This report focuses on the perspective of an assistant financial manager of an event management organisation that organises different types of events in London. Hence, Oxygen Event Services Limited is chosen as the firm, which produces wide variety of events for a group of clients working in different types of venues. It follows a personal approach coupled with leadership, design and creativity for assuring the effective event delivery possible (Oxygen-events.com 2018). It is assumed that the organisation would carry out a new product launch for a popular retail firm in UK to attract the customers to buy its product. In addition, some renowned movie personalities would be present in the event, in which the London individuals are able to attend the event via an entry fee.
Oxygen Event Services Limited has various venues to conduct different events. Some of the main venues of the event firm comprise of Barton Court, Hedsor House, The Royal Geographical Society, The Household Cavalry Museum, The Hurlingham Club and The Steel Yard. The main services of the firm comprise of global events, awards ceremony production, brand event management and launch of new events. Thus, the report would shed light on launching the brand new product of the popular retail firm in UK.
Oxygen Event Services Limited has conducted few identical events in the past and it made considerable profits from them, few of which are described as follows:
Rebranding of Restaurant Associates:
Restaurant Associates has spent six months to work on re-branding and thus, it is necessary for them to find a space to go through the passion, which had gone into design. For this particular event, Oxygen Event Services Limited has developed white stage flats in order to cover the venue back wall for presentation space. The intention is to form a huge backdrop having a central screen. The design was made for maximising the effect of power point presentation and graphics (Atkins, Carey and Sanders 2016). The event fetched adequate number of audience due to which it emerged out as a success for the organisation.
IAA Summer Ball:
The event was a dinner and party for 950 individuals at the Hurlingham Club. The organisation has worked with the International Advertising Association, which is contracting with the organisation to prepare its annual summer and Christmas events for the past seven years. The club hired for conducting the event was turned into a circus theme along with effective lighting design for the venue, columns, dance floor and dining area. The guests were treated effectively and the association has praised the work of Oxygen Event Services Limited, which made this event a huge success.
There are several alternative sources of finance for Oxygen Event Services Limited and they are elaborated briefly as follows:
Bank loan:
As the banks hardly make any profit by providing funding for an event, it would be hard to obtain loans from them (Barr and McClellan 2018). Due to the popularity of Oxygen Event Services Limited in the event industry of UK, it would be easier for the organisation to obtain bank loan. This could be obtained in the form of an asset mortgage. However, before mortgaging its asset to the bank, it would be necessary for the organisation to ensure that the event would succeed prior to obtain the bank loan.
Sponsorship:
Once after the completion of the event, the sponsors tend to attend the venue. The motive is to accumulate information about the number of people attended the event, duration of the event and its agenda along with the marketing strategy of Oxygen Event Services Limited. As a result, it would be necessary for the organization to accumulate funds for the event from people attending the event before the approach is made towards the sponsors. Along with this, the finalisation of sponsorship packages is necessary, which could be carried out with a clear description of the sponsor benefits.
Angel investors:
Websites like Angelsden could be used on the part of Oxygen Event Services Limited to develop a link with the potential investors via personal introduction or event pitch in exchange of fee. The success rate of the website is 90% and it has nearly 13,000 angel investors (Finkler et al. 2016). The other methods through which the organisation could obtain investors are using the current contacts or specialised investment groups. For instance, since Oxygen Event Services Limited would arrange the event of a retail firm for launching a new product, the organisation could advance the sports organisations for placing advertisements on the selected venue of the event.
Advance selling of tickets:
For selling tickets in advance, Oxygen Event Services Limited could use Eventbrite, which is a platform of event-ticketing. As a result, the organisation could assess the viability of the event proposal, since it could obtain working capital access (Gatzert 2015). Such processing of payment of the platform would be crucial for Oxygen Event Services Limited to apply for prepaid payment before the event date. Thus, the organisation could be able to accumulate some money from advance selling of tickets, since the cash inflows would be increased for execution of the project.
Financial management has an important role to play in the UK events industry and its main purposes within the sector are elucidated as follows:
Ascertainment of the composition of capital:
It is the responsibility of the assistant financial manager of Oxygen Event Services Limited to ascertain the capital structure of the firm before making estimations. As laid out by Lau (2016), in order to find out the capital structure, both long-term and short-term debt and stockholders’ equity are necessary. This would rely on the proportion of equity that the organisation has and excess funds to be accumulated from the external parties.
Anticipation of capital requirements:
Anticipating the capital needs is another crucial responsibility of the assistant financial manager of Oxygen Event Services Limited. Such anticipation is relied on the estimated benefits and costs along with the upcoming policies and programs of the organisation (Karadag 2015). Thus, it could be stated that anticipations are to be made correctly, since they would help in enhancing the earning capacity of the organisation.
Financial controls:
As the assistant financial manager of Oxygen Event Services Limited, planning, utilising and procuring the funds are of utmost significance. In addition, authority needs to be provided to the personnel for gaining control over funds. The control would be achieved by using the techniques of financial forecasting, ratio analysis and control of cost (Martin 2016).
Fund investment:
Assistance needs to be provided to the assistant financial manager of Oxygen Event Services Limited for finding out the distribution of funds towards profitable events. As a result, the investment risk would be reduced, while timely returns would be provided whenever possible (Getz 2014).
Choosing sources of funding:
Options like angel investors, loans from banks and financial institutions and public deposits obtained in the form of bonds would be useful for the organisation for procuring funds. The selection of factors needs to be made depending on relative merits and demerits of the funding sources and periods (Vogel 2014).
Cash management:
The assistant financial manager has an important role to play in managing cash decisions of the organisation. This is because cash is required for paying wages and salaries, water bill, electricity, existing dues, creditors, inventory level and other event stuffs (Henninger, Alevizou and Oates 2017).
Disposal of surplus:
In order to undertake net profit decision, it is necessary for the assistant financial manager of the organisation to extend support to the financial manager. This assistance could be made in two ways. The first procedure is declaring dividends constituting of the dividend rate and other bonus benefits. Another method is retained income, in which it is necessary to find out the volume based on innovation and diversification plans of the organisation (Hoye et al. 2015).
In order to carry out this event, Oxygen Event Services Limited could adopt the following pricing techniques for the event:
Flat fee:
The event requirements need to be reviewed with the client and once they are made, the price needs to be presented. In the words of Jones and Jones (2014), this strategy is preferred mostly due to the prior information of the payments to be made. However, it is necessary for the firm in anticipating the time spent on the job or it might have negative consequences on the payment type.
Fixed hourly rate:
The rate would initiate from £15 and above. The attendees paying this rate might intend to obtain information about the total number of hours the event would continue. Such rate would enable Oxygen Event Services Limited to obtain payment for the total event hours.
Commission:
Some event firms charge their fees in order to accumulate commissions from venues, travel agents and hotels. This strategy is profitable; however, it would be the sole alternative (Matthew 2017). In addition, some clients know the full advantages of this technique, which would help in collecting payment, venue for equivalent services along with double dipping. Such strategy would be advantageous in the context of Oxygen Event Services Limited, since the retail firm is popular in the UK market and thus, it could pay its rates due to financial stability.
Percent of profit:
This pricing technique is reliant on the proportion of the amount to be accumulated from the client. Thus, it is necessary for Oxygen Event Services Limited to sell all the seats or the profit level would go down from the event. In this context, McKinney (2015) advocated that some event companies aim to earn between 15% and 20% of the overall event cost irrespective of the overall number of individuals.
Hourly rate:
Hourly rate could be charged along with add-ons for meeting the total expenses to be incurred for the event. Along with this, the different project managers of the firm might subcontract few parts that are not handled directly. In such a scenario, the client might have to pay an additional charge ranging between 15% and 20% of the total event cost. In addition, this technique considers printing and mailing as well (Morgan, Jackson and Laws 2015).
In the words of Phillips (2016), with the help of CVP analysis, break-even point and product volume could be ascertained. As a result, it enables the managers of an organisation in undertaking short-term decisions. The analysis considers different assumptions, in which the fixed cost, variable cost per unit and selling price per unit do not change. For carrying out this analysis, there is need for different equations and such development could be made via price, cost and other variables. For plotting them, the utilisation of economic graphs is made. Hence, this is a cost accounting technique associated with the effect of changing cost and sales levels in relation to the operating profit of the organisation.
Oxygen Event Services Limited needs to depend on CVP analysis, if costs do not change with a specific production level. It is assumed that all tickets would be sold and there is no presence of semi-variable cost. This denotes that the types of cost in the event would be fixed and variable. CVP analysis uses the contribution margin, which is beneficial for managing the product contribution margin. The margin could be termed as the output that is obtained after the variable expenses are deducted from the total sales (Pedersen and Thibault 2014).
For making this event a success, Oxygen Event Services Limited is required to be aware regarding the contribution margin, since the total fixed costs are required to be lower than the contribution margin. Along with this, the use of contribution margin is to be made to arrive at the break-even point and sales. For determining the break-even point, the following formula is used:
Break-even point = Fixed costs/ Contribution margin ratio
In order to arrive at the number of customers for break-even, the following assumptions are made:
|
Primary Assumptions: |
|
|
Particulars |
Units |
|
Average revenue per customer |
£ 16 |
|
Average variable cost per customer |
£ 4 |
|
Contribution margin per customer |
£ 12 |
|
Incremental fixed cost |
£ 3,000 |
|
Number of customers |
300 |
The above table clearly illustrates that Oxygen Event Services Limited is expecting 300 customers for the proposed event. Further assumption is made that the revenue to be made from each customer is £16. In a similar fashion, assumptions are made regarding fixed costs and variable costs. The variable cost per customers is assumed as £4, while the total fixed costs are assumed as £3,000. The contribution margin per customer is obtained by subtracting the variable cost per customer from the revenue expected per customer. These primary assumptions have paved the path for computing the break-even point and sales and they are illustrated as follows:
|
Break-even calculation: |
|
|
Particulars |
Units |
|
Revenue |
£ 4,800 |
|
Total variable cost |
£ 1,200 |
|
Contribution margin |
£ 3,600 |
|
Incremental fixed cost |
£ 3,000 |
|
Total profit |
£ 600 |
|
Break-even (in customers) |
250 |
|
Contribution margin ratio |
75.00% |
|
Break-even (in sales) |
£ 4,000 |
In accordance with the above table, the contribution margin from the event in the context of the organisation is obtained as £3,600. A greater margin of contribution is desirable for a firm in order to increase the profit level and thus, the overall business operations are improved as well (Raj, Walters and Rashid 2017). In order to arrive at the net operating income, the fixed costs are subtracted from the contribution margin. Thus, it has been found that Oxygen Event Services Limited needs at least customers for avoiding loss; however, no gain would be made as well. Finally, in order to find out the break-even sales, the fixed cost is divided by the ratio of contribution margin. Hence, the organisation needs to generate at least £4,000 from the event to remain in no-profit-no-loss situation.
For representing the break-even chart, the changes in revenues have been made and accordingly, contribution margin and net operating income have changed. However, the fixed costs do not change with any change in the overall level of activity (Titman, Keown and Martin 2017).
|
Revenue |
Contribution |
Fixed cost |
Profit |
|
£ 3,000 |
£ 2,250.00 |
£ 3,000 |
-£ 750.00 |
|
£ 6,000 |
£ 4,500.00 |
£ 3,000 |
£ 1,500.00 |
|
£ 7,500 |
£ 5,625.00 |
£ 3,000 |
£ 2,625.00 |
|
£ 9,000 |
£ 6,750.00 |
£ 3,000 |
£ 3,750.00 |
Break-even chart:
After careful assessment of all the funding sources, it is recommended to Oxygen Event Services Limited to accumulate funds from bank loan and sponsorship. These two sources are the most appropriate for the organisation to conduct the event due to primary reasons. Despite the fact that the profit-making event companies find it difficult to raise bank loans, the success records of to Oxygen Event Services Limited would pave the path for the organisation to obtain the same. In addition, as the event cost is not too high, it would have to pay lower rate of interest to the bank and hence, the effect on working capital would not be significant (Winfree, Rosentraub and Mills 2016). The reason behind the selection of sponsorship as another source of funding for the event is that the client could be able to accumulate prior information about the expected customers, location and event timing, its agenda and marketing plan of Oxygen Event Services Limited. As a result, it would help in increasing the satisfaction level of the clients.
In terms of pricing strategy, Oxygen Event Services Limited could follow the flat fee structure. This is because with the help of this structure, the organisation would be able to provide pertinent knowledge about the expected participants to the client (Veal 2017). In addition, due to the presence of experienced staffs in the organisation, it would be possible to make appropriate anticipations of time to be spent on the job.
Conclusion:
From the above evaluation, it has been found out that Oxygen Event Services Limited would carry out a new product launch for a popular retail firm in UK to attract the customers to buy its product. Financial management is necessary for the conduction of such as event, since it would help in anticipating capital requirements, ascertaining capital cost, cash management and many others. Finally, the funding sources that are suggested to the organisation include bank loans and sponsorship, while the flat fee pricing structure is recommended in combination with the sources of finance.
References:
Atkins, M.G., Carey, J.E. and Sanders, P.J., 2016. Event management in a distributed processing system. U.S. Patent 9,344,381.
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education. John Wiley & Sons.
Finkler, S.A., Smith, D.L., Calabrese, T.D. and Purtell, R.M., 2016. Financial management for public, health, and not-for-profit organizations. CQ Press.
Gatzert, N., 2015. The impact of corporate reputation and reputation damaging events on financial performance: Empirical evidence from the literature. European Management Journal, 33(6), pp.485-499.
Getz, D., 2014. Event studies. In The Routledge handbook of events (pp. 45-64). Routledge.
Henninger, C.E., Alevizou, P.J. and Oates, C.J., 2017. IMC, social media and UK fashion micro-organisations. European Journal of Marketing, 51(3), pp.668-691.
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Jones, M.L. and Jones, M., 2014. Sustainable event management: A practical guide. Routledge.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. Emerging Markets Journal, 5(1), p.26.
Lau, C., 2016. Financial Management.
Karadag, H., 2015. Financial management challenges in small and medium-sized enterprises: A strategic management approach. Emerging Markets Journal, 5(1), p.26.
Matthew, B.T., 2017. Financial management in the sport industry. Taylor & Francis.
McKinney, J.B., 2015. Effective financial management in public and nonprofit agencies. ABC-CLIO.
Morgan, J., Jackson, C. and Laws, C., 2015. Is the events industry a creative industry?.
Oxygen-events.com., 2018. Oxygen Event Services Ltd – London Event Production Company | Experts in technical production, logistical management & conceptual design. [online] Available at: https://www.oxygen-events.com/ [Accessed 23 Mar. 2018].
Pedersen, P.M. and Thibault, L. eds., 2014. Contemporary sport management, 5E. Human Kinetics.
Phillips, M., 2016. An evaluation of the feasibility of setting up a mobile smoothie and juice bar, to attend outdoor events across the South of England (Doctoral dissertation, Cardiff Metropolitan University).
Raj, R., Walters, P. and Rashid, T., 2017. Events management: principles and practice. Sage.
Titman, S., Keown, A.J. and Martin, J.D., 2017. Financial management: Principles and applications. Pearson.
Veal, A.J., 2017. Research methods for leisure and tourism. Pearson UK.
Vogel, H.L., 2014. Entertainment industry economics: A guide for financial analysis. Cambridge University Press.
Winfree, J.A., Rosentraub, M.S. and Mills, B.M., 2016. Sports finance and management: Real estate, entertainment, and the remaking of the business. CRC Press.
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