BEM – Financial Management & the budget (B)

BEM – Financial Management & the budget (B) Lim SeiKee @ cK

Income is derived from people buying tickets. • Apart from that, what are the other sources of income or revenue besides the ticket sales? • These sources may be other revenue-generating activities, or sponsorship-related activities.

Special events are such diverse activities that it can be difficult to generalize about them, especially in financial terms. • Additional income is often needed for events, even those where there is a defined ticket price.

For example, we might wish to run a charity or philanthropic fund-raising race night and charge tickets at $15. • Good amount, above and beyond what was needed to break even. • Other sources: Auction of pledges, selling or merchandise, games activities.

Other sources of income of events • Programmes / brochures / guidebooks • Catering / fast food / sales stalls • Retail / souvenirs / clothing / merchandising • Corporate hospitality areas / lounges / chill-out areas • Photography charges / photography sales / video • Car parking / transport services • Concessions / stalls / stands / pitches / rentals • Broadcast rights (usually major sporting events only)

$$$ matters! • The generation of additional revenue is often a key failure of many events, especially volunteer events, because it is wrongly seen as less important than financial control. • No one is made responsible for ideas about it. • Consequently opportunities to raise extra income streams are lost.

All events need a specific funding? • Events vary considerably in how they are funded. • There might be as many sources of income as there are costs associated with the event. • The ‘income’ for operating an event may simply be a budgeted amount that an organization has to spend, funded by the organization itself.

Certain types of events can require start-up funding. • This can be sought from all kinds of bodies who might have an interest in the event • Example: • Government, • Councils or agencies • Sponsors

Types of event funding • Leisure event • Cultural event • Organizational event • Personal event

Leisure event:International city athletics competition • Funding: • Government agencies such as sports councils • Local government funding for sporting events • Support from sports sponsors and broadcasters • Income generated from ticket sales, concessions selling food, drink and sports-related merchandise

Cultural event:Traditional event carnival • Income: • Entrance tickets, parking • Income from renting pitches for various stands • Money raised from various games • Sponsorship of activities on an organizational or individual basis • Charitable donations in money or in kind (gifts)

Sponsorship and public funding • An event can easily attract sponsorship? • WRONG! • In practice the attractiveness of any given event to potential sponsors is very limited. • The time and effort that the organizers might waste trying to get sponsorship could well be better used elsewhere

Potential sponsors have to get something out of the event, and are extremely unlikely to provide money for nothing. • Therefore it is important to keep in mind what the event would do for a potential sponsor.

Important to consider! • 1. The event and potential sponsors should be looking at the same target market. • 2. The issue of media exposure: what are the publicity and public relations plans for your event. • 3. Will the sponsor get some direct benefit besides media coverage?

Sponsors will be looking not only for hospitality opportunities, but also for events that raise their image or supports some other marketing objective. • To get sponsorship an event organizer must fit (conveniently) into the sponsor’s own plans, as well as matching the event’s objectives.

Sponsorship • Sponsorship, is effectively, a commercial promotional technique, and not a method of obtaining donations. • There are a number of trade-and-business related bodies with an interest in promoting relationships between commercial organizations and those seeking sponsorship, patronage or other support.

An event organizer, having succeeded in getting the desired sponsorship, must then be able to service the sponsor •  fulfill the sponsor’s expectations of the event and its outcomes for the sponsor’s business or brand.

A Sponsorship Agreement • A Sponsorship Agreement (Sponsorship Business Plan) is needed. • There are costs and benefits attached to servicing sponsors. • Event organizers are responsible for liaison with sponsors, ensuring that sponsorship agreement is fulfilled and that the objectives are achieved and measured.

Sponsorship Agreement - Elements • Heads of Agreement • Stating the objectives of the sponsorship on the parts of both the event organization and the sponsor, • The person in each organization who is ultimately responsible for ensuring the success of the sponsorship activities

Sponsorship Agreement - Elements • Marketing Statement • Laying out the target audiences and stakeholders, • listing the methods by which the sponsor’s name or brands will be placed in the public eye before the target audiences

Sponsorship Agreement - Elements • Budget • Dealing with how the funds received from the sponsorship would be allocated. • EG: prizes, equipment, kit, gear, buildings, etc

Where there is more than one sponsor, that respective areas of promotion are allocated in the sections of the agreement • An evaluation section, dealing with how the impact of the sponsorship would be measured, • (for example, in the keeping of press cuttings, minutes of exposure obtained in TV or radio news or other media) and • (whether participants’ awareness of the sponsor had been raised).

The event organizer’s liaison officer/ team • Checklist: • Liaison officer’s time • Allocation of corporate hospitality funds for sponsor’s support • Costs for publicity • Printing, signage • VIP parking allocations • Travel and other expenses • Ticketing arrangement for sponsors

Checklist can be used to work up an estimate of what costs are associated with servicing a sponsor, and thus how much money in terms of sponsorship proposal to be worthwhile. • If the costs of servicing a sponsor are going to be more than the sponsor is actually paying, then other sources of funding will be preferable.

Sponsorship is the only potential alternative income source for an event? • NO!! • Local authorities or other funding agencies might be willing to put money into an event if an appropriate and suitable case is made for it and if such a case complies with the objectives of the funding body.

It should be noted that funding from public bodies is notoriously slow. • Even after the slow process, the application for a grant may not succeed. • Why? • The short-lived nature of some events makes this a problem.

How to get sponsors? • Measurement and quantification of the benefits will have to be stated. • Does the type of event being put on match the social or community objectives of the patron? • Will there be a positive outcome in terms of public image? • These are the types of questions which will have to be dealt with, in order to get funding.

In return, patrons should gain some personal or organizational benefits. • Events patrons often gain preferential seats; admittance to VIP areas of the event; invitations to launch parties or to meet celebrities; attendance at a patron’s lunch. • In some cases patrons may wish their name on some aspect of the event; some patrons may wish to remain private supporters of an event.

Sources of patronage, grant funding and other income for events • ‘In-kind’ arrangements, mutual benefit exchanges of goods or activities, volunteer work or donations • Grants from local, regional or national governments • Grants from charitable bodies • Fund-raising activities related to the event • Commercial borrowing • Funding from trusts or other philanthropic bodies

Summary • Effective financial management of special events is increasingly complex. • The careful monitoring, recording and control of these incomes and expenditures is a significant concern of clients, organizers, coordinators and finance officers of all kinds.

Exercise of the day! • Sponsorship and the Tour de France • Facts: • Begun as a newspaper publicity stunt, it celebrated its centenary in 2003. • 22 teams, of nine riders, compete for $3 million in prize money - $400,000 for the winner • Coloured jerseys (each sponsored), distinguish the leader on time; leader on points; ‘King of the Mountains’; best climber and best young rider.

Your next assignment @ 11th July 2014 • You are to read the case study ‘Sponsorship and the Tour de France’ and do a presentation next week. • You are to: • 1. Summarize the case study • 2. Answer all the 3 questions. • NOTE: This is an individual assignment. Submit your presentation slides latest on 11th July 2014. No report is needed.

BEM – Financial Management & the budget (B)