OLABISI ONABANJO UNIVERSITY

FACULTY OF SOCIAL SCIENCE,

DEPARTMENT OF ECONOMICS

ECO 320: PROJECT EVALUATION II

FEASIBILITY STUDY ON:

ART AND GALLERY

SUBMITTED BY:

FAMOJURO VICTOR OLAYIWOLA

MATRIC NUMBER: SOS/20/21/0278

LECTURER IN CHARGE:

Prof. E.O GEORGE

Dr. I.O OSENI

Mr. S.B ADEGBOYEGA

EXECUTIVE SUMMARY

This feasibility study has been conducted to assess the viability of establishing an art

gallery in Ikeja, Lagos, named Fame Gallery. The primary objective of the study is to

evaluate the potential for the project to be financially sustainable and profitable while

fulfilling the cultural needs of the community.

The study was carried out through market research, financial analysis, and site visits

to similar galleries. The research indicates that there is a significant demand for an art

gallery in Ikeja, Lagos, and the surrounding areas. The growing interest in the arts and

culture industry among the local population, combined with the city's vibrant and

diverse community, presents a unique opportunity for the establishment of an art

gallery.

The proposed Fame Gallery will specialize in contemporary and modern art,

showcasing the works of local and international artists. The gallery will offer a range

of exhibitions, educational programs, and workshops to engage and educate the local

community. The gallery will also host events and private receptions, generating

additional revenue streams.

The financial analysis indicates that the project is financially viable, with a positive

net present value (NPV) and an internal rate of return (IRR) higher than the required

rate of return.

The study also highlights some potential risks and challenges that may affect the

project's success. The primary risks include competition from established galleries

and the uncertainty of the art market. However, the study proposes a range of

strategies to mitigate these risks, including building a strong brand, establishing

partnerships with local businesses and organizations, and offering unique and

exclusive exhibitions.
In conclusion, the feasibility study shows that the establishment of Fame Gallery in

Ikeja, Lagos, is a viable and profitable project that fulfills the cultural needs of the

community. The study recommends that the project proceeds to the next stage of

development, including securing funding, leasing a suitable property, and

implementing the proposed strategies to ensure the gallery's success.

INTRODUCTION

Art is the process of intentionally arranging objects in ways that influence and affect

the senses, emotions, and/or intellect. Art includes an extensive scope of activities,

creations, and forms of expression.

Art and art galleries have a symbiotic relationship. Art galleries are spaces where

artworks are exhibited and sold, and they play a crucial role in promoting artists and

their works. Art galleries provide a platform for artists to showcase their art to the

public, and they offer an opportunity for art collectors and enthusiasts to view and

purchase artworks.

Art galleries also help to establish the value of artworks by showcasing them in a

professional and curated environment. By doing so, art galleries give artworks an aura

of prestige and importance, which can increase their value and demand in the art

market.

Furthermore, art galleries can influence the direction and trends in the art world by

promoting certain styles or artists over others. This can have a significant impact on

the careers of artists and on the art world as a whole.

Overall, the relationship between art and art galleries is one of mutual benefit and

influence, with art galleries serving as important gatekeepers and facilitators for the

art world.
BUSINESS DESCRIPTION

Fame Galleries is a new art gallery venture owned and managed by Famojuro Victor,

an experienced art professional with a deep passion for promoting African art. The

gallery is located in the heart of Ikeja, Lagos. Our mission is to showcase

contemporary art that inspires and tells unique stories.

Our collection features works by established and emerging artists from Nigeria and

other African countries. We are committed to providing a diverse range of art that

appeals to both seasoned collectors and first-time buyers. At Fame Galleries, we are

passionate about supporting emerging artists and building relationships with

collectors and buyers.

Famojuro Victor will work closely with our team of six staff members to manage and

operate the gallery. Our team consists of experienced art professionals with a passion

for supporting emerging artists and building relationships with collectors and buyers.

We will work closely with our artists to provide personalized support, including

marketing and sales assistance, to help them establish their careers and reach their full

potential.

In addition to our physical gallery space, we will establish a strong online presence,

leveraging social media platforms and online marketplaces to reach a wider audience

and offer online sales and virtual exhibitions. We will also host regular events and

exhibitions to promote our artists and engage with our local community.

Fame Galleries will be committed to providing a unique and engaging experience for

art lovers, collectors, and enthusiasts in Ikeja, Lagos. We are dedicated to promoting

emerging artists and contributing to the growth and development of the art market in

Nigeria and beyond. Our goal is to establish Fame Galleries as a leading destination
for contemporary African art, and we look forward to showcasing the best of African

art to our local and international audiences.

SCOPE AND OBJECTIVES OF THE BUSINESS.

The scope of the feasibility study covers the following aspects:

Market Analysis: This involves analyzing the demand for art works in Nigeria, as

well as the competitive landscape, including the key players in the art gallery

industry.

Financial Analysis: This involves a projection of income and expenditure over time,

evaluation of the capital requirements needed to start the business, identification of

the potential sources of funding, and the determination of the profitability of the new

business which entails evaluating the potential return on investment (ROI) by

analyzing the cost structure, revenue potential, and the break-even point.

Technical Analysis: This involves examining the technical feasibility of establishing

an art gallery business, including the requirements for equipment, materials, and

supplies.

Legal Analysis: This involves analyzing the legal requirements for establishing an

art gallery business in Nigeria, including obtaining copyrights, permits, licenses, and

regulations.
The Objectives of this feasibility study include the following:

1. To evaluate the operational, financial, economic, technical, and legal feasibility

of establishing an art gallery based on the current market demand and

competition in Nigeria.

2. To identify the required resources, including capital, equipment, and personnel,

needed to establish and operate the business.

3. To determine the potential economic and social impact of the art gallery on the

local community, including its contribution to employment and community

development.

4. To identify potential challenges and risks associated with establishing art gallery

business in Nigeria and develop strategies to overcome them.

5. To identify ways in which the art gallery can contribute to sustainable

development and reduce its environmental impact, such as through the use of

quality and eco-friendly materials in the course running the gallery..

6. To provide recommendations for establishing and operating a successful and

profitable art gallery business in Nigeria, based on the analysis and evaluation of

the various factors.

Location of the Business

In selecting the proposed location of the art gallery business in Nigeria, a lot of factors

were put into consideration, these factors include;

 Location: The siting of the gallery is crucial in attracting visitors and potential

buyers. Ideally, the gallery will located in an area with high foot traffic, such as a

busy shopping district or cultural center.

 Space: The size of the gallery space is also important, as it will able to

accommodate the artworks, visitors, and events. The space will be flexible and

adaptable, with adequate lighting and climate control to protect the artworks.

 Accessibility: The gallery will be easily accessible by public transportation, and

there will be ample parking nearby for those who prefer to drive.

 Neighborhood: The neighborhood where the gallery is located will be safe and

appealing to visitors. It would also have a reputation for supporting the arts and

culture.

 Competition: The competition in the area would also be considered, as the gallery

will need to distinguish itself from other galleries and cultural venues in the area.

 Cost: The cost of rent, utilities, and other expenses associated with the gallery

would be taken into account, as these can significantly impact the gallery's

profitability.

Overall, the siting of Fame Gallery has undergone careful consideration of various

factors to ensure that the gallery is well-positioned to attract visitors and promote the

artworks and artists it represents.

However, the projected business location will be in the centre of the commercial state

of excellence Lagos. It will be sited in a two plot land area across Ikeja City mall, on

Obafemi Awolowo Way. This location satisfies all the requirements and factors stated

above and will be the best location to site the business.

SWOT ANALYSIS

STRENGTHS WEAKNESSES

 Unique collection of artworks that  High start-up costs, which can be a

can attract a diverse range of art significant barrier to entry
enthusiasts  Difficult to establish a customer
 Potential for high-profit margins on base, especially in the early stages of
sales and services the business

 The gallery can be a focal point for  Competition from established art
art lovers and can become a galleries in the area
destination attraction for tourists  Difficult to keep up with changing
 Can offer art exhibitions, workshops, art trends, and high maintenance
lectures, and other cultural events, costs for art installations and events.
which can enhance the local
community.

OPPORTUNITY THREAT

 Building strong relationships with  Economic downturns, which can

local artists and art collectors impact art sales and customer
demand
 Developing strategic partnerships
with other art organizations and  Competition from other art galleries
cultural institutions in the area and cultural institutions in the area

 Expansion of business operations to  Political instability, which can affect

include online sales and exhibitions, tourism and the overall art market.
and art rental services  Challenges in obtaining funding and
 Developing a robust social media support for art-related projects.
presence to reach a wider audience.
Fame Gallery aims to maximize its strengths by;

 Showcasing unique and diverse artwork: The gallery would offer a wide variety

of artwork and unique pieces that have an advantage over galleries that have a

limited collection. By showcasing a diverse range of artwork, the gallery can

attract a wider range of customers, increase its appeal to art enthusiasts, and

create a reputation for being a go-to place for unique and diverse artworks.

 Strong curatorial expertise: The art gallery would work with a team of

experienced and knowledgeable curators to enable it with a competitive

advantage in the art world. Curators who have expertise in the art world can

identify and curate high-quality works of art, which can lead to a positive

reputation for the gallery and increase sales.

 Strategic location: The gallery would be well-located gallery so it can attract

more visitors and generate more revenue. If the gallery is located in an area with

high foot traffic or near other cultural institutions, it would have an advantage in

attracting visitors.

 Effective marketing: Fame Gallery would adopt a strong marketing strategy so it

can effectively reach out to its target audience, promote its exhibitions, and

increase its visibility in the community. This can lead to increased foot traffic and

sales.

 Partnership with other institutions: The gallery would partner with other cultural

institutions, such as museums, art schools, or community centers, can increase its
 visibility and reputation. Collaborating with other institutions would also help the

gallery expand its reach and audience.

By focusing on these strengths, an art gallery can position itself for success and stand

out in a competitive market.

The Business attempts to minimize its weaknesses by;

 Address operational inefficiencies:The gallery would identify and address any

inefficiencies in the gallery's operations, such as delays in processing sales or

inadequate staff training. By improving these areas, the gallery can provide a

better customer experience and increase overall efficiency.

 Develop a stronger online presence: Many customers today prefer to browse and

purchase artwork online. The gallery would seek have a strong online presence by

investing in a website, social media accounts, and other online marketing

channels to expand the gallery's reach and compete healthily with existing

galleries.

By addressing these weaknesses, the gallery can improve its overall performance and

customer experience. It is important to continually reassess weaknesses and work to

improve them over time

In maximizing the opportunities of the gallery, Fame Galleries seeks to:.

 Collaborate with artists: Partnering with artists can help the gallery expand its

collection and attract a wider range of customers. Collaborations can also provide

opportunities for the gallery to host special exhibitions or events.

 Leverage technology: Technology can be used to enhance the gallery's customer

experience, such as offering virtual tours or using augmented reality to display

 artwork. Technology can also be used to streamline operations, such as

implementing an online booking system.

 Expand into new markets: Consider expanding into new markets, such as opening

a satellite location or targeting new customer segments. This can help the gallery

reach a wider range of customers and increase sales.

 Participate in art fairs and events: Art fairs and events provide opportunities for

the gallery to showcase its collection and attract new customers. They can also be

a valuable networking opportunity and provide exposure to industry

professionals.

 Offer custom services: Offering custom services, such as art consulting or

framing, can provide a competitive advantage and attract high-end customers.

By taking advantage of these opportunities, the gallery can position itself for growth

and success. It is important to continually monitor the market and adapt to changing

trends and customer preferences.

The business aims at reducing threats by;

 Monitor market trends: Keeping up with trends in the art world can help the

gallery stay competitive and adapt to changing customer preferences. It is

important to stay informed about market trends and adjust strategies accordingly.

 Address competition: To address this threat from competitors, Fame galleries

would differentiate the gallery from competitors, by showcasing unique artwork

or offering exceptional customer service.

 Manage risks: Risks can come from a variety of sources, such as theft or damage

to artwork.The gallery would have proper insurance and security measures in

place to mitigate these risks.

 Maintain relationships with artists and customers: Maintaining strong

relationships with artists and customers will help the gallery in building a loyal

customer base and maintaining positive relationships with artists will help ensure

continued success.

By taking these steps, the gallery can reduce its vulnerability to threats and position

itself for long-term success. It is important to continually reassess threats and adjust

strategies as needed.

SOCIAL AND ENVIRONMENTAL ASSESSMENT

On the social front, the establishment of Fame Galleries could have a positive impact

on the community in Ikeja. The project could create job opportunities for the local

population, particularly in the arts and culture industry. Additionally, Fame Galleries

could serve as a platform for local artists to showcase their work, fostering a sense of

pride and community engagement. The project could also provide cultural and

educational opportunities for residents, promoting the development of the local

creative industry.

From an environmental perspective, the establishment of Fame Galleries should be

evaluated for its impact on the local ecosystem. The project should consider the use of

sustainable materials and energy-efficient systems to reduce its environmental

footprint. Additionally, the project should assess its potential impact on the local air

and water quality, as well as the management of waste generated from its operations.
In conclusion, while the establishment of Fame Galleries in Ikeja, Lagos, has the

potential to create significant economic benefits, it is essential to consider its social

and environmental impact. Conducting a comprehensive social and environmental

assessment will ensure that the project is developed in a sustainable and responsible

manner, benefiting both the community and the environment.

MARKET ANALYSIS

The purpose of this analysis is to provide an overview of the art market, and to

identify potential opportunities and challenges for Fame Art Gallery venture.

Market Overview:

The Nigerian art market is one of the fastest-growing in Africa, with Lagos being a

major hub for contemporary art.

According to a report by ArtTactic, the total value of Nigerian art sold at auction rose

from $500,000 in 2013 to $1.4 million in 2018, indicating a growing interest in

Nigerian art both locally and internationally. This also shows that there is still a lot of

profit to be attained in the market and it is a rationale decision for Fame Galleries to

venture in the Art market.

Overall, the art market in Nigeria, particularly in Lagos, is showing signs of growth

and increasing recognition both locally and internationally. With a growing number of

galleries, institutions, and events, there is a thriving art scene that is continuing to

evolve and expand.

Market Trends: Several trends are shaping the art gallery market. One trend is the

increasing demand for contemporary art, particularly in emerging markets. Another

trend is the shift towards online sales, which has been accelerated by the COVID-19

pandemic.

Another trend is the growing importance of social media in the art market. Platforms

such as Instagram have become essential marketing tools for galleries, enabling them

to reach a broader audience and connect with potential buyers.

Opportunities and Challenges: The art gallery market presents several opportunities

and challenges for a new venture. One opportunity is the growing demand for

contemporary art, particularly in emerging markets. This presents an opportunity for a

new gallery to focus on showcasing contemporary art and to build relationships with

emerging artists.

Another opportunity is the shift towards online sales. A new gallery could leverage

this trend by establishing a strong online presence and offering online sales and

virtual exhibitions.

However, the art market is highly competitive, and new ventures may face challenges

such as establishing a reputation and building a customer base. Another challenge is

the high cost of operating an art gallery, including rent, insurance, and marketing

expenses.

Conclusion: In conclusion, the art gallery market is a vast and diverse industry that

presents both opportunities and challenges for a new venture. A thorough

understanding of the market trends and dynamics is crucial for a successful art gallery

venture. Additionally, a focus on contemporary art and leveraging online sales could

provide a competitive advantage for a new gallery.

DEMAND AND PRICING ANALYSIS.

The Demand and pricing analysis is conducted to determine the potential demand for

art in the area and to set appropriate pricing strategies for the artwork on display.

Demand Analysis:

To analyze the potential demand for art in Ikeja, Lagos, several factors were

considered.

First, the size and demographic makeup of the population indicate the potential

market for art. The city has a population of approximately 500,000 people, with a

significant percentage being young professionals and students. This demographic is

likely to have disposable income and an interest in art, making them a potential target

market for the gallery.

Second, the city has a growing arts scene, with several other galleries and cultural

institutions in the area. This indicates a potential demand for art in the city and

suggests that there may be a receptive audience for a new gallery.

Finally, the location of the gallery is considered. Ideally, the gallery is located in a

busy area with high foot traffic. This can help to increase visibility and attract

potential customers.

Based on these factors, it appears that there is a potential demand for art in the area,

and establishing an art gallery would be successful in attracting customers.

Pricing Analysis:
Setting appropriate pricing strategies for the artwork on display is also an important

consideration. To determine pricing, several factors have been taken into account.

First, the reputation and recognition of the artists on display will impact pricing.

High-profile artists with established reputations will command higher prices for their

work than emerging artists or lesser-known artists.

Second, the medium and size of the artwork also influence pricing. Large-scale work

or works in expensive mediums such as oil paint will command higher prices than

smaller works or works in less expensive mediums.

Finally, market demand and competition is also taken into account. If there is high

demand for certain artists or types of art, pricing may need to be adjusted to reflect

this. Similarly, if there is a lot of competition in the area, pricing may need to be

adjusted to remain competitive.

Based on these factors, Fame Gallery is adopting a tiered pricing strategy that takes

into account the reputation and recognition of the artists on display. For high-profile

artists, prices should be set at a premium, while prices for emerging artists or lesser-

known artists should be more affordable. In addition, pricing for larger works or

works in expensive mediums should be adjusted accordingly.

Based on the analysis conducted for Fame Gallery, it appears that there is a potential

demand for art in Ikeja and that establishing Fame gallery could be successful in

attracting customers. To set appropriate pricing strategies, factors such as artist

reputation, medium and size of the artwork, and market demand and competition is

taken into consideration. By using a tiered pricing strategy, Fame Gallery can appeal

to a range of customers while still commanding premium prices for high-profile artists

and works in expensive mediums.

FINANCIAL ANALYSIS

Key Revenue & Costs

The revenue drivers for Fame Art Gallery will be the revenue of the art displays it will

sell. It will split the profits from the sale of the art sold with the artist that produced it.

Revenue will also come from rental fees from individuals, companies, or non-profits

that want an attractive venue to hold their event. Lastly, the Art Gallery will have

revenue from membership fees and ticket sales.

The cost drivers will be the costs of maintaining the art gallery space. The main

expenses will be the rent and utilities for the 5,000 square foot location, and all

supplies needed to provide the art seminars and classes

FINANCE REQUIRED

Fame Gallery requires a sum of N13,500,000 for its incorporation. It is required in

the form of a term loan of 5 years(60 months). If the financing is provided at an

interest rate of 10%, the loan repayment will amount to N247,500 per month. The

financing will be used to purchase the necessary fund the rents, utilities, legal fees etc

This fund would be gotten from loans from commercial and development banks.

The funds gotten would be used in the following regard:

DETAILS AMOUNT

Rent 2,000,000

Utilities 1,200,000

Generator 500,000
Insurance 500,000

Legal and Accounting fees 600,000

Fixtures and Fittings 1,200,000

Salaries of Employees 900,000

Interior Design 700,000

Marketing and Advertising 1,100,000

Equipments 1,500,000

Software and technology expenses 400,000

Motor vehicle 2,400,000

Working Capital 500,000

TOTAL 13,500,000

LABOUR COST AND LABOUR POLICY

Labour Cost:

Labour Cost: The art gallery will employ six workers and pay each worker a salary of

N100,000. In addition, Mr Famojuro Victor will take a monthly salary of N300,000.

The total monthly labour cost for the gallery will be N900,000.

The six workers would consist of two security personnel, two receptionist, one cleaner

and one gallery docent.

Position No of workers Salary Monthly Total

Owner/Manager 1 300,000 300,000

Gallery Docent 1 100,000 100,000

Receptionist 2 100,000 100,000

Security 2 100,000 100,000

Cleaner 1 100,000 100,000

Total 900,000 900,000

Labour Policy:

As the owner and manager of the art gallery, Mr Famojuro Victor is committed to

creating a positive and fair work environment for all employees. The following labour

policies will be implemented:

 Employment: The gallery will follow all applicable labour laws and regulations in

Nigeria regarding hiring and employment practices. All employees will be hired

on the basis of their skills, experience, and qualifications without discrimination

based on race, gender, age, religion, or any other factor.

 Working Hours: The art gallery will operate from 9 am to 5 pm, Mondays to

Fridays. Employees will be expected to work for eight hours per day, totaling 40

hours per week. Overtime pay will be provided to employees who work beyond

these hours or on weekends.

 Compensation and Benefits: Employees will receive a monthly salary of 100,000

Nigerian Naira. The gallery will also provide benefits such as health insurance,

paid vacation days, and sick leave.

 Performance Management: The gallery will implement a performance

management system to evaluate employee performance regularly. The system

will include setting clear performance goals, providing regular feedback, and

offering training and development opportunities to help employees improve their

skills and knowledge.

  Code of Conduct: All employees will be expected to conduct themselves in a

professional manner and adhere to the gallery's code of conduct. This includes

treating all customers and visitors with respect, maintaining a clean and safe work

environment, and following all gallery policies and procedures.

Fame Gallery will ensure that all employees are aware of these policies and will

address any concerns or issues that may arise. By implementing fair and reasonable

labour policies, Fame Art Gallery can create a positive work environment and attract

and retain talented employees who are committed to the gallery's success.

PROJECTED INCOME STATEMENT

Year of production Year 1 (N) Year 2 (N) Year 3 (N) Year 4 (N) Year 5(N)

Income 7,000,000 8,140,000 8,790,000 9,120,000 9,460,000

Cost of Sales 550,000 770,000 790,000 820,000 850,000

Gross Profit 6,450,000 7,370,000 8,000,000 8,300,000 8,610,000

Operating cost 1,750,000 1,900,000 2,000,000 1,950,000 1,920,000

Depreciation 300,000 400,000 500,000 600,000 700,000

Total Expenditure ( 2,050,000) (2,300,000) (2,500,000) (2,550,000) (2,620,000)

Earnings before Tax 4,400,000 5,070,000 5,500,000 5,750,000 5,990,000

Income Tax 350,000 520,000 700,000 750,000 840.000

Net Profit 4,050,000 4,550,000 4,800,000 5,000,000 5,150,000

PROJECT INVESTMENT APPRAISAL

Net Present Value

NPV analysis will be employed to evaluate the feasibility of the proposed car wash

business in Ikeja, Lagos. By estimating the expected cash flows of the project over a
5-year period and discounting them back to their present value, we will calculate the

NPV and determine the financial viability of the proposed business. This analysis will

provide valuable insights into the potential returns of the project, allowing us to make

informed decisions about the proposed investment.

PROFORMA NET PRESENT VALUE COMPUTATION

YEAR CASHFLOW DCF @10% PV

0 13,000,000 1 (13,500,000)

1 4,050,000 0.9091 3,681,855

2 4,550,000 0.8264 3,760,120

3 4,800,000 0.7513 3,606,240

4 5,000,000 0.6830 3,415,000

5 5,150,000 0.6209 3,197,635

NET PRESENT VALUE 4,160,850

Based on our analysis, the proposed art gallery business in Ikeja, Lagos appears to be

a financially viable investment opportunity. Our calculation of the net present value

(NPV) of the project, using a discount rate of 10%, yielded a positive value of

+4,160,850, indicating that the expected cash inflows from the project exceed the

initial investment costs of 13,500,000.

From this analysis and calculations, we can confidently state that the project has a

positive net present value (NPV). This means that the present value of the project's

cash inflows exceeds the present value of its cash outflows. Therefore, the project is

expected to generate a profit and add value to the company over its lifetime. A
positive NPV also indicates that the project is a worthwhile investment opportunity,

and its benefits outweigh its costs. Overall, the positive NPV result supports the

decision to move forward with the project and invest resources in its implementation,

as it is likely to yield positive financial returns in the long run.