CHAPTER 7 Financial Management of MICE Learning Outcomes At the end of the chapter, you should be able to: 1. explain the importance of funding in MICE management; 2. discuss the significance of budgeting and financial control in MICE management; 3. clarify the meaning and importance of sponsorships; and 4. describe some tips on how to look for sponsorships and how to make sponsorship work. F Funding (Adequate funding is essential for a sticcessfuil@vent. The biggest mistake of event organizers is to host an event without adequate financial’support. To do so will result in the failure of the event. Budgeting Careful budgeting is vital for the success of an event. A budget is an ‘estimate of income and expenses. It is necessary to budget carefiilly tofindiout planning and implementation of 'the’event Each activity should be analyzed as follows: 1. The specific activity to be undertaken 2. The estimated cost of each activity 102 Scanned with CamScanner7. 8. . The benefit of each activity . The income from the activity . The necessity of the activity . The place of the activity in the budget priority How the expenditure of the activity can be monitored. How the income will come in and how certain it is The costs and benefits of the whole project should be considered before deciding to undertake it. The budget should be made as accurately as possible. AWARDS BANQUET Income 100 _—Registrations 101 Preregistrations 102 Regular registrations 103 Door sales Subtotal 200. Marketing 201 Sponsorships 202 Advertising 203 Merchandise Subtotal 300 Investments 301 Interest income Subtotal 400 Donations 401 Grants 402 Individual gifts 403 Corporate gifts Subtotal Total income 103 Scanned with CamScanner104 500 Administration (fixed expense) 501 Site office furniture rental 502 Site office supplies 503 Site rental 504 Site telephone expense Subtotal 600 _ Printing (fixed expense) 601 Design 602 ‘Printing 603 —_— Binding Subtotal 700 Entertainment (fixed expense) 701 Talent fees 702 Travel and accommodations 703. Sound 704 Lights Subtotal 800 Food and beverages (variable expense) 801 300 dinners @ $50 802 Open bar for one hour 803 Ice sculpture Subtotal *Include taxes and gratuities. 900 Transportation (variable expense) 901 Staff travel 902 Valet parking Subtotal ‘3 1000. ‘Insurance (fixed expense) 1001 = Cancellation 1002 — Host liability Subtotal Total expenses Total variable expense Total projected income Total projected expense Gross retained earnirigs ’ Percentage of fixed overhead Net retained earnings (reinvestment) Scanned with CamScanner $ . 1,000 1,000 3,000 1,000 $ 6,000« $ 3,000 5,000 1,000 $9,000 $ 10,000 1,000 2,000 2,000 $ 15,000 $ 15,000* 3,000* 500 $ 18,500 1,000 750 $ 1,750 $ 1,000MUSIC FESTIVAL Income 100 Ticket sales 101 Regular advance 102 Student advance 103 Regular door sales 104 Student door sales 105 Group sales Subtotal 200 Marketing 201 Sponsorships 202 Advertising 203 Merchandise Subtotal 300. ~ Investments 301 Interest income Subtotal 400 Donations 401 Grants 402 Individual gifts 403 Corporate gifts Subtotal Total income Expenses ; ; 500 Administration (fixed expense) 501 Site office furniture rental 502 Site office’ supplies 503. Site rental 504 Site telephone expense Subtotal 600 Printing (fixed expense) 601 Design 602 ‘Printing Subtotal 700 Entertainment (fixed expense) 701 Talent fees 702 travel and accommodations 703 Sound 704. Lights Subtotal 105 Scanned with CamScanner106 800 Transportation and parking (variable expense) 801 Staff travel $ 500 802 Parking lot rental 3,000 Subtotal $ 3,500 900 Insurance (fixed expense) 901 Cancellation $1,000 “902 Host liability 500 903 Comprehensive general liability 2,000 904 Pyrotechnics rider 1,000 Subtotal _ $ 4,500 Total expenses $ 51,750 Total variable expense $ 29,250 Total projected income $ 393,000 Total projected expense 91,500 Gross retained earnings $301,500 Percentage of fixed overhead 150,000 Net retained earnings (reinvestment) $151,500 CONFERENCE AND EXPOSITION Income 100 Registration. 101 _—Early-bird discount $100,000 102 Regular 50,000 103 On-site 25,000 104 Spouse/Partner 10,000 105 Special events ~ __ 15,000 Subtotal $ 200,000 200 Marketing 201 Sponsorships 10,000 202 Advertising 15,000 203 Merchandise 10,000 Subtotal $ 35,000 * 300 Investments 301 Interest income $1,000 Subtotal $ - 1,000 400 Donations 401 Grants $ 5,000 Subtotal $ 5,000 _ 500 Exposition 501 200 booths @'$1,500 $300,000 502 50 tabletops @ $500 10 Subtotal 5 Total income $566,000 Scanned with CamScannerAdministration (fixed expense) 601 _Site office furniture rental 602 Site office supplies 603 _ Site rental 604 Site telephone expense Subtotal 700 Printing (fixed expense) 701 Design ) 702 ‘Printing Subtotal 800.. Postage (fixed expense) 801 Hold this date 802. Brochure 803 Miscellaneous Subtotal’! t 900 Entertainment (fixed expense) 901 Talent fees _ 902 Travel and accommodations 903 Sound 904 Lights Subtotal 1000 Transportation and accommodations 1001 Staff travel i 1002 — Staff accommodations Subtotal 1100 —_—Insurance (fixed expense) 1101 Cancellation F 1102 | Comprehensive general liability Subtotal i i 1200 Speakers (variable expense) 1201 + Honoraria 1202 Travel 1203 + Accommodations 1204 Complimentary registrations 1205. _ Per diem Subtotal 1300 Audiovisual (variable expense) 1301 Rentals (general sessions) 1302 Labor (general sessions) 1303 Rentals (breakouts) .. 1304 Labor (breakouts) 1305 Prerecorded modules Subtotal Scanned with CamScanner 5,000 $ 43,000 107Exposition (variable expense) Pipe and drape gs Percentage of fixed overhead Net retained earnings Financial Structures iannengiemnieegpecipeiaanensitnginmmentio financial structures need to beiestablished immediately. Notwithstanding the even paid staffitomanage the finances. When the structure involves committees, there are two options: 1. nace ie tang commit ereyoe mone omy 2. cikessnceniapibiiiminaiiaieidtitslaccs allocated budget. ; The method to be chosen will depend. on the nature and level of the ‘event, the finances, and personalities involved. It is important to have a clear ee. Everyone must know who money and who authorizes and controls expenditures. Control The careful control of financial transactions is a vital aspect of MICE management. Various control systems are necessary to keep spending within agreed limits. Failure to, implement proper control over budgets will lead to confusion. The following are practical steps to follow for effective financial control: : 1. Limit the number of people who can incur expenditure. 2. Keep accurate records of all income and expenditure _ 108 Scanned with CamScannerCTU CETL) aut arr rr (a) PET cy : Gries) ee nc each group Er Ly (b) Figure 7.1. Approaches ‘to Financial Control (a) Each committee or subcommittee has its own treasurer to look after its allocated budget. () FIERCE SELENE CEOS Scanned with CamScannerSources of Funding ' MICE organizers should identify possible sources of income and how to’ obtain funding for them. There are several agencies that MICE organizers can approach for funding such as: 1. local authority leisure department; 2. education authority; 3, local SEREUSRALEpORS Counc ‘as . foundation for Sports and the Arts; a a p 7. sponsorship agencies; 8. business agencies; 9. professional institutes; 10. hoteliers; - 11. heritage agencies; 12. local or national charities; 13. voluntary agencies; and 14. the National Lottery. Inaddition, MICE organizers can produce income from various activities such as: 1. franchising; 5. ‘donations; 2. ticketing; 6. programs; “3. entry fees; j 7. raffles; 4. fundraising; 8. souvenirs; 110 Scanned with CamScanner9. catering; : 13. participant contributions; 10. advertising; 14. sales stalls; 11. licensing (logos, etc.); 15. bar; and 12. trade exhibitors; 16. corporate hospitality. Sources of Funding 4 Philippine Charity Sweepstakes Office Cultural Center of the Philippines 111 Scanned with CamScannerFundraising Several projects need some kind of fundraising. There are many forms of fundraising. If carefully chosen, they can produce significant amounts. The following are some suggestions: 1. Sponsored runs, swims, and cycles 2. Dances and discos 112 Scanned with CamScanner3. Marathon swims and walkathons 4, Lotteries and raffles 113 Scanned with CamScanner5. Gambling evenings such as casino nights and race nights Sponsorship _ Sponsorship is a mutually beneficial business arrangement between the Commercial sponsorship is very difficult to find and requires a lot of effort to service it. Finding sponsors is not easy. Information about possible sponsors may be obtained from: 1. yellow pages and telephone directories; 2. local’and national newspapers; 3. business organizations such as Chambers of Commerce; 4. professionals such as lawyers and architects; 5. participants and their personal tontaces 6. libraries—local, regional, and national; 7. market research through learned centers, consultancies; 8. partners that have supported previous events; and 9. existing sponsors. 114 Scanned with CamScannerSome Tips on Looking for Sponsorship 1. Use imagination and innovation - a new idea might convince a person to be a potential sponsor. 2. Put in the marketing effort - be sure that the product and price ‘are correct, and the quality of the event is widely known. a a. 4. aEERUE NET promotion ~ adapt the event to suit the sponsor's idea, desires, GRIREGUTEEND. 5. LE ——— Rotary Club. 6. Assess respective images - sponsors must be compatible with the 7! ere unlikely’ targets - -sptoach some wh hs 8. Do the necessary research ~ do detailed researcusing the madia "9, Check existing sponsors - din ot wharaeivescomnpates are 10. Get media support - ~ the support the media isiceded to attract How to Make the Sponsorship Work Sponsorship can be very worthwhile. Both parties must work to make it effective, The MICE organizers must not promise what they cannot deliver. The” technical skills and knowledge of the organizers must be used in the planning 115 Scanned with CamScannerThe Bidding Process “The bid isa proposal to hostan event. Itis the most critical marketing tool —_ ‘The bid should answer all the needs and requirements ‘presented to an individual, a small committee, a board of directors, or a general (assembly of Ihundreds/or ven thoiisands of people) The presentation may take place when decision-makers visit the city, or it may take place in another location. bureau or to a relatively new client. Each bid presentation will have its own ‘bureaw) The following are important in the bid process. Preparation 116 1. Ask for a(copy of a “bid form” or information regarding the (Specifie requirements ‘of the organization: The bid form is a f . It could be shortorlong. 2. Research on the history of the association for the past four years. Examine if there are conflicts and clear them with the association” planner. . Evaluate the strengths and weaknesses of your destination from the point of view of the planner. . Find out how the bid will be made; whether the association will accept an oral presentation, a written presentation, or both. . Research the details of bid presentation such as location, date, and time. . Meet the leader of the local district to discuss the strengths of the local organization. Make clear the role of the local leaders in the bid presentation. Find out if the neighboring areas will support the bid. . Categorize the organization according to kind—social, educational, political, scientific, etc. Scanned with CamScanner8. Examine your market position. Find out what makes your destination different from other destinations. The positioning of a destination is essential to find out its importance as a good location for a meeting, convention, or trade show due to its being unique or unusual. 9. Communicate with previous host cities and request them to help you in dealing with the organization’s planner. 10. Request local representatives to help you pre-sell your destination through letter-writing, accompanied by several photographs or pictures. Presentation 1. Make sure that the presentation document is complete and easy to read without spelling and grammar mistakes. 2. Make the bid document personalized by engraving the name of decision-makers on the cover of the bid document. 3. Send a letter of invitation following the protocol -order to congressmen, senators, governors, mayors, local members, and the bureau. 4. In case there is a “bid form” from the organization, make sure that it is completely filled-out and contains the necessary supplemental information: Include colored photographs and brochures that will sell your destination. 5. In case an oral presentation is needed, prepare the scripts of every person who will participate in the presentation. Have a local'member of the group open the presentation, followed by the mayor or another high-ranking local government official. Next, the bureau’s sales executive should make a short but detailed presentation. The local members will end the oral presentation. 117 Scanned with CamScannerAfter the Presentation Upon winning the bid, a memorandum of agreement will be signed between the bid proponent, which is the local association, and the international organization. Upon losing the bid, the proponent will revise the bid and bid again. How to Bid for International Events For international events, it is the host federation or national governing body that formally makes a bid to its international federation to secure an event. Once the event is secured, and the contractual agreement with the international federation has been made, the host federation will have to enter into a contract with its chosen host city. The host federation is the one that selects the appropriate venue. Financing of Bids and Events The cost of bidding and organizing international events can often be a . financial burden to the host city. Many governing bodies require the prospective host city to fund the bid process and shoulder the total cost of the event. Importance of Hosting International Events The significance of hosting international events can be seen from the way events stimulate the local economy through multiplier effects. These events can contribute significantly to a city’s overall economic regeneration plan. The expenditures in the city by participants, spectators, officials, and visitors will boost the local economy. Hotels, restaurants, clubs, shopping centers, and local transportation will all benefit from the event. 118 Scanned with CamScannerAdequate financial support is vital for the success of an event. The biggest error of MICE organizers is to launch an event without adequate funding. Careful budgeting is necessary for the event to work well. The budget must be accurate because inaccurate figures can be misleading and may cause bigger problems in the future. Efficient control of financial transactions is essential to prevent financial losses. MICE organizers need to’ identify possible sources of funding. Sources of funds are sponsorships and fundraising. Sponsors ‘of events may be groups or individuals. Sponsorship can be very rewarding if the MICE organizer and the sponsor will work together to make it effective.. Fundraising can generate a significant amount of money if the type of. fundraising activity is carefully chosen and if it is a new idea. Abidisa proposal to host an event. Itis an important marketing tool in obtaining business. It should be clear and complete. The bid process consists of two stages—the preparation and the presentation. 119 Scanned with CamScanner’DISCUSSION QUESTIONS e . Explain the importance of funding in MICE management. Discuss the meaning and importance of budgeting. . Describe the types of financial structures. . Discuss the practical steps for effective financial control. ;. Name some agencies that MICE organizers can approach for funding. Describe some fundraising activities. yan ow fF YW N . Explain some practical tips when looking for sponsorships. KEY TERMS AND CONCEPTS activity expenditure lottery bid financial control marathon catering funding program donation fundraising 1 raffle exhibitor income 3 walk CHAPTER ACTIVITY Your MICE management organization is willing to accept the project if the total gross profit for the event is more than Php5,000. Your client estimates that there will be between 100 and 300 guests. The company pays Php100 per person with a minimum of Php10,000. Your variable cost is Php4,000. Calculate the maximum and minimum gross profit you can achieve for this event. 120 Scanned with CamScannerCHAPTER QUIZ I. Identify the following: 1. A game of chance in which tickets are sold and one or more ticket holders may qualify for a prize 2. Money that is readily available 3. A financial contribution to an organization : 4, A company or organization sponsoring an exhibit booth 5. A lottery in which the prizes are goods rather than money 6. The right to market a service or product granted by the manufacturer or distributor for a fee 7. The process of regulating financial transactions 8. A series of performances presented at a scheduled time 9. Agencies which render services without compulsion 10. A proposal to host an event IL. Enumerate the following: 11-20. Give some tips when looking, for sponsorships 121 Scanned with CamScannerREFERENCES Badmin, P.M. Coombs and G. Rayner. Leisure Organizational Management Facilities. London: Longman Publishing, 1998. Batterham, G. A Practical Approach to the Administration of Leisure and Recreation Services. London: Croner Publications, 1999. Buttrick, R. The Project Workout. London: Pitman Publishing, 1999. Crainer, S. The Financial Times Handbook of Management. London: Pitman Publishing, 1998. Davis, K.A. Successful Private Sector Business Strategies. Michigan: Brown and Benchmark, 1999. English Tourist Board. The Give and Take of Sponsorship. London: English Tourist Board, 1998. Hall, C.M. Hallmark Tourist Events-Impacts, Management and Planning. London: Belhaven Press, 1999. Steir, W.F. Fundraising for Sport and Recreation. London: Human Kinetics Publishers, 1999. t White, A. Managing for Performance. London: Piatkus, 1998. i Wright, J. Recreation and Leisure. London: Croner Publications, 1999. 123 Scanned with CamScanner