Music Business & Management Business Plan and Funding Proposal - Case Study Example

Business Planning & Funding Music Business & Management Business Plan/Funding Application Proposal Executive Summary The paper describes a business plan for a radio broadcasting company. The business will operate in the United Kingdom region and promote entertainment services to the people with elements like music, news and sports with main concentration on music of various genres such as rock, jazz, hip hop, and classical songs among others. The business plan will describe the estimated amount of funds and their uses in different business related tasks. Further, this plan will also include proposed financial statements such as income and expenditure estimations for three years. The schedule of assets and liabilities as on 1st January 2013 is also described in this plan. It will be a self-employed business where owners will regulate all major decisions concerning business. Table of Contents Executive Summary 2 Table of Contents 3 Amount Requested 4 Purpose of Financing 5 Use of Funds 6 Description of Market 7 Description of Business 8 Financial Expenditure and Income Projections 9 Schedule of Assets and Liabilities 9 Management/Ownership 11 11 Financial Status of Owners 12 References 13 Appendices 16 Amount Requested In order to fulfil the business objectives and mission, the radio broadcasting business would request for a grant amount of almost 60,000 Pounds. The amount of grant would allow towards receiving approval for broadcasting of music, news, sports and cultural events to the British community. The grant amount will benefit the planned business for providing professional training for creation of new broadcasting programmes. The programmes will aim to increase awareness of public regarding different factors in the community. Besides, the grant amount will also allow the funders to make people aware about the services of new radio broadcasting business; community groups and the funders can pay appropriate attention to the public demand as a whole. The new radio broadcasting business requests loan of 400,000 Pounds in order to initiate the trade. The annual income of the radio broadcasting business is supposed to be 190,500 Pounds per annum. The estimated interest on loan is 28,000 Pounds per annum by assuming 7% rate of interest. Therefore, the breakeven point will be (400,000 P / 28,000 P =) 14 years approximately. It implies that the repayment of loan will take almost 14 years. Purpose of Financing The radio broadcasting business will serve two purposes. The first purpose is to collect sufficient money because every business requires certain amount of capital to gather all resources and assets. The second purpose is to develop a plan for primary business development in order to direct the radio broadcasting towards accomplishing the objectives (Spellman, n.d.). The purpose for the requested finance is to cover the primary money requirements as well as expenses before making profit from the business. It is estimated that the existing capitals of the owners and other additional financing from loan will be sufficient to cover the estimated cash requirements in the end of 2012. After 2012, it is anticipated that the radio broadcasting business will require extra 60000 Pounds and the amount can change according to any uncertain circumstances. The other purpose of financing is to cover the operational costs, the marketing cost and the promotional cost, which will comprise broad advertising campaigns with relation to beginning of the radio broadcasting services. After satisfactory beginning of business operations, the finance will be needed for distribution expenses, programming expenses and additional development of the radio broadcasting system. On the successful collection of finance, it can be projected that all capital requirements for conducting the radio broadcasting business will be achieved and therefore every business tasks will run efficiently. The business plan had considered every possible financing and risk associated with the good performance. The purpose of financing in this business is to complete all business related tasks timely and effectively; otherwise those can negatively impact on the profit (XM Satellite Radio, 2000). Use of Funds Of the 11, 50,000 Pounds of total fund that is planned to be raised, 230, 000 Pounds will be paid for capital expenditure which includes of 30,000 Pounds for getting the broadcasting licence and 11, 0000 Pounds for receiving satellite contract. Under the agreement of using satellite, ground equipment, machinery, and genuine software will be purchased for using in the radio transmission system. The estimated cost for purchasing those items will be almost 480, 000 Pounds. This amount is excluded from inducement payments and will rely on the performance of satellite. It is expected that insurance coverage of 660,000 Pounds will be made, and as of December 2012, 6600 pounds will be paid as yearly premium. Regarding design of radio broadcasting system the operational expenses will be approximately 60, 200 Pounds by the end of 2012. It is expected that this cost will cover the maintenance facilities such as programming cost, cost of studio management, and cost of maintaining other equipments. In order to conduct radio broadcasting business, there is a need to get a music copyright licence. The estimated cost of getting this licence is almost 90,000 Pounds. The expenses regarding licence can vary according to type of radio station and time period of licence. In order to develop an attractive website, deal will be made with a web developing entity for website preparing and maintenance. It will cost almost 5000 Pounds. The new radio business will also conduct venture with other establishments to improve the website to provide more facilities. In order to transmit the broadcast signal 435, 000 Pounds worth transmitter and repeater will be installed (Radio and Telly, 2012). Description of Market The music industry consists of two sections which are record companies and broadcasting industry. The record companies and broadcasting industry perform together to become successful in the market. The record companies need radio stations to play their songs and represent the artists and the radio stations also require reliable stream of fresh products in order to entertain the listeners. The broadcasting companies generate profit by selling air time for advertisements or getting sponsorships (Gordon, 2005; Harrison, 2011). The broadcasting industry consists of radio station, television, internet and online music among others. The UK is considered as one of the biggest digital radio networks internationally. In the UK, radio broadcasting provides entertainment, education, and information to the public. The radio broadcasting industry provides extensive ranges of music and soundtracks to the listeners. Almost 90% of people in the UK listen to radio on an average 21.8 hours per week. The radio broadcasting industry in the UK is divided into four categories which are digital radio, internet radio, FM radio and AM radio (Radio Joint Audience Research Limited, 2010). The digital radio delivers high quality sound and also offers ranges of music stations to the listeners so that they can enjoy extra contents. Unlike other radio broadcasting, digital radio broadcasting uses the digital signals which can successfully eliminate the limits related with analogue signals (Radio Joint Audience Research Limited, 2010). The listeners of digital radio broadcasting have increased significantly in the UK. In 2010, the digital broadcasting absorbed almost 24.6% of total radio broadcasting business which was 3.5% more compared to 2009, which was at 21.1%. High percentages of people in the UK possess digital radio facilities in their houses, which signify high opportunity in this business (Ofcom, 2010). Description of Business The new radio broadcasting business will provide wide ranges of music arrangements, commercial advertisements and direct chat option with several popular music artists. The major music formats which will be offered in this radio broadcasting business are Jazz, Rock, Dance, Folk, Classic, Fusion, Hip Hop and New Age. In order to ensure that the programmes of new radio business entertain the listeners properly, there will be company website where people can provide feedback about any program. The radio broadcasting business will provide listeners the best and the latest collections of music with better sound quality (XM Satellite Radio, 2000). Apart from music, the new radio broadcasting business will also transmit news and sport programmes. These programmes will include any kind of breaking news, live comment on major sporting events taking place in the UK and other important programs or updates which need to be informed to the audience. The news service will be available regularly, three times in a day. The radio broadcasting services will offer higher quality contents on digital base and also sponsor Digital Audio Broadcasting (DAB) technology to the listeners. The business will use digital signal and listeners can also catch the programmes through internet. Use of new technology will help the radio broadcasting business to increase the opportunity to view all programmes anywhere in the UK (BBC Trust, 2011). Financial Expenditure and Income Projections Income Projections of three years (Amounts in Pounds) 2012 2013 2014 Grants 55000 60000 67000 Program Sponsorship 68000 72000 86000 Membership Fees 6000 6500 7400 Fundraising 3000 5000 6800 Advertising 35000 46000 66000 Marketing Promotion 23500 36900 46400 Total 190500 226400 279600 Expenditure Projections of three years (Amounts in Pounds) 2012 2013 2014 Radio Station Maintenance 9500 10000 13400 Administration Expenses 5700 6300 7200 Salary 10000 13000 14000 Insurance 6600 6600 6800 Phone 3200 3500 4000 Licences Renew 10400 10650 11000 Electricity 10000 11700 12300 Interest on Loan Nil 28000 28000 Sundry Expenses 4800 5700 6000 Estimated Total Operational Expenses 60200 95450 102700 Profit Before Tax 130300 130950 176900 Net Profit (Assuming 20% tax) 104240 104760 141520 Schedule of Assets and Liabilities Estimated Schedule of Assets and Liabilities as of 1st January 2013 Liabilities Amount (in Pounds) Assets Amount (in Pounds) Capital 500000 Cash in Hand 54000 Net Profit 104240 Cash at Bank 95000 Loan Payable 400000 Machinery and Equipment 270000 Long Term Investment 250000 Furniture 67000 Goodwill 30000 Land and Building 329100 Licence and Agreement 409140 Total 1254240 Total 1254240 Source: (Abana, 2005). Management/Ownership The owners of the radio broadcasting business will be responsible for all sorts of managerial tasks. It will be the responsibility of owners to take any major decisions regarding purchasing, financing and other promotional functions. It will be the role of the owners to decide how much fund will be spent on radio broadcasting services and they will be in charge of providing any financial support for the business. The expected management and ownership structure of the business is described in the following diagram: Financial Status of Owners The owners represent strong financial status. It is a self-employed form of business where the owners’ capital will be added in the assets. Apart from the planned loan and long-term investment, the owners are scheduled to invest almost 500,000 Pounds from their own personal funds. Therefore, they carry the similar risks as the investors who capitalise their money on the business. References Abana. (2005). Schedule of assets and liabilities. Retrieved from http://www.abana.org/downloads/wagner/2004_conf_sch_of_assets_liab.pdf BBC Trust. (2011). BBC radio five live. Retrieved from http://www.bbc.co.uk/bbctrust/assets/files/pdf/regulatory_framework/service_licences/radio/2011/five_live_apr11.pdf Gordon, S. (2005). The future of the music business: how to succeed with the new digital technologies: a guide for artists and entrepreneurs. US: Backbeat Books. Harrison, A. (2011). Music - the business: the essential guide to the law and the deals. UK: Virgin Books Limited. Ofcom. (2010). The communications market: digital radio report. Retrieved from http://stakeholders.ofcom.org.uk/binaries/research/radio-research/digital-radio-reports/report210710.pdf Radio and Telly. (2012). Setting up an FM, Satellite or DAB Station. Retrieved from http://www.radioandtelly.co.uk/startaradiostation.html Radio Joint Audience Research Limited. (2010). Digital radio explained. Retrieved from http://www.swiftelectrical.net/pdf/DAB.pdf Spellman, P. (n.d.). Writing a music business plan that works. Retrieved from http://www.mbsolutions.com/articles/writing_music_business_plan.html XM Satellite Radio. (2000). Radio to the power of X. Retrieved from http://www.annualreports.com/HostedData/AnnualReports/PDFArchive/xmsr2000.pdf Bibliography BBC. (2012). BBC introducing around the UK. Retrieved from http://www.bbc.co.uk/music/introducing/ Kusek, D. (2005) The future of music: manifesto for the digital music revolution. UK: Omnibus Press. Appendices Appendix 1 (Covering Letter to Local Council) Mr. XYZ Local Council, Subject: Application for grant to the local council Dear Sir, The new radio broadcasting business would like assistance from the council to provide radio broadcasting services in the UK. It is the mission of the radio broadcasting business to deliver entertainment in the form of ranges of genres, news and sporting events. In order to fulfil the mission, the business proposal requests financial grant of amount 60,000 Pounds in the year 2012. This amount will support in delivering new and creative broadcasting programmes for the public. These programmes will not only entertain them, but also will increase the awareness about numerous issues in the community. Besides, the grant amount will also help the funders to persuade existence of new radio broadcasting businesses, community groups and they can pay appropriate attention to the public requirement altogether. We are looking forward to your response. Thanking You, Mr. ABC Executive Director. Appendix 2 Mr. YYY Barclays Bank, United Kingdom, Subject: Application for loan Dear Sir, According to the radio broadcasting business proposal funding requirement, we request for a loan of about 400,000 Pounds from your bank for the tenure of fourteen years. The amount will help to pay for initial expenses of the business. The approved loan amount will also be used for purchasing goodwill as well as other machineries for the business. We would like to assure that we have gone through all terms and conditions of the loan amount and will certainly accept them. The loan amount will be repaid by 14 years with annual interest of almost 28,000 Pounds per annum. We will look forward for a positive response from your side. Regards, Mr. ABC Executive Director. Read More