Events in this day and age are a bit of a gamble – especially as we’re not quite out of the COVID woods just yet. The best way of spreading risk around is using OPM – other people’s money – and financing an event can often require a bit of creative management.
If you plan on putting on events again and again, it makes sense thinking about finance from a business perspective. Here’s how to ensure you event business has the best chance at success.
Long-term loans for long-term assets – the crucial factor
If you’re in corporate events, putting on music or stage shows, or set up hospitality in a variety of venues, there’s going to be big-ticket items that will be crucial to your business making money. Bill Tsouvalas, Managing Director of Savvy and finance expert says that these assets need to be paid off across the length of time you intend to use them, ideally taking advantage of suitable hospitality finance. “This is the biggest mistake a business can make; using short term cash for long-term assets such as your PA, pizza oven, or what have you. If you intend to use an asset for at least five years, loan it for five years. Don’t buy short term inventory with your loan, and vice versa. It will save you a lot of heartache.”
What about leasing?
For some event businesses, leasing is a better option than buying outright. Operating leases gives your business use of an asset for a fixed term; and they also cover maintenance and servicing as part of the repayments. Finance leases are similar, except you can pay a residual and take ownership of the asset. “Either way, it gives you flexibility to ramp up or down, or pivot into other areas. You won’t be left with a white elephant if you’re leasing for a fixed term. In some cases, you can hand back the equipment before the lease is up.”
Take advantage of tax incentives
Make sure to take advantage of tax breaks whether you’re leasing or buying. “If you’re buying,” Tsouvalas says, “a chattel mortgage is the right product for you. You can borrow more than the value of the asset, so you can pay off servicing or installation over time. Your business can also claim the GST, interest paid, and depreciation up to the depreciation limit. The same goes for leases – though your lender might pass this on in the form of reduced repayments in some cases.”
Do you have the right infrastructure?
Having the right assets is key – and so is the right IT infrastructure. With so many moving parts, having a spreadsheet and email doesn’t cut it. CRM and invoicing solutions like EventPro can streamline and consolidate all your operations from one central point, for example. “Having the right finance, the right infrastructure, and right attitude can help your business survive its infancy and thrive,” Tsouvalas says. “Remember to consult a finance professional before taking the plunge.”
