Discusión

Introduction

This chapter considers the importance of implementing financial planning and control at the feasibility stage by describing the process involved. The role of budgeting and targets are discussed as a key part of this process. The complimentary area of income gener- ation, also a key activity at this stage of planning, is covered in the next chapter. Event finances have to be managed on an on-going basis and throughout the process however, and so the central focus here is on how that can be achieved. Key areas such as the acquisi- tion of funding and the control of expenditure are considered, as well as the need for financial risk management emphasized.

Event feasibility

A decision to go ahead with a sports event is a managerial one and can therefore be subjective, but this decision-making process can be made more reliable via planning. The purpose of determining if an event is feasible, prior to a decision to go ahead, is needed to ensure that expenditure or effort is not wasted. Therefore, the importance of the feasibility stage in the event planning process cannot be under- estimated. The model, proposed in Chapter 3, in the main considers an iterative process but is cautious about early progression from stage to stage. At the feasibility stage, progression should not occur unless the event can be successfully implemented to achieve its objectives. This is achieved by considering if the event concept does indeed meet objectives and whilst it is improbable that a dress rehearsal of the event is practical, the determination of the financial status of the project is a pre-requisite. This involves financial plan- ning and in some cases may require implementation of those plans prior to any decisions to go ahead with the event. It may also require other forms of planning and in particular the implementation of key partnerships that make the event feasible, and the assessment of financial risk in determining plans for its on-going management.

Financial planning

This text does not consider generic financial planning and business accounting in great detail but does focus on the aspects that are per- tinent to the strategic planning of sports events. There are however, a number of texts recommended at the end of the chapter that will serve well for theory and practice of event financial management.

There are a number of stages in the financial planning and con- trol process that need to be considered (Berry and Jarvis, 1999).

Stage 1: Objectives

There are two levels of objectives involved in the management of events. Firstly, there are the organizational objectives that are

desired by the event owners for the future direction of the organ- ization. Then there are the objectives for individual events. The first level of objectives will have wider implications for the organ- ization as a whole and will impact on the objectives that are set for any event it owns and/or organizes. Whether there are one or more events, the objectives set for each event need to be aligned with the organization’s objectives. This congruence of goals will become a greater issue the larger an organization becomes, and as the aspirations of managers may conflict with those of others and the organization itself. The issue here in the events industry is that many events are run by event management organizations on behalf of event owners and the lack of goal congruence between the two may be a critical factor in the running of the event and the company’s success.

Secondly, there are business objectives that are set for events, for example the maximization of sales, the maximization of profits, the improved return on investment through dividends to share- holders or the re-investment of profits into the business for growth. These are all quantitative objectives and are therefore quantifiable with targets that can be set and importantly, easily assessed.

Non-financial objectives may also be set and for organizations involved in non-profit events these can be an important aspect. For example, local authorities may be most concerned with objectives that ensure that their sports events deliver an amount and quality of service. Even with non-financial objectives however, there are implications for the financial planning and control of the event.

Stage 2: Strategic decisions

For the organization as a whole there are strategic decisions to be made regarding the future of the business that will be in accord- ance with the organizational objectives. For event owning organ- izations this may well involve the divestment of properties, or the investment in other areas of business either for security purposes or to develop and grow. These decisions are long-term decisions and are made at a senior level. Consequently they may impact on the management of individual events.

The decision to create a new business that would open up opportunities for the development of International Management Group (IMG) was taken by Mark McCormack, when Trans World International (TWI) was formed. This new division was to explore the television opportunities for both IMG and its clients’ events, and claims to be the world’s largest independent producer, pack- ager and distributor of televised sports programming (IMG, 2003). One such client is the Association of Tennis Professionals (ATP) Tour and for them this assisted in the delivery of two objectives, one financial and one non-financial, growth in worldwide cover- age and the achievement of increased broadcast revenue, and the development of the sport of men’s tennis, respectively.

Stage 3: Operating decisions

Operating decisions are mainly concerned with pricing and the level of service to be offered (Berry and Jarvis, 1999). These deci- sions need to be aligned with the strategic policies that have been set previously in order for them to be effective and are the basis of the short-term financial plan for the event. This short-term plan is referred to as the event budget.

Budgets differ according to the requirements of the organiza- tions involved but will typically represent the duration of the event planning process. Depending on the size of the event an event budget can cover a very short period of hours or days or be run over a number of years. For example, a cycle road race organ- ized by a local club may be advertised to its members, entry fees collected and catering supplies and a trophy purchased only a week in advance of the event. The club treasurer will operate a very simple budget covering that period and those types of rev- enue and expenditure. In contrast, the winning bid for the 2000 Olympics in Sydney necessitated an accounting period that lasted from 1993 and an operational budget that involved divestment and handover elements that lasted well into 2002 when Sydney Olympic Park Authority eventually took over the Olympic facil- ities (Adby, 2002).

Stage 4: Monitoring and correction

In the setting of the budget, personnel are individually made responsible for revenues and costs and therefore should have contributed to the formulation of the budget and its targets ini- tially. As the planning for the event progresses the budget can serve as a valuable tool in the measurement of performance for individuals as well as organizations as a whole. A reporting sys- tem is required so that individuals and teams who are financially accountable can report on actual performance against the budget so that deviations or variances can be identified. This is com- monly referred to as a process of responsibility accounting. Through this monitoring of performance, causes for variance can also be identified and the necessary management decisions can be taken.