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HassleOff - A New Enterprise

David and Shazmeen had spent two hours on the Internet from their home in Leeds trying to get their tickets to see the Spice Girls re-union concert at London's 02 arena. Having finally secured their tickets, they now had to think about getting to London. Not only that, the concert would not finish until around 11pm, so getting back to Leeds was going to be difficult. In any event, they wanted to enjoy the experience and spend a bit of time in London the day after. All in all, despite their determination to go to the gig, they agreed it was all a bit of a hassle.

"If only there was someone who would do all this for us", said Shazmeen. That was it; the idea was sown. The two talked about what would be their ideal scenario for some time. What would be great, they concluded, is if there was some one who you could alert about events that you wanted to go to, like concerts, who then took on the responsibility of getting the best tickets available in the price range you wanted, who sorted out the transport and any accommodation requirements, and took the hassle away from the process. This would allow people to actually enjoy the concerts rather than go through the hassle that they currently face.

 

A concert

Getting back from concert venues can cause problems
Copyright: stock.xchng/halocyn.

That was the start of HassleOff Limited. As they talked, they began to see the germ of a business idea. Why wasn't anybody offering this sort of service? Why couldn't they do it? Well, that's just what they did. The next nine months were spent trying to get their idea put into reality. They had a number of things that they had to do. They had to:

  • make contact with ticket agencies to find out how they could acquire large numbers of tickets
  • find an office to act as the base for their operations
  • do some market research to find out if their idea had a market
  • write a business plan
  • think about how they were going to finance the business
  • spend time thinking about what to call the business
  • consider the risks involved
  • find out what the competition was
  • think about an appropriate marketing mix
  • consider legal and tax issues
  • consider the effects of changes in economic activity and interest rates on their decision-making

David and Shazmeen decided to recruit customers through a membership scheme. Customers would pay £100 a year as a membership fee, and could use their membership to place orders for up to 10 sets of concert tickets per year. Customers would still have to pay for the tickets, for their transport and accommodation, of course, but what they were paying their membership for was the work that David and Shazmeen put in to make their concert experience hassle free. This helped David and Shazmeen to come up with the name but it also made them laugh when they heard it because of the similarity with TV and singing star David Hasselhoff! They thought that people would be able to associate their business name much more easily as a result.

A pile of credit cards

A single transaction would streamline the booking process
Copyright: Biz/ed team

The pair managed, with some considerable difficulty, to make contacts with a ticket agency who agreed to let them have batches of tickets for concert performances; they also formed contacts with a group of international hotel chains, a group of independent hotel chains and a transport company. They had a business relationship in place for each of the key parts of their service.

Having formed these relationships, they went back to their market research and tried to create a cash flow forecast for the year. They had to make some assumptions, since it is not always clear which artists will be touring, but they used data from the previous five years to create an average number of concert dates at key venues. Their market research suggested that this service would be popular with concert-goers. Their key market was aged between 25 and 40. David and Shazmeen thought that this was because this group of people could afford to go to concerts but who were also very busy people and so time was valuable to them.

Their market research suggested that they could recruit 30 members per month after the initial launch; the initial launch would take three months to get all the systems set up. These systems would include all the links with the partner companies, payment systems and the communication and postal links that would be needed to carry out the service. Having started the whole project in January, they were finally ready to begin trading at the start of April. They estimated that each concert would bring in an average revenue of £200 – which included the price of the ticket, accommodation and travel, and that 10 of the members would use the services every month.

 

A festival crowd


Copyright: Biz/ed team

The pair calculated that their set up costs would be £35,000, of which they would have to raise £30,000; the remainder would be money they both put into the business - £2,500 each. The money that the pair put in was set aside as their opening balance in January. They would be the two shareholders in the business. The running costs would be associated with acquiring the tickets, which they calculated as an average of £60 each, the cost of accommodation (£120 per night per concert) and travel - £50 per concert. They had to buy some tickets for shows in April in advance so that they could be sure that they had some to sell to their first customers! The administration costs were estimated at £1,000 per month and they both decided to take a salary of £600 per month to begin with.

Below is a copy of their cash flow forecast they prepared based on these assumptions:


Cash flow forecast

Click here to download this spreadsheet as Excel an file.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Receipts (subscriptions) 0 0 0 3000 3000 3000 3000 3000 3000 3000 3000 3000
Concert receipts 0 0 0 2000 2000 2000 2000 2000 2000 2000 2000 2000
Total receipts 0 0 0 5000 5000 5000 5000 5000 5000 5000 5000 5000
Payments            
Tickets 0 0 600 600 600 600 600 600 600 600 600 600
Travel 0 0 0 50 50 50 50 50 50 50 50 50
Accomodation 0 0 0 1200 1200 1200 1200 1200 1200 1200 1200 1200
Administration 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
Salaries 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200
Total payments 2200 2200 2800 4050 4050 4050 4050 4050 4050 4050 4050 4050
Opening balance 5000 2800 600 -2200 -1250 300 1250 2200 3150 4100 5050 6000
Closing balance 2800 600 -2200 -1250 300 1250 2200 3150 4100 5050 6000 6950


Questions

  1. Asking why? Why not? and 'doing it' are three important enterprise skills. Discuss the relevance of these skills to David and Shazmeen and assess other important skills you think they may need to make a success of their business.
  2. Assess the possible ways that David and Shazmeen could have used to raise the finance they needed to start the business. Recommend which of the ways you have considered would be the most appropriate for David and Shazmeen and why?
  3. Once the business started, David and Shazmeen found that the actual receipts and payments differed from their forecast ones. The actual figures are shown below:

    Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
    Receipts (subscriptions) 0 0 0 2000 2500 4000 3500 5000 5500 2000 1000 500
    Concert receipts 0 0 0 1000 1200 1000 3500 4000 1000 6000 4000 2000
    Total receipts                        
    Payments            
    Tickets 0 0 1200 1500 2500 2000 1000 800 3500 3000 2500 2000
    Travel 0 0 0 350 500 750 600 500 800 550 400 500
    Accomodation 0 0 0 1000 800 1500 1800 1400 1000 1800 1500 2000
    Administration 1200 1350 1400 1100 900 1200 1150 1500 1400 1250 1300 1250
    Salaries 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200 1200

    In the light of these actual figures, assess the impact on the cash flow of HasselfOff and discuss how David and Shazmeen might best manage the situation they find themselves in as a result.
  4. Discuss the possible reasons why the actual figures could have differed so much from those forecast by David and Shazmeen. Recommend a possible strategy that the pair might use in the future to make their cash flow forecasts more accurate.

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