Financial Feasibility Assignment: Introduction
This Financial Feasibility Assignment deals with conducting a literary festival at Cambridge University. This word festival is conducted twice a year and it has gained popularity over the years. It is a literary festival where there will be great literary works on display for the guests. The constant support of the Cambridge University has been the most motivating thing for the Word-fest organizing committee. I have tried to create an operating budget for the same to be able to do financial study of the festival.
Details about the financials
This type of project does not require huge amount of initial expenditure. It is traditionally a low-cost investment. But as any business requires, it will also require initial investment which has to be funded through the traditional sources of financing, i.e. equity and debt. The requirements for this project are described below:
- Organizer’s Contribution: The initial investment in the project can be funded by equity participation. The organizers of the literary festival have to bring in an initial corpus as their contribution to the business. The promoter has to bring in this amount because of the nature of the business. As this business is perceived to be a risky business, the promoter bringing in this amount will give confidence to the investors.
- Loan from Financial Institutions: The promoter has to rope in some of the financial institutions to get funding for the project. The financing has to be to be a nominal amount sum but looking at the lucrative financials of the business, the investor might show confidence. Also, we are ready to give an 8 % rate of interest, which is higher than the prevailing market prices. This will definitely attract the investors.
This is a literary festival and so the nature of business is one time or it may be said that it is an activity based project. And so the maximum concentration of the expenses in the project is on the initial expenditure involved in the project. Although it might appear that a business of this nature should not involve huge capital outlays, but it is not true. These can be made more clear in the following points:
- Initial Expenses: The initial expenses include expenses incurred during the pre-operative stage, wherein money is spent on the project planning, formulation, financial Planning, advisory services, market research etc. All these expenses are those which one is not usually exposed to, but a businessman knows the impact of such expenses.
- Legal Expenditure: This type of event requires permission from the government offices and other competent authorities. Getting the required permission will not only cost a huge sum of money but it will also eat a lot of time for the organizers. But the organizers cannot move ahead without getting the green signal from the authorities.
- Up-front payment: The whole festival is about creating an environment which is conducive to literary works and creates an aura around it. This will require setting up of tents and stalls for the event. The partners for setting up the venue will have to made some upfront payment for the execution of the project.
Parameters/Assumptions For Financial Feasibility Assignment
a) This is a literary festival and so the sources of income are identified as:
It is assumed that we will be able to get a sponsorship of around 250000. And for this we need a maximum of 4-5 sponsors who can give us to the tune of 40000-50000.
2.Entry Fees charged to every visitor
The guests who are visiting the event will have to pay an entry fee of £ 50. This will help in meeting all the general expenses incurred at the festival
3.Income from sale of products from the Stalls
Since this is literary festivals, we expect a huge sale from the book stalls and other literary works.
b) In this type of project, the major uses of funds have been identified as:
1.Cost of tent and decoration
The festival will require a set-up of tents and decoration to make the festival look elegant.
2.Marketing and Promotional Costs
The event will require at least 25 employees. Since this is not a yearlong event, we do not need employees on roll. They can be called for that week only.
The organizing committee has to incur expenses for the utilities like electricity, water supply etc.
4.General Administrative Expenses
All business has to incur for the general administrative expenses.
The event has to be promoted on a large scale so as to get maximum foothold. And this will require promotional campaigns, published materials etc.