Every week, we will seek out expert advice to help a small or medium-sized company overcome a key issue it is facing in its business
Toronto-based events company Oxford Beach puts on more than 250 affairs a year, but a big chunk of its revenues come from one massive shindig: its “St. Party's Day” event.
That's St. Party's, not St. Paddy’s, and it's a deliberate takeoff for St. Patrick's Day.
Created two years ago by Oxford Beach founder Billy Hennessy, the event occurs on St. Paddy's Day, and the last one attracted 8,000 celebrants to Toronto's St. Lawrence Market, he says.
Between beer company sponsorship and sales of booze and food, the event generated revenues of more than $300,000, he says.That equals almost a third of the $1-million the 13-employee company expects to generate in 2012.
Mr. Hennessey believes there's more where that came from, and he now wants to take the event to other cities, capitalizing on the St. Party's Day name he says he has trademarked.
He could do it himself but believes he'll have more traction if others do the heavy lifting. The options he is weighing: to licence the name to another event company or to an alcohol company. So far, he says, four beer companies, three event companies and two liquor companies have approached him.
He sees pros and cons to both. If a booze company had the licence, he foresees the potential for rapid growth -- but he worries that he’d have less control, and fears that an alcohol company might make a big initial splash but not carry on year after year.
An event company, on the other hand, he thinks might bring slower growth without a big-brand name behind it, but he believes he might have more control and more potential for growth over the long term.
Mr. Hennessey would like to see a St. Party's Day event in four new cities next year – Halifax, Montreal, Calgary and Vancouver – and if each city hosted one, he sees potential for fourfold growth in revenues for Oxford Beach. That, of course, would greatly depend on licensing arrangements, among other things, but it’s the number he’d like to achieve.
While anyone could host a St. Patrick's Day party, Mr. Hennessey says he has already put in a lot of the work that it takes to get something of this scale going. The licensee would be buying what he calls his “event recipe.”
“It's not easy to execute an event of this magnitude,” he says.
The Challenge: “Which is the best option for growth?" he asks. "Our main goal is market penetration, but we're not sure the best way to licence the name.”
THE EXPERTS WEIGH IN
Dave Zimmel, Calgary-based vice-president of private enterprise with business advisory firm MNP LLP
If you get involved with the beer or liquor companies, you’re selling yourself into a global market, and that can be quite enticing. While there may be less control, there’s a big reach to what they’re doing.
The biggest question he has to understand, though, is what he is getting himself into. He needs to project what this type of deal might look like [in]a year and five years. The minute he walks down the road with the beer companies, it’ll be hard to pull back.
Find out where you fit in to their marketing developing plan. Understand the revenue picture and what royalties will be provided. Ask how his party fits into their short, medium and long-range plans. Events like his always have a life cycle to them — I guarantee you it won’t be there forever. So he has to figure out which option will give him the best run.
Sandy Huang, president of Vancouver-based business consulting firm Pinpoint Tactics
The first thing he needs to do is run a financial simulation to see what he’d get by licensing through each option. Generally, a company would licence a name for between five and 10 years. So assume an alcohol company wants it for 10 years and plans on doing five different things with it, then project what that revenue will be. He’ll have to find out from the alcohol company how much revenue they’re anticipating from the event.
He actually may have more control than he thinks when he licenses to a beer or liquor company. It’s all part of the negotiation. Make sure he’s involved or go to a different company. Maybe he can get growth, control and revenue.
It’s a similar exercise with the event -management company. I can’t tell him which option is better. He needs to run the numbers – numbers can’t lie.
Brian Scudamore, founder and chief executive officer of Vancouver-based 1-800-Got-Junk LLC
I’d go with the beer company. They [have]deep pockets and can scale up quickly and they want something they can use to go against Guinness, which is associated with St. Patrick’s Day.
But what he needs to do is weigh the potential profits against the effort it takes to make that money. Licensing the party to other event-management companies could be a lot more work – he might want to consider franchising the event rather than just licensing, which is what we did, if he goes that route. With the beer company, he could just licence the name and not be involved. He has to decide how much effort he wants to put in.
THREE THINGS THE COMPANY CAN DO NOW
Put together projections
Project what different deals might look like, including revenues, royalties, and short-, medium- and long-term plans. Key is to also figure out how the event would fit into a company’s marketing plans and what kinds of promotional commitments would be given.
If control is important, negotiate a deal to retain oversight. Go with the company, and the option, that offers the most involvement.
Franchising to other event companies – rather than just licensing – could be a way to retain control and maintain a percentage of profits.
Special to The Globe and Mail
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