Festivals, as in all other types of businesses, require good accounting practices and financial management. The events industry at large face unique challenges determined by mostly external factors, ranging from rising entertainment costs to volatile market behaviour. These complex issues call for expert financial forecasting and advice, both of which help drive and ensure a festival’s success.
At BDO Tauranga, our business advisory team have been involved with festival operations in the local area that have led to a festival’s sustainable business. Below are some financial insights we’ve gained after years of working within the entertainment industry that can be applied to any and all types of businesses.
Planning ahead
While it goes without saying that business planning is essential, for festival businesses, this rings even truer. Events need to be planned at least six months ahead. Ideally, planning needs to start a year prior to large events. As most of the projected income of the festival relies on the success of the festival itself, festival planners need ample time to prepare.
Seasonality is an issue that festival operators will face and need to take into careful account. It is much harder to sell festival tickets in winter, for example, when people are budgeting for the holidays. Many other businesses will be subject to seasonality, and festival operations have taught us that having a weekly or monthly plan of action will keep the project on track.
Collecting cost information and creating an accurate but flexible budget
Cash flow is one of the biggest issues any festival operator will face. Besides the initial difficulty in procuring funds and sponsorships, identifying all probable costs and expenditures and comparing that to expected revenues is not a straightforward task. This is where expert financial forecasting will prove the most useful.
To create an accurate budget, festival operators need as much information about costs as possible. There are many costs to consider, from entertainment costs and venue hire to promotional costs and staff wages. The creation of a budget and cashflow forecast is not the end of the process. Budgets must be flexible and need to be updated consistently, owing to the changing demands of the event. Some sponsorships or acts may pull out, for example, so budgets need to accommodate for these types of risks.
Conducting risk assessments
On the subject of risk, conducting a risk assessment is imperative for festivals. As mentioned earlier, a festival’s success is subject to a number of external factors. There are many risks involved, from bad weather, cancelling acts, physical hazards, and more.
Getting insurance is imperative here to offset some or all losses, an essential that should be mirrored by businesses in all industries. Health and safety risk is also another factor that needs to be assessed.
Comprehensive market research
Marketing is another huge factor that drives an event’s profitability. Promotional media need to attract the right audience and sell to them successfully, so a robust marketing budget that’s allocated in the right places is important.
To do this, plenty of research is required. This includes research on competitors, customer behaviour, and pricing. Research is also required to find opportunities to promote in new channels and gain a bigger audience. The marketing team needs to brainstorm which communication vehicles will work best for their audience, e.g. opting to promote on social media versus email marketing.
Ultimately, festivals need to think of cost-effective ways to communicate with their audience, and any other business should be no different.
Building networking skills helps your business thrive
Festivals are a service-based industry for providing entertainment, and that service is centred around people. Festival operators consistently network with artists, promoters, social influencers, and other people involved in the industry, so the ability to build strong relationships and mutually beneficial partnerships makes these events sustainable in the long term. This skill will serve you well no matter what industry your business is in.
Evaluate
As with any business, evaluation is key to improving products and services. When it comes to festivals, qualitative feedback from customer surveys or reviews are a high priority. After all, it is their experience that will determine whether or not the festival was indeed a success. However, quantative feedback needs to be meticulously collected as well.
Quantitative measurements include ticket sales, merchandise sales, vendor fees, audience attendance counts, venue admissions, and others. However, most of these metrics will be determined on the day, so it’s important for festival operators to practice real-time monitoring to adjust strategies and redistribute resources as needed. A nimble and flexible state of mind is key to achieving this, as well as a robust plan that accounts for changes in projected sales or attendance.
After the event, evaluation reports and financial reports need to be created and discussed with the stakeholders, so plans for the following year’s festival can begin as soon as possible. This openness to change course, whether on the fly or with the help of thorough evaluation of your key metrics, can only open your business up to opportunities for growth.
Work with an experienced BDO adviser today
The flexibility and preparedness required to host a successful festival is no small feat. The BDO Tauranga team, backed by a national and international network, has extensive experience in financial forecasting, risk advisory and more to deliver exceptional client service, no matter your industry. Contact us about how BDO can back your success today.