The Band Case Study UGB 230 Business Enterprise Management Copyright William Ang’awa 2017 Alex, John, Janet and James have set up a band and wish to establish a music business as their hobby of playing in pubs has now become serious business. They want to do this without getting in trouble with the law, as they have good graduate jobs having just graduated from the University of Sunderland. They wish to call their band “Shindig” please give them advice, if they could do this? and whether they could register a business in the UK at Companies House Cardiff under this name? They are wondering whether they should hire a manager at a fixed cost of £3600 per year. This would increase their gig income by 60%. Incorporation Fee The cost of registration is: £120 with Jordans (The Company that helps to incorporate businesses). Share Capital Each Band member will put in £1000 each as per Share capital of £1 each. They will each control 25% of shares each. This would be paid into the bank before the start of Business. Other Capital The band has convinced their parents to put in £4000 each. (Alex and Janet are brother and sister). They will not own any share capital. This will be seen as an interest free loan. In fact they do not know what to call it. They have not decided if it is repayable. Loan The band will ask for a £10000 loan from one of the UK high street banks. They are not sure which one to chose? Do you think they should take the loan? Grants The band members are all under 29 and it is possible they may access £500 from the Princes Trust for Research purposes. The Councils in the North- East of England may provide them with a £3000 creativity grant on commencement of the business. What other income opportunities do they have? Income from: What would be the source of the Band’s income/revenue stream? The band aims to play at a gig each month in venues holding at least 500 people. They will play at two regional gigs in the summer and they would be paid £2000 each for this. The Band will play as the opening act for a major group at 3 venues. They will get £4000 for each performance. However, they will have to meet their own travel and accommodation costs. Sales – The band charges £750 per gig in the venues stated above – that is 500 people. Sale of merchandise – T – shirt, CD sales, Digital Downloads 20% of the approximately 300 fans who attend their events will purchase £10 worth of merchandise. Sponsorship Do you think the band would require sponsorship and how would they account for this? Value added Tax – For the purpose for this report we need to be aware of VAT but we will not provide for it, as it is too complicated for non-financial students at this moment in time. Value added Tax – The band is operating under the threshold for Value added Tax. No provision for this has been made in the forecast. Find out what the VAT Threshold will be from April 1 2012. Direct Expenses These are travel costs to gigs, cost of purchasing and printing T – Shirts and CD sales, packaging, art work, etc. What other costs would they incur? The band will record a promotional EP of 6 songs? Should they include cost if recording? They intend to upload songs onto youtube.com. What mark up costs should they go for? How would they work this out? What are mark up costs? What is the group’s profit margin? Indirect costs How would they work out indirect costs? Fixed assets The group will purchase the following equipment 1. A Bass Guitar 2. An Electric guitar 3. An Acoustic – Spanish 12 string guitar 4. A Drum Kit 5. Roland Stage electric piano/synthesizer 6. A Second hand van for – £3000 Other accessories: Speakers, mixers, mikes, etc were given to them as a gift. They are worth £4000. Marketing Costs What marketing costs would be associated to their projects? On what basis? The group has a friend who would do their online and social media campaign for £100 per month and their website for £600. General office The band intend to work from the spare garage space in a house owned by dad. He will charge £120 per month. Operational Costs What operational costs would they incur? What would the professional fees be? Financial Costs What financial costs would they incur or should they work out? End