II. Main Cultural products 7. Cultural Events

Section 7.10: Financial Issues

When working on the event budget, entrepreneur must remember that „a budget can be described as a quantified statement of plans, in other words, the plan is expressed in numerical terms.The budget process includes costing and estimating income and the allocation of financial resources.” ( Events managament, p.177).

We already have spoken about expenses – costs, that determine the amout of hte neccesary income and help to calculate the value of an entrance ticket.

In order to cover the expenses the bussinessman uses:

1. Company's own savings
2. Financial support from sponsors
3. Support from public sector – government and municipal programmes
4. Support of NGOs – grants and funding programmes of different organizations.

In order to attract financial aid, a budget of the planned event (an estimate of expenses and possible income) needs to be created first of all (see chapter 4). All activities of the event, as well as marketing costs need to be included in the budget. While creating the budget, entrepreneur has to overview finance needed in order to achieve the goals set and also to calculate the amout of the neccesary income. In order to preserve an accessible and reasonable ticket price for the target market, sponsors and supporters of the event have to be found – organizations with similar target markets are being searched.

When the budget is ready, one can work on an offer to sponsors and collaboration partners. The goal of the offer is to attract the attention of sponsor or collaboration partner and to make them interesed in supporting the event. Sponsoring offer must contain the plan how the sponsor's needs will be achieved. To attract sponsor's attention, the win-win situation must be created - use and involvement of sponsor’s product and promotion materials.

Collaboration with any other company has to be organized in time, because both - private and public sector are planning their budgets at least a year in advance. Therefore entrepreneurs must hand in their proposals in good time. A lot of interesting propositions are left without support exactly because of dealyed actions in Latvia.

Entrepreneur does the calculations of planned expenses and income, but life makes its own corrections, and frequently the actual numbers are different from the planned ones. Actual numbers can be more or less in all positions – expenses or income. To avoid unpleasant surprises, usually the so called unforeseen costs are calculated, so that the expenditure part of the budget is increased. In our case entrepreneur had not calculated the unforseen expenses, fortunately they did not appear; however, the income was not as planned. The income can fluctuate more as it is affected by greater risks. For example, if there are more visitors than expected, then the event may fail because of being overcrowded – the visitors are the sufferers. That’s why the entrepreneur needs to know the optimal number of visitors depending on the capacity of the place where this event will take place and capacity of services. The optimal number of visitors shouldn’t be exceeded even for financial reasons. The other example: the number of visitors is smaller than expected, which of course is affecting income. To secure against financial losses, sponsors need to be attracted, as well as marketing activities planned.

In case of the Līgo event in „Rakši”, the actual income was smaller than planned, because number of visitors was smaller than expected (actual - 2200), therefore ticketing income didn’t reach the plan. It was planned to get 16,910 Ls, but the actual figure was 14,715 Ls, that is by 2195 Lats less than expected. The company got profit of 4160 Lats and, in addition, 2200 happy visitors – the potential clients in the future, experience and collaboration partners. K. Blaus confirmed that event was successful and noted that similiar event will be organized the next year as well. Also sponsors and collaboration partners were satisfied with the event.

Planned and Actual expenses/income

After the event entrepeneur must create a financial review of the event and together with a "Thank you" note send it to the collaboration partners and sponsors. Transparency and honesty are the best companions in event organization – a guarantee for success of next event. Even in the case of financial failure it is very important, because we learn from mistakes by analyzing and eliminating them.

Questions

Questions