An important part of the planning of your event is deciding on how much it is going to cost you and how you are going to pay for it. One of the aims in business is to make a profit, or at least not to make a loss. Planning will help you work out if your idea will achieve this.
Managing your finances is also essential if you want to do a series of events or want to continue the work for some time. Good money management will help your long-term sustainability. The National Council for Voluntary Organisations gives more advice about managing money.
The Woodroffe School has a work sheet Financing your event and advises that to plan your financial requirements you will need to:
- Identify resources needed
- Calculate costs
- Identify sources of funding
- Plan income and expenditure
- Monitor cash movements
Resources are the things you need in order to carry out a task. For a gig they could be equipment such as PA, music instruments, computer for emails and record keeping, phone or transport, people with skills you need – technical support/musicians etc, venues, insurance, poster/flier printing. An easily forgotten resource is time.
For each objective/action you need to do, make a list of all the resources you will need and where you will get them. Check their availability for the time you need them.
There may be some skills you need for the project that you or your organising team don’t have. You may want to learn the skills yourself or find someone with the skill. Do you know someone who has done something similar before? Can they teach you or do it for you? You could build training into your project, but allow enough time for this. Identifying all the skills needed to deliver your project and finding where to get them will be an important part of making your idea a success.
Not many things are free. Friends and volunteers may give their time for nothing but resources usually have to be paid for.
Resources to carry out actions can be priced in advance. Do some research to find out their cost so you know how much money you need. You don’t want any unpleasant surprises later!
If something is expensive, it may pay to shop around and get several quotes. Recommendations for quality are also good to have. If someone asks a high price for a service, are they worth it? What can they bring to the project that justifies the cost – reliability, customer care, skill or experience?
Physical things that you buy to keep, such as equipment and buildings, are known as ‘capital’ costs. These can be expensive and you need to think about buying vs. hiring. Cost, frequency of use, maintenance, storage, transporting equipment around and insurance are issues you’ll need to consider.
All other expenses are known as ‘revenue’ costs. They are costs for temporary things that you don’t own. These include things like wages, printing, phone bills, insurance, venue hire, publicity, equipment hire, accountancy, taxes, electricity/utilities and professional services.
Overheads are costs to a business/organisation that have to be paid even if you stand still and do nothing. These are things like rent for an office, mortgage repayments, telephone line rental, salaries for staff you employ, insurance.
If you are asking for grants to help finance your project, funders often put a limit on the overheads they will pay e.g. 20% of your budget. They want to fund the costs of a specific idea and not the general running costs for an organisation. You need to be as efficient as you can with your overheads so you can keep within funders requirements. If you are doing several projects at the same time, you can divide your organisational overheads between the various projects, in proportion to the time and overhead resources they take. This will help you lower the overheads in grant funded work.
Volunteers should not have to pay for their own expenses – they are doing enough by giving their time. The expenses they have when helping you are good to put into your budget so you can pay them back.
It is also worth noting the value of resources kind enough to be given to you, like volunteer time or equipment that is given or loaned to you (known as ‘in kind’ expenses). What would these things have cost you if you had to pay for them? The ‘in kind’ contribution will help show how much other people value your project. This is useful if you are looking for grants, donations or loans.
Pricing how much each action will cost and adding that up will give you a total budget. Gulp! It’s surprising how fast costs mount up! How can you get that money back to pay for everything and hopefully make a profit?
Income/sources of funding
There are a number of ways you can get money to create an income. As a rule, the more ways you can find, the less dependent you are on your main source. This spreads the risk and you don’t have all your eggs in one basket.
The example here is a small scale event in somewhere like a village/town hall or local small theatre. For an idea of scale, a professional budget in a 7,000 seat venue see Budget example for large concert- Settlement-File.
For a gig, ticket sales are probably going to be your main income. If you relied on just tickets, how many would you need to sell and at what price?
Lets say all your costs for a small scale gig may be £950 (venue costs £300 – including its staff and public liability insurance, local band £300, publicity £100, DJ £100, VJ £!00, phone/administration £50). The venue can take up to 150 people. If you relied on a full venue to break even you would need to sell £950 divided by 150 = £6.33 per ticket. It’s rare to get a full venue, especially if you are starting out as a promoter and the band is not well-known. Perhaps work on 2/3rd full = 100 people. To break even you need to sell 100 tickets at £9.50.
Is this realistic? Can you persuade people that they will get value for money? What is your competition? Is your audience used to paying this? Market research will help you answer these questions. You may think £9.50 is too much to ask. To break even or make a profit, you have 2 options:
- Cut back on your costs.
- Reduce your ticket price and get the money needed from another source.
Cutting costs – some options:
- Negotiate with the venue to reduce their hire fee.
- Cut out elements of the program e.g. the VJ and DJ and just put on pre-programmed background music as a warm up.
- Ask the band to lower their costs.
- Lower your poster print run and rely more on free social media to get your audience.
If you are using professional musicians in your event, they expect a nationally recognised rate of pay, guided by the Musicians Union. Amateur musicians may be more flexible about payment but as a promoter, respect people’s need to make a living through music. A good understanding of this issue can be found at Musicians Against Playing for Free – a Facebook forum page with lots of examples of promoters trying to get professional musicians to play at their events for free with the lure that the performers will get future offers of paid work – getting musicians names about etc. The forum shows strong arguments against this. Why is the musician expected to be the first to not get paid at an event? Something to bear in mind when negotiating with performers.
Creating another income could be by asking the band to put some merchandise into a raffle. You could ask a local business to sponsor some of the event in return for making their name prominent on all your marketing information. If you could show some social value to your project, you may be able to get people or organisations to donate or give a grant. Creating different income streams makes more work for you, so you should allow more time and effort to organise this.
Lets say the band will give away 5 CDs in a raffle and you think you will sell 50 tickets for £1 each. You may get a business to sponsor you for £100 = £150 extra income.
You may have cut costs down to £600 (venue costs £250, local band £250, publicity £50, phone/administration £50). With the £150 alternative income, you need to find £450 through ticket sales. 100 people at £4.50 each would do this. If you think they would pay £5 or £6, you could even make a profit. If you sell more than 100 tickets, the profit starts to become more significant. When you have a profit, you can start paying yourself and be rewarded for your efforts. If you want to be paid, you need to build what you expect to be paid into the costs of the project in the first place.
If you make a decent profit you may want to pay a better deal to the people you negotiated down (because you were nervous about loss) e.g the band could get what they originally wanted – £300. Your long term reputation for fairness is an investment – part of your brand – your business reputation. Ideally, everyone involved in a project should walk away at the end with a smile on their face, be it a cleaner or a super star. If they are not important, why are they there in the first place? Respect is key to long term success.
If you think you could sell 100 tickets for £6 each but to break even you need 100 sales at £4.50, you could
- Encourage people to buy a limited number (up to 100) ‘early bird’ tickets in advance for £4.50
- Offer discounts of £4.50/ticket for block bookings.
If you sell 100 tickets in advance at £4.50, you won’t loose and money will help pay for some of the costs you may need to pay before your event. Early bird sales could create a buzz in your social media campaign, with stories like ‘nearly sold out, last few available’ etc.
The different ways of adjusting your budget to lower the risk of going into debt are all judgments you have to make. Cutting back on some expenses may make less of a spectacle. It’s a juggling act to balance realistic income with the cost. Your vision of what the event may feel like may have to change. Think about your aims and what the key ingredients are to achieve them. That should help you focus on what is essential and what is just nice to have if you could.
A new way of funding projects in the arts and music is to Crowdfund, where creative people sell perks and rewards to fans in order to fund their project. It uses the internet to reach fans and they send you money to help fund your project. Crowdfunding depends on having enough people who believe in you so that when each one gives you a small amount of money, the total is enough to complete your budget. It is hard to crowdfund unless you already have a fan base. Fans already like what you do and want to support you, so you have a good starting point. Worth reading:
- How to Crowdfund
- Crowdfunding Tips
- Pitfalls of Crowdfunding
- Crowdfunding Guide – a list of crowd funding organisations. We Did This – another crowdfunding broker for the arts – part of Peoplefund.it
In your action timetable, you can put a cost by each action. This will give you a cash flow forecast so that you know when you need money and can plan an income to match it – preventing you going into debt.
If you know you will have to spend some money before you get it back from things like tickets, you should think about where you can get this money in advance.
You could arrange a loan or bank overdraft to cover the costs, or ask suppliers if you can pay them later when you get the money from sales. If you need to borrow money, arrange this before you spend money. It is cheaper to pay interest on a pre-arranged loan/overdraft than on an overdraft at the bank that hasn’t been arranged. You can use your plan to show the lender/bank that the loan/overdraft is a low risk for them and is very likely to be paid back. If you need to do this, don’t forget to add into your costs any interest you may have to pay.
You can also try to get money from your customers before they get what you are selling. Advance product orders or ticket sales will help you pay for expenses that must be paid before the event or product launch. You could offer discounts for advance orders to encourage an early income.
When you have decided how much you will spend and estimated how much you will earn, it is important to keep a record of all the money you actually spend and earn. Records will help you know if you are keeping to your budget and will be needed if you need to report to your organisation, funders or the taxman.
The simplest form of bookkeeping is to have a spreadsheet with columns showing the date and amount you have paid for something or been paid, and what it was for. You can also have columns breaking down transactions into cash, cheques or cards.
Example: See Simple Book Keeping
When you know what to do, when and how much it will cost, you will need to work with people to make it all happen. The next blog is about Management, Communication and Teamwork.
To find the list and links to all B Sharp’s posts about event and project planning, go here: Ideas into Action
Links to other music resources, compiled by B Sharp, can be found here.