THE MUSICAL MUSEUM

ANALYSIS OF THE ACCOUNTS

31-3-2019

Produced by M J Ryder
Version x
October 2018
The Musical Museum

Report on Accounts 2018/19

Introduction
As per previous years I have looked at the detail in both MM & MM(T)Ltd accounts (consolidated as if one organisation). In doing so, I have been looking at
further developments of a number of ‘models’ for future use. Most of the transaction go through MM(T)Ltd and are recharged as a block to MM, the reason for
this is that MM(T)Ltd is registered for VAT so this minimises VAT but there is a ‘deal’ with HMCR that limits reclaimed VAT to 80% due to the use of the building
for non VAT purposes e.g. ‘museum’. It is complicated and goes back to the VAT on fitting out the current building. It could be that MM(T)Ltd de-registers for
VAT as it is now under the limits but this may open the “can of worms” related to the fit out so for the moment we continue to stay registered. As our ambition
is to grow the income and reduce costs VAT limits should be exceeded.

INCOME
There are some 12 income streams :- Admissions, Donations, Gift Aid, Members subs, Investments, Shop, Events, Hires, Catering, Films, Grants, Bequests, One
off items & Other Income.

COSTS
There are costs that relate to specific income sources (e.g. Shop sales, Catering, events etc.) and those that relate to the building, marketing, governance as weel
as staff costs ( both full-time, part-time and casual wages),and ‘paper costs’ e.g. depreciation.

FUNDS
These are not real money but the Capital side of the Balance Sheet which in a commercial company would be the P&L account and Reserves. The Museum has,
Unrestricted Reserves for a General Fund and a Collection Fund while also restricted funds for Heritage Lottery Fund and a Memorial Fund.

ASSET CHANGES & WRITE OFF’S

Following a suggestion by Joe Bourke following last year’s Report & Accounts the Board agreed some months ago that the Museum should tidy
up the Balance Sheet by clearing out old Fixed Assets that were written down by depreciation to virtually zero and bring the HLF restricted fund
and the Leasehold annual write down to match each other and a number of adjustments which affect the P&L account and the B/S. These
amounted to £9,048 and £15,645 deprecation. The accounts describes these as ‘loss on sale of fixed assets’ These are ‘paper transactions’ and
do not affect the cash flow through MM & MM(T)Ltd,
 INCOME

ADMISSIONS
The cash value received was
Y/E 2019 y/e 2018 y/e 2017 y/e 2016
£33,345 £29,110 £28,295 £28,752
Following a period of static income there has been a 14.5% increase in income from this source. However a word of caution, the numbers mask
both a change in the mix of types of admissions and price changes in earlier years.
Y/E 2019 Y/E 2018
Adults 982=11% 979 = 33.3%
Concessions 1029=11% 1134 = 38.6%
Children 283=3% 338 = 11.5%
Families 127= 1% 141 = 4.8%
Free 403=4% 344 = 11.7%
TOTAL 2824 2936
(The Total footfall for the year 9,341. This data is from all reported sources such as films, concert, hires etc. by the office.)

So what does this mean? We had 2,421 paying customers of which only 40% paid the full adult rate (38% y/e. 31-3-18). The average collected per
head £ 13.77 (9.92p). The Museum was open for 200appx. public open days therefore an average of 14 (13) people per day of which 5 (4) paid the
full entry price. This means there is a huge area for growth possible. It also indicates that there is also a huge area for general marketing of the
Museum targeted at general ‘walk in’ visitors..

TARGET FOR 2019/20 and onwards

The above shows that the museum must set achievable growth rate for the next few years. My target would be 10% 2019/20 and 15% 2020/21
with a 5-10% year-on-year after that.
The issue for most independent museums is that once a visitor has been round the collection they are unlikely to return for several years
unless there is something new to see/hear so the target is to bring new visitors through the doors that will pay full entrance fees. (But as can be
seen, Concessions are one of the largest percentage of visitors and at reception, these are encouraged by for example, drawing attention to LBH
residents that they can get a substantial discount! Full price £11.00 LBH £5.50 with 50% discount, but Concession rate £9.00 with LBH 50% discount
only pay £4.50. - a 59% discount on full adult entry. This should be reviewed so only one discount is granted. Target £35,000
(Based on £11.00 Adult, £9.00 Concessions, Children £5.00 Family £25. Price increases are in the pipeline for 2019/20.)
DONATIONS & GIFT AID
There are several potential sources of donations:- cash dropped in the collection boxes, donated items for re-sale and specific appeals.

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£5,846 £6.700 £14,200 £2,250

The comparison with 2015/16 to 2017/8 shows how much this income stream varies. Three areas that can be followed up are:-
1. Tour Guides must express the need for donations very loudly and repeatedly during the tours.
2. That posters should be in several places explaining how much it costs to keep this heritage alive to pass on to future generations and visitors
donations are vital to achieve this. These should be prominent by collection boxes.
3. That there is a specific appeal for a highlighted instrument. This instrument could be placed in reception with a large poster “ Help us! So you
can hear this long silent instrument play again” type of appeal. Linked to this when an instrument is being worked on in a gallery an appeal for
specific small things such as “ 20 screws”, “ 6 metres of cloth”, or “20 metres of special tubing”
TARGET Get all posters etc in place and aim for £6,000 by year, with a 10% year-on-year increase for the next three years. Target £6,000.

Gift Aid
Some £2,050 was received y/e 2019. This can be increased by aligning ‘admission deal’ with GA rules. Target £6,000.

MEMBERS SUBSCRIPTIONS
Another area of change. The Museum moved to a membership by subscription starting on 1 st April 2018 the old Supporters Club was phased out by
31 March 2018 and no further ‘Supporters Club’ subs will be accepted. The supporters brought in
y/e 2019 y/e 2018 y/e 2017 y/e 2016

£8,825 £1,215 £2,355 n/a ‘Friends’ active

Membership income will drop from the initial income figure as several members took up the offer of a single life membership payment of £250.
Without going into the technicalities of accounting for life membership there will be an initial peak y/e 2019 then a fall there after to the annual
subs . MM has chosen to take all life members subs into the accounts in the year received.
TARGET A Membership promotion campaign in January 2020.:- leaflets, posters and social event. Membership numbers rising from 100 (as now) to
120 and 20 every year for the next 3 years (£500 increase per annum) Target £2,500 to £4,000 by 2021.

INVESTMENT INCOME
This income stream has always been an important part of the Museum’s passive income representing 10% currently. However with the sales of
investments; £50,000 y/e 31/3/2017 & £60,000 y/e 2018 this stream was destined to fall. The sales were necessary to sustain the Museum’s cash
flow and cover monthly cash losses.
With the receipt of the substantial bequest £154,000 from Bill Thornecroft’s estate and Pickstock £163,000 the income could in part recover.
However, decisions on the use of these bequests are still being agreed by the Board. In my view at least £110,000 should be invested in CAF
products to replace the withdrawals of previous years.
The income has been a stable 3.6% return appx. over three years and comes from a CAF portfolio of 50% fixed interest and 50% equity.

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£5,100 £5,700 £ 9,433 £8,337
TARGET £6,000 but if a decision is made to invest in further CAF investments from the bequest this could rise further. E.g. on £320,000 @ 3.8%
£12,350. As the Museum has no control over market conditions this source of income is not likely to vary much. Target £6,000 (with no further
investments being bought). This income includes the interest on the Deposit account but the Pickstock element has not yet produced significant
income.

SHOP SALES
The shop sales and costs have been:-
y/e2019 y/e 2018 y/e 2017 y/e 2016
Sales 12,279 £11,200 £9,526 £10,585
Cost of Sales 9,641 6,457 5,467 5,312

Gross Profit 2638 4,743 4,059 5,243

Percent 21% 42% 42% 49%
.
The stock is marked up to give a gross profit of about 40%. The shop is carrying high levels and value of CDs and Guidebooks 63% of total value. It is
not clear why y/e GP % has fallen by such a significant amount. If as I suspect, it is in the valuation of the closing stock then this will self-correct in
2020.
Generally, for every paying customer (see above, say 3,000) the shop sells £5 ( £3.70) products of which £2.00 (£1.48 ) is gross profit but this is not
strictly true as it is likely that when a Group Visits occurs then there is peak in sales where as general visitors it is more of a trickle. Also visitor
numbers may include repeat callers who have already bought what they liked.
In order to improve income from the shop we need to find out what customers would like to buy. A short survey over a month or two might
give us that answer. For Example, would they prefer to buy Museum Badged items: notebooks, book marks or general kids toys etc. for
grandchildren. It would also be helpful if there was a ‘dip stick’ study of a group visit, age, interest and what was sold in the shop during their visit
and how much they spent. The following questions should always be in our mind:-
1. What is the profit margin of this shelf space?
2. How much per metre is this shelf making?
3. Cull what is not selling and replace with what does?
4. With the new Wurlitzer Book due in print before December 2019 (I hope) the stock value will rise substantially.
TARGET. To increase the overall shop ‘take’ by strong promotion of selected items (MM badged) and in conjunction with increased footfall a 5%
rise y/e 2020 and 10% y/e 2021
Discussion on the pro’s and con’s of increasing second-hand sales and Gift Aid procedures is needed. Will it be worth the effort and what effect on
storage and promotion is necessary?. TARGET Overall Gross Profit £6,000

CATERING
y/e 2019 y/e 2018 y/e 2017 y/e 2016
Income £25,300 £23,700 £25,550 £16,400
Costs £15,800 £16,570 £16,960 £8,014
Gross Profit £9,500 £ 7,130 £ 5,590 £8,386
37.5% 30% 22% 51%
The catering gross profit has varied year on year. Part of this is explained by the fact that some catering income is included in ticket prices but not
transferred from that income stream to catering income. So far it has not been possible to work out a standard transfer per head per event. That
will only be possible when a ‘meal’ by ‘meal’ is caught for each event. E.g. coach group visit of 30 people having tea and biscuits while another
similar group get wine and mince pies.
What these numbers do not take into account is the casual wages spent on staffing the café and supporting catering for hall hire which amounts to
£19,230. Some of this must have been recovered through Hall hire and events income charges but on the face of it catering lost money. Much more
detailed analysis event by event is needed. I have raised this several times before but the office has been unable to undertake this so far.

TARGET to get catering to at least break-even by 31/3/2020.

This to be achieved by a detailed costing and charging of all items in the café, similarly in the provision for Hall Hire catering. The cost of casual
wages must be included in all hire charges e.g. a group visit which requires casual labour for the provision of the service whether the charge is via
group ticket charges or sales on the day. On Hall Hire a balance needs to be struck between the Hire and Catering so combined they make MM an
overall profit and contribute to the building overheads.
Target gross profit excluding wages £12,675

EVENTS
y/e 2019 y/e 2018 y/e 2017 y/e 2016
Net Income
£11,290 £23,541 £20,257 £12,909

The definition of these is very open, in effect covering anything that does not slot into the other income headings. Mostly these items are Hall Hire.
However, behind these totals are a number of widely different details. y/e 2018 shows hire charges vary from £75 for a piano school to £1,160 for a
birthday party. A monthly average works out at £1,515. These hires brought in a footfall of 3,000 (average 75 per hire) The most regular hirer was
Maiastra ( 7 hires @ £350).
Associated with some of these events was the supply of catering (unfortunately detailed records are not available before the improved monthly
reporting sheets were introduced) Typically, a wedding hire of £1,000 would also have catering £1,790. The most exceptional hire paid £1,000 for
the hire but £3,213 on catering! (y/e 2018)

But note my comments on the cost of catering provision.

TARGET. We should aim for a minimum of one hall hire per week i.e. 52. (y/e 2018 there were 51). Given the Museum’s resources if more hires are
to be achieved two things must happen a) P/T casual staff must be brought in and costed in the hire charge. b) the hire charges need to be
increased generally by 10-15% bringing in an additional total of £3,100, bringing the annual to around £23,700 p.a
To achieve this there needs to be plenty of photographs of hall set out for parties in the lift, outside the hall, and outside on Noticeboards. Quality
leaflets and brochures easily to hand and promoted at reception, web site etc. and advert in newsletter. Target £24,000

FILMS
For ease of analysis I am excluding silent films with organ accompaniment and will treat these separately.
y/e 2019 there were 16 films shown which sold 826 seats in total. Films brought in £4,885 net of £100 licences per film. The face value of seats was
£7.00 and £5.50 concessions but the average is £5.92p showing most of the audience takes advantage of the concessionary rate
No films were shown in August 2018.
There seems no particular pattern in attendances
Statistics on catering income at film shows indicate the average café spend is £2.47 per seat sold (say £2.50).

SILENT FILMS WITH ORGAN ACCOMPIMENT

There were 3 shows all with Donald MacKenzie at the console. They brought in some £2,117 from 188 patrons (av. 62 but biased by one film at
108) Fees were £350 per showing £1050 in total providing Net profit of £1,067
Within the year films brought in £2,090 and possibly £1,250 in café sales.

TARGET Increase the seats sold from 826 to 1,000. Net Income £6,000
We must
1. survey our audiences as to the sort of films they enjoy, the best time they prefer and how often they might visit. Current they are Sunday
afternoons.
Improve publicity with concentrated coverage on silent and organ.
2. Also pop-up e-mail/ txt to members reminding them of the show say, one week before the showing.
3. Put into place an 18 months plan for films, concerts shows etc but not necessary for publication but to aid a balanced programme, artists
bookings and publicity/marketing development.
CONCERTS
y/e 2019 y/e 2018
£42,025 £31,248
Less costs £13,789 £8,976
NET INCOME £28,236 £22,272
GP% 32.8% 28.75%
For the whole year the audience was 1,945 The costs include the organists and other artists fees, making an overall contribution of £28,250.
However, the concert audiences varied with 220 for the Christmas Concert and an average of 100 for the others. Most organists are paid £350 with
the exception of Phil Kelsall who was paid £550. Details of the Christmas shows were circulated a few months ago. What I have not been able to
factor in is the costs of catering e.g. free drink & mince pie to full lunch . This re-emphasises the need to keep additional records of show by show
full income and costs. In the costs is the cost of hiring light and sound equipment at £1,800. Clearly there is scope to put on more of these on so
long as the organist will play for fees between £350- £500. See spreadsheet for individual concerts.
TARGET There is scope to increase this source of income. Much better marketing with a detailed plan for the whole year but to do this there needs
to be at least a 12month booking plan for the organists. Holding further single organist concerts would produce more income as these only need to
sell 30-40 seats to break even while our average concert should draw in 70-100 ticket sales. To encourage pre-booked ticket sales a discount
arrangement should be considered e.g. buy four concerts in advance and get 10% discount.
Total net income from the concerts £35,000 24% increase from y/e 2019 and 10% year-on-year thereafter.

GRANT
Since the appointment of a Grants Officer (P/T) grants awarded has been a noticeable success. However, a number of these have not been received
within the accounting period. Also some grants are paid from the awarding body direct to service provider. One such being the Archive Trust for a
scoping grant re. Roll Library etc During y/e 2018 actual cash £4,000 for a ‘Survive & Thrive’ study was received.
TARGET. To draw up a realistic income stream and costed applications aimed at specific grant givers. However we need to have a few ‘on the shelf’
projects’ to meet deadline dates and scales of applications
£20,000

BEQUESTS
This income flow is entirely unpredictable however the Museum did receive £154,000 in y/e 2018 and y/e 2020 £165,000 from the Pickstock
estate. The Board is currently deciding how to allocate these funds. It is essential at every opportunity we mention bequests to visitors, in print, on
the web site and make sure we have an attractive, well written, inviting leaflet dotted about the Museum e.g Café, Reception by Visitors book and
so on.
TARGET None.
ONE-OFF and OTHER INCOME
y/e 2019 £2.250 (£1,500 y/e 2018) arose from Simon’s trick of selling Car Park spaces which is about £43.30 per week.
TARGET Maintain the current level of income. The issue of car park barriers/chains etc is still under discussion. £3,000

MUSEUM COSTS
The Museum has both fixed costs, variable costs and one-off costs. My analysis will look at each cost heading in the accounts at 31/3/2019 and
where possible compare them with the two previous years y/e 2018 & 2017.
In the order they appear in the published accounts:-

INSURANCE
There are broadly two insurances a) the building, b) 3 rd party. Like most museums the collection is not insured on the basis that the objects are
irreplaceable as they stand, that the cost would outweigh the benefit and that the Security risks are low. The building insurance is set by The
London Borough of Hounslow and the Museum forms just a small % of the Borough’s overall building insurances. It is a stipulation in the lease we
have to pay it. How reasonable the charge is after 14 years is a possible future study getting outside quotations but the Museum could only use use
this a a debating point with LBH.
3rd Party cover, required by law, should be reviewed every so often but I cannot say when this was last done. Another possible insurance which the
museum does not offer is , so far, is Trustee Cover i.e. that so long as they act in good faith any potential liability would be covered by the policy.
Part of the revised M&A was to include such a permission clause. A review of 3 rd party cover (business cover policy) and the costs of Directors
indemnity cover needs to be followed up within a couple of months with the aim of a start 1/4/20, now the M&A changes are agreed with CC.
TARGET Review 3rd Party – before renewal date. Longer term test building cover value and Trustee cover during 2019.
Costs y/e 2019 y/e 2018 y/e 2017 y/e 2016
£3,100 £1,325 £2,305 £806
(I suspect 2017 & 2016 is just are timing differences. total £1900 average over 4 years.
TARGET Monitor these costs no expected large change. £2,000

LIGHT & HEAT

This is one of the biggest overheads:-
y/e 2019 y/e 2018 y/e 2017
£24,000 £14,663 £13,872

y/e 31-3-2019
If the additional electricity is removed the annual total would be £13,740 which compares well with the two previous years.
Telephone £2,880 ( £2,469) (not sure why in the Utility account)
Water £1,645 (£2,456) This is a fixed cost and can only rise in the future. I doubt we can get a different tariff)
Electricity. £9,390 (£7,630) We pay some £200 p.a. for automatic meter reading.
Gas. £7,860 (£2,900) This is paid on a monthly charge and varies with weather conditions etc. One very high bill,( normally £3,360 ) was a catch-up
bill. Usually £1,200.
TARGET Electricity should reduce when the solar panels are installed. All tariffs have been reviewed within 12 months.
TARGET .£22,000 in total.

REPAIRS TO PROPERTY & REPAIRS AND RENEWALS

I will deal with these two cost heading together as what gets posted to which is rather varied.
y/e 2019 y/e 2018 y/e 2017 y/e 2016
£18,300 £19,500 £19,000 £20,000

y/e 31-3-2019 @ £18,300 is roughly in-line with previous years.

Main recurrent costs are:-
Argent’s quarterly fees £4,790
Rubbish Collection £1,890
Gardening £800, ( this used to be done by volunteers but now by a firm)
ADT alarms £2,750
PRS etc Licences £915 (why in here you may ask? Premises costs)

TARGET. To keep these costs down to £18,000, with the understanding that they are likely to rise as the building ages. A large cost can be expected
when the boilers are replaced.

PAYROLL incl Casual wages.

In the y/e2019 the Museum employed 1.8 full-time members of staff and a number of casual staff who were treated (at their request) as self-
employed.
The numbers used here for y/e 2019 may well change in future as the Board decide on additional staff.
y/e 2019 2018 2017 2016
£90,600 £75,500 £59,786 £37,557
Part of this increase reflects the p/t employment of a Fund Raiser, Full-Time 1.8 FTE was £66,000 (£54,454) and casual £21,000 (£18,996). Of the
casual most was spent on catering staff £19,300 with a smaller amount on cleaning £1,770. In some cases the same person did both making
accurate allocation difficult.

TARGET. To hold total payroll below £100,000

Action Cost any new potential employees including the use of casual staff. Ensure all casual staff hours are covered by hire/events income and
new positions bring in at least 200% of their salary
HIRE of EQUIPMENT
y/e 2019 y/e 2018 y/e 2017 y/e 2016
£2,370 £1,996 £1,577 nil

The majority £2,370 relates to sound and lighting equipment for the Christmas shows with the balance related to ‘red carpet’ hire. These costs
should fall as the Museum has bought its own ‘rig’.
A notional ‘hire’ charge should be included in costing events where this is to be used.
TARGET. To allocate notional ‘equipment hire’ to the concerts it is used for. Re-inforces the need to have a concert by concert Income &
Expenditure analysis. This cost likely to be £1,000 for other equipment

POST and STATIONERY etc

y/e 2019 y/e 2018 y/e 2017 y/e 2016
£4,305 £6,907 £7,859 £5,293

It is unlikely much savings can be made on this cost heading but some things could be investigated again such as the Museum becoming a postage
stamp seller
Target £7,000

ADVERTISING, MARKETING & PRINT

y/e 2019 y/e 2018 y/e 2017 y/e 2016
£9,100 £8,640 £4,907 £8,236
This cost seems to remain around £8-9000.
TARGET. There should be a link between a particular ‘campaign’ costs and increased income for that stream e.g. Groups Magazine adverts, trade
shows etc and local newspapers and general footfall or specific special day(s) event like half-term. As a matter of some urgency, to provide a
marketing plan with forecasts and outcomes. I would expect this cost to rise as efforts to increase footfall increase. £11,500.

TRAVEL & ACCOMMODATION

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£3,400 £5,300 £3,618 £340

These costs may reduce with changes of Board meeting patterns

TARGET
2019 £2,500
CONSULTANTS FEES

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£0 £4,700 nil £26,213

The 2018 fees were part of the Survive & Thrive project for which the Museum received a Grant of £4,000. No direct payments were made to
consultants in y/e 2019

TARGET There will be no consultancy during y/e 2019 Estimate 2019 £0

ACCOUNTANCY & AUDIT

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£10,840 £10,300 £8,788 £6,650

The increase in costs is as a result of having legal advice related to changes in the Museum governance. ‘Audit’ fees were £6,500 in total for both
MM & MM(T)Ltd. In some previous years MM had to hire book-keeping services through Joe Bourke.

TARGET. I expect the ‘audit’ charges to rise with inflation. 2019 £7,000

FINANCIAL COSTS

y/e 2019 y/e 2018 y/e 2017 y/e 2016

£2,277 £2,939 £2,864 £1,630

These are mainly credit card fees.. The bank charges remain at £450 p.a.

TARGET 2019 £2,500

OTHER SUNDRY COSTS

There are a number of other costs not outlined above such a Subscriptions , Training costs, & Sundries which in total, amount to £1,000 roughly but
as these vary year to year further analysis would provide little useful information.
TARGET. 2019 £1,000
SUMMARY OF TARGETS
£
Admissions 35,000
Donations 7,000
Gift Aid 6,000
Members Subs. 4,000
Investment Income 6,000
Shop (gross profit) 6,000
Catering (gross profit) 12,675
Film Shows 6,000
Concerts 35,000
Bequests -
Grant Income 20,000
Sundry 3,000
Events (hires) 24,000

TOTAL INCOME 131,100

Insurance 2,000
Utilities 22,000
Premises 18,000
Payroll 100,000
Hire 1,000
Postage etc 7,000
Ads/Market’g 11,500
Travel etc 2.500
Consultants 0
Clean’g/garden 3,000
Accts/audit 7.000
C/cards 2,500
Sundry 1,000

TOTAL COSTS 177,500

LOSS -£46,500
Note 1. Depn has not been included as it is not a cash outflow but would is £15,645 (39,600). In 2020 will be appx £35,000
2. Of the above loss some £17,000 is due to the appointment a new P/T Grants Officer (fixed term) to be funded from B Thornecroft’s
bequest. And recovered in part through grants received.
3. Investments and cash balances are £170,000 Inv. £160,000 cash Total £330,000 But @ 31/10/2019
Bank balances £246,606
Investments £163,600
TOTAL £409,606