-term obligations, creditor payments, maintaining sufficient inventory and purchase of stuffs related to the events (Getz and Page 2016).
Financial controls:
It is necessary for the assistant financial manager of Timebased Events Limited for planning, using and procuring the funds. Moreover, the personnel would require exercising controlling over funds. This could be fulfilled with the help of various techniques by taking into consideration ratio analysis, financial forecasting and cost control (Hoye et al. 2015).
For conducting this particular event, the relevant pricing strategies that Timebased Events Limited could use comprise of the following:
Pricing Strategies for the Proposed Event
Fixed hourly rate:
This rate would start from £15 and more. Majority of the attendees paying hourly rate would want to obtain information regarding the overall number of hours planning is expected to make. With the help of fixed hourly rate, the firm would receive payment for the overall event hours; however, the coordination hours above time.
Flat fee:
Timebased Events Limited is needed to review the requirements with Amazon and after the review is done, the price could be presented. As laid out by Jackson, Morgan and Laws (2018), majority of the clients prefer this strategy, since they obtain prior information regarding the payments. However, the organisation is required to be appropriate at estimating time devoted on the job or it would have negative effect on this type of payment.
Profit percentage:
This pricing strategy depends on part of the amount collected on the part of Amazon. Hence, Timebased Events Limited is required to ensure the fill-up of seats or it might make pennies on a pound. In this regard, Jaimangal-Jones, Fry and Haven-Tang (2018) cited that few event firms work for a percentage varying between 15% and 20% of the total cost of the event regardless of the number of individuals brought in.
Commission:
Few event organisations base their fees for obtaining commissions from travel agents, venues and hotels. Such pricing strategy might be profitable; however, it would be the only option (Jones 2014). Moreover, few clients are aware of these benefits and they might envision double dipping, obtaining payment and venue for similar services. This strategy could be highly beneficial for Timebased Events Limited, as it is working with Amazon, which could accommodate its rates because of financial stability in the UK market.
Hourly expenses:
Another strategy that Timebased Events Limited could use is to charge hourly expense with add-ons in order to cover expenditures (Lim 2017). In addition to this, the various project managers of the organisation would subcontract portions, which are not managed directly. Under such situation, the client would be provided with a bill of additional 15% -20% over the overall service cost. This strategy could take into account stuffs such as mailing and printing (Raj, Walters and Rashid 2017).
According to Masterman (2014), CVP analysis is reliant on determining the break-even point of the cost and volume of product. This analysis is extremely useful for the managers of a firm to make short-term decisions. Since it takes into account different assumptions to enhance relevance, it considers that fixed costs, selling price and variable cost per unit do not vary. In order to conduct this evaluation, various equations are required and these could be developed with the help of cost, price and other variables. In order to plot them, the economic graphs are utilised. Hence, it is a process of cost accounting related to the impact of varying levels of costs and sales in terms of operating income of the organisation.
Conclusion
Timebased Events Limited could rely on CVP analysis, if the costs do not vary within a particular level of production. Assumptions are made that all the printed tickets would be sold and there would be absence of semi-variable cost, which means that the costs would be either variable or fixed. With the help of CVP analysis, the use of contribution margin is made in order to handle the product contribution margin, which is the output sought after deducting variable costs from overall sales (Pedersen and Thibault 2014).
In order to ensure the success of the event, Timebased Events Limited needs to be aware about the contribution margin, as it needs to be greater than the overall fixed costs. Moreover, the contribution margin could be used for ascertaining the break-even point and break-even sales. This could be obtained by dividing the overall fixed costs by the ratio of contribution margin (McKinney 2015).
|
Particulars |
Units |
|
Average revenue per customer |
£ 35 |
|
Average variable cost per customer |
£ 10 |
|
Contribution margin per customer |
£ 25 |
|
Incremental fixed cost |
£ 20,000 |
|
Number of customers |
900 |
Table 1: Assumptions to compute the break-even point in terms of customers
(Source: As created by author)
According to the above table, it could be evaluated that the expected number of customers is 900 to attend the event of Amazon. It is expected that the organisation would earn £35 from each customer. On the other hand, the average variable cost for each customer is assumed as £10. However, no cost of sales has been taken into account for conducting this event. Hence, the contribution margin for each customer is £25 (£35 – £10). The fixed cost in order to conduct this specific event of Amazon is assumed as £20,000. With the help of primary assumptions, the break-even in relation to customers and sales is calculated, which is depicted below in the form of a table as follows:
|
Particulars |
Units |
|
Revenue |
£ 31,500 |
|
Total variable cost |
£ 9,000 |
|
Contribution margin |
£ 22,500 |
|
Incremental fixed cost |
£ 20,000 |
|
Total profit |
£ 2,500 |
|
Break-even (in customers) |
800 |
|
Contribution margin ratio |
71.43% |
|
Break-even (in sales) |
£ 28,000 |
Table 2: Break-even in customers and break-even sales for the event of Amazon
(Source: As created by author)
Based on the above table, it could be found out that the contribution margin of Timebased Events Limited is obtained as £22,500. A positive contribution margin is always favourable for retaining the greater portion of profit, which could enable in enhancing the business operations of an organisation (Michopoulou and Giuliano 2018). After the deduction of incremental fixed cost, the net profit expected to be made after the completion of the event is £2,500. Thus, Timebased Events Limited requires minimum of 800 customers to be in no-profit-no-loss condition. Moreover, the break-even sales of the event are computed by multiplying the contribution ratio with fixed cost. For avoiding loss, Timebased Events Limited needs to accomplish £28,000 in sales.
Various revenue scenarios have been considered in order to prepare the break-even chart, which are represented as follows:
|
Revenue |
Contribution |
Fixed cost |
Profit |
|
£ 20,000 |
£ 14,285.71 |
£ 20,000 |
-£ 5,714.29 |
|
£ 40,000 |
£ 28,571.43 |
£ 20,000 |
£ 8,571.43 |
|
£ 50,000 |
£ 35,714.29 |
£ 20,000 |
£ 15,714.29 |
|
£ 60,000 |
£ 42,857.14 |
£ 20,000 |
£ 22,857.14 |
Table 3: Various revenue scenarios for preparing the break-even chart
(Source: As created by author)
Figure 1: Break-even chart for the proposed event of Amazon in the context of Timebased Events Limited
(Source: As created by author)
Based on the above evaluation, it could be stated that the most appropriate financing sources that Timebased Events Limited could use for carrying out the new product line launch of Amazon include sponsorship and bank loan. It has been found out that the bank loans are not provided easily in the current era, since the banks are unlikely to make profit for financing an event. However, since Timebased Events Limited has global records of achievement, it is possible for it to seek the bank loan option. Sponsorship is selected, as the number of attendees, venue and time of the event, agenda of the event and marketing plan would be known beforehand.
The pricing strategy that Timebased Events Limited could adopt is flat fee structure, as Amazon would be able to seek appropriate knowledge of the patients. Moreover, since Timebased Events Limited has number of competent professionals available in the organisation, they could carry out effective projections of the time devoted on the job.
Conclusion:
The above evaluation clearly states that the assistant financial manager of Wonderland Agency is required to project the capital requirements of the firm. This would depend on projected costs and profits coupled with the future policies and programs of the firm. After the projections are made, it is crucial to ascertain the capital structure of the organisation. The organisation needs to follow the flat fee pricing strategy, as Amazon would be able to seek appropriate knowledge of the patients. Finally, in order to raise funds for the event, Timebased Events Limited could seek bank loan and sponsorship for making the stated project a success along with assuring its overall commercial viability.
References:
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Timebased.co.uk. (2018). Timebased Events | Creative Event Planning and Corporate Event Management, London, UK. [online] Available at: https://www.timebased.co.uk/ [Accessed 15 Mar. 2018].
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