At the ICAS convention in Las Vegas last December, event organizers participating in focus group discussions hosted by ICAS said their greatest concern for the future is money. Some are seeing declining attendance and reduced sponsor revenue, while others are worried about rising costs of such things as fuel, insurance and performer fees. And whether their shows are big or small, the concerns are universal. So why do some shows survive these problems while others fall victim to them and fade away into air show history?
No one ever launched an air show with the intent of watching it fail, yet that is what happens all too frequently. In the past two years, more than 20 air shows have either gone out of business or put their programs on the shelf for at least a year if not longer, due mostly to financial issues. And some of these shows have been around for more than 15 years.
A sound and healthy financial position is clearly one of the cornerstones of sustaining your air show over the long term. To gain some insights into financial sustainability, we spoke with leaders of two of the most successful air shows in America to learn how they approach the issue of budgeting and finance.
Chuck Newcomb is president of C.K. Newcomb and Associates. His company produces the Cleveland National Air Show. Harry Wardwell is Executive Director of the California International Air Show in Salinas, California. Both shows have been around for more than 30 years, have had their share of ups and downs (no pun intended) and have weathered (pun intended this time) a variety of difficulties, including weather problems and world events such as 9-11 and Hurricane Katrina.
While the concept of financial sustainability is as simple as living within your means, that’s a lot easier said than done. And it starts with realistic expectations on both sides of the ledger. Both Newcomb and Wardwell say, when they go through their budgeting process for the next year, they rely heavily on historical data. “Shows that have been around for a while should have enough data to give them a good idea of what to expect in the future,” Wardwell said.
Both shows take a hard look every year at each individual revenue source to understand where the money comes from and compare the information to previous years. “We look at the revenue from advance ticket sales, sales at the gate, sponsorship income, parking income and everything else we have. We look for trends in each category and we look for changes so we don’t get caught by surprise. This tells us if we need to make adjustments in the coming year,” Wardwell said.
Newcomb echoed this approach. “You can’t just look at last year’s budget, add five percent and hope for the best. Historical data is vital. If you don’t use it, you can miss something important. You must diligently collect information from year to year. It helps you build a picture of the future,” he said.
How well does Newcomb do with his projections? “I can usually come within five percent and sometimes three percent of actual income based on my historical data,” he said. That gives him a lot of comfort.
Big show or small, you have to take your budgeting process seriously. At the Salinas show, Wardwell’s team divides its budget by category and makes an individual director responsible for a specific category such as air operations, admissions, concessions, facilities, etc. “Each director presents a budget which is thoroughly reviewed with the executive committee. When all the individual budgets have been reviewed, the entire budget is reviewed and approved by the full board,” Wardwell said. Once approved, monthly budget reviews are conducted to track expenses up to and through the show. Each director is held accountable for how his or her portion of the budget is spent.
For Newcomb, the approach is similar. While he doesn’t use the show’s board for putting the budget together, the process he uses is the same as Salinas. “It starts with a review of prior year budgets and from there we make our projections. Over time, the previous budgets help ensure we don’t forget something and can account for all of our revenue streams,” he said.
Both Newcomb and Wardwell said their data is now good enough that they can predict the financial differences between years with the Thunderbirds, the Blue Angels, the Snowbirds and years when no jet team comes. This kind of data gives confidence in adjusting budgets and avoiding surprises.
Another important bit of data that can emerge from budget analysis is determining the per capita revenue from each person who attends the show. “If you accurately project your paid admission, you can accurately project your revenue from such things as food concessions, parking and souvenir sales. This is an extremely helpful tool in budget projections,” Newcomb said. Comparing per capita income year to year also becomes an additional check and balance to your budgeting process.
Another important aspect in budget development is accurately showing the true cost of everything you do. It’s one thing to factor in performer fees and fuel for example, but do you include the cost of fuel for media day, sponsor rides, etc.? It can add up. And are you giving a sponsor more than he is paying fore? Many sponsors have a history of asking for more tickets once a contract has been signed and all too often show organizers are reluctant to say no for fear of alienating the sponsor and losing the income.
“Sometimes it’s a real chore to go through each line item and look at these kinds of things, but it is absolutely necessary if you are to retain control of your budget. Said another way, failure to pay attention to the budget will kill the event,” Newcomb said.
One of the truths of the air show business is that many are run by passionate amateurs who have little or no business experience and have to learn as they go. Some learn and succeed and some don’t. This is true of established shows as well as startup shows. “A lot of the financial concern can be eliminated simply by making an accurate assessment ahead of time. If the numbers work, you proceed. If they don’t, it’s a hard reality, but maybe you shouldn’t be putting on a show in the first place,” Newcomb said.
There is another budgeting factor that often gets overlooked, especially when shows are operating on a thin financial margin. It’s the reserve. As we all know, we spend all year putting the show together, but have to make our money within two or three days. We are subject to weather problems, competing events in our communities and a lot of other factors outside our control which can put us into the red very quickly.
“Luck eventually runs out for any show without a reserve because this is a high risk business and, if we don’t have a reserve behind us to get us through a bad year, we won’t be around very long,” Newcomb said. Both Newcomb and Wardwell make funding a reserve a line item in the budget. They don’t rely on surplus funds to cover this item. The size of a reserve varies, but both Newcomb and Wardwell recommend 50 percent of the operating budget.
The value of the reserve was driven home to Wardwell’s team with the 9-11 attacks on the World Trade Center and the Pentagon in 2001. The attacks happened just a few days before his show and resulted in the grounding of all airplanes for several days all across the United States. “Obviously, we lost a lot of money, but our sponsors and our community stood behind us. Some wanted their money back, but many didn’t. That income, combined with our reserve, allowed us to get through what would otherwise have been a very bad year for us,” Wardwell said.
Reducing the risk of a bad year can also be assisted by getting as much of your revenue up front as possible. “We try to get 40 percent of our revenue from sponsors and are usually successful,” said Wardwell. He said his show also sells about 40 percent of its tickets in advance which also softens the risk.
Unfortunately, success can also bring its own set of problems. “If you have an unusually good year and make more money than expected, there is going to be a tendency to overspend the next year. Before you do that, you need to look at your ten year averages when projecting next year’s income and expenses,” Newcomb said. By looking at prior year data, you can figure out where the increases came from and understand why it happened.
Wardwell agrees. When his show has a good year, they give the money away rather than boost their spending. “Our show was established to create a funding source for local charities while providing quality entertainment for our community. So instead of going on a spending spree, we give our excess income away,” he said.
There is also another type of success that can send a show into a tail spin, especially if it’s a small show. And that is getting your first jet team.
“When you get your first jet team, you feel like you’ve won the lottery. And expectations of high ticket sales and sponsorship dollars can cause an organization to overspend on the rest of the show. Since the biggest draw is going to be the jet team, spending a lot of money on civilian performers isn’t going to increase attendance or sponsorships, so be careful about how much you spend filling the rest of your show,” Newcomb said.
While there are differences between air shows and communities, there are some universal truths. Large show or small, it starts with due diligence when projecting income and expenses. “Make sure everyone in the organization is on the same page with a solid budget, good financial reports and monthly tracking of expenses, said Wardwell.
Market research is also crucial, especially when it comes to ticket sales. Where is your audience coming from? Is it growing or shrinking? Are you spending your marketing dollars where they will give you the most bang for the buck? “These are all crucial questions that an organization should be able to answer,” said Newcomb.
The last piece of advice offered by both Wardwell and Newcomb is to ask for help when you need it. Budgeting doesn’t come easy to everyone, but it’s one of the most important aspects of this business. “Within ICAS there are people who are as close as a telephone call or a computer keyboard.”