Designed for GCSE business studies students, the programme goes backstage at a music festival to explain five important business concepts. Presented by Radio 1's Greg James.
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Hundreds of different businesses make a festival a festival.
From poncho sellers to ice cream vendors,
they all started as someone's money-making bright idea.
You see, it's all about spotting a gap in the market
and then using your head to make a bit of cash.
Do that and you'll be well on your way
to becoming a full-on entrepreneur.
Matt Pickup and his friends
spotted an opportunity in 2004
and have never looked back.
He might look like any other festival-goer,
but the tent we're pitching is one of
350 we've got to get through.
This could take a while!
Matt is a co-owner of tent hire company Tangerine Fields.
Here at Reading, their 350 tents
can be rented for up to £90 per person.
Last year the company turned over
one million pounds.
It's a classic tale of spotting and seizing an opportunity.
Myself and my business partners were at the Big Chill Festival.
We were really tired and just wanted to get home on the Monday morning
and had noticed that others were obviously in the same frame of mind
but they just couldn't be bothered to take their tents down
so they'd bought and pitched them and left them.
And so we thought, if people are willing to do that,
they'd be willing to not buy the tent, not pitch it and leave it.
As simple as that!
Er, yeah. It was a simple idea that took off.
How did it go from the idea to becoming a proper business?
We took a risk and invested some money in buying some tents.
Spoke to the Big Chill Festival and laid out our idea to them.
It seemed quite popular and from there it doubled
and doubled in size each year and
now we've moved up to 26 festivals this summer.
If Matt needed any more inspiration, he need look no further
than some of our most successful entrepreneurs.
Scary Lord Sugar began his business life trading out of a van,
and is now worth £770 million.
Levi Roots charmed the Dragons in the den
and within a year was shifting 40,000 bottles
of his Reggae Reggae Sauce a week.
And let's not forget Posh Spice,
whose clothing range has helped push brand Beckham's worth
up to an eye-watering £165 million.
What those guys have got, apart from a big bank balance,
are some special qualities that make them top entrepreneurs.
But what exactly are those qualities?
Confident and good at talking to people.
If you're shy I don't think you're going to get anywhere.
Smart and well presented.
Yeah, dress well, good first impression.
Guts, I think. I think you have to be really brave
because it's all about taking chances
and working out whether gambles are worth doing.
There's no magic formula for being an entrepreneur,
but there are qualities which could help.
Creativity is essential
for transforming an opportunity
into a real business idea.
Guts - starting up a new business is always a risk,
so you need to be daring to be successful.
Drive - getting an idea off the ground isn't easy,
but with determination you could hit the big time.
Even some of the world's most successful entrepreneurs
have had failures in the past.
So it's all very well having a great idea.
The key is putting that idea into practice,
like the traders are doing here.
Once you've had your idea, you need to think about the practicalities.
Before starting, think about whether you might be able
to legally protect your idea against copying.
Where are you going to base your business?
If you've got an ice cream van,
don't park it on a quiet country lane.
Instead, go to a festival
with loads of people with cash to spend.
Finally, what sort of business model best suits your idea?
Should you act as a sole trader?
Or do you need to form a limited company?
But one of the most important things to think about is the big R.
And by the big R I mean research.
and I don't just mean buying a few books and surfing the web!
To find out more, I've ditched the wellies
and left the music behind to meet
a man who spotted a - how can I put it?
An "interesting" opportunity at a festival
and backed it up with some hefty market research.
This is Richard Wharton,
and the cardboard box he's putting together
is his solution to an age-old festival problem -
yes, going to the toilet.
I'm at my festival,
I've got to go, so I whip this out and just sit?
-Yeah, absolutely. It'll take your weight.
-It'll take my weight?
Yeah, that'll take up to 20 stone in weight.
-And then do my business?
Festival lover Richard came up with the idea
in 1989 after visiting the toilets
Once you had the idea, what did you do in terms of market research?
We made up just short of 300 and gave them away
to mates, festival-goers to trial out
and what we found from that was
we had a Marmite product.
Some found it embarrassing to use in their own tent,
other people didn't care at all
and at 3 o'clock in the morning at a festival, it was a godsend.
Sending out samples as Richard did
is one of many market research methods.
The other options include...
That's asking people their opinion -
in person, on the phone or online.
Gathering information related to your idea
from books and the internet.
Research can be qualitative - about people's reaction
to the product. Do they think it's a good idea?
Or quantitative -
gauging the number of people who'd actually be willing to pay for it.
So being an entrepreneur is more than just
coming up with an idea. You have to take a calculated risk
and actually do something with those ideas.
And if you do, with the right qualities, you never know,
you too could be sat on a fortune!
And if you'll excuse me, I need some privacy now, so...cheers.
Three days, 80,000 people,
40 brilliant bands,
the Reading Festival is where every aspiring rock star
wants to play. But the music business
is about more than just the glamour of a festival.
One type of businessperson might ply their trade
a world away from the noise and chaos of Reading,
but still play a really important role in the music industry.
This is Jake Travis and this is his record shop.
Nine years ago Jake turned his passion for reggae into his job.
He swapped the factory production line for the freedom of being
his own boss, and became a sole trader. Put simply,
sole traders are the only owner of their business.
I'm not a great one for being told what to do and having to stick to
a time schedule.
You're your own boss, you're your own business.
You come and go as you please and you answer only to yourself,
so, you know, that is a major plus.
As a sole trader, what are you responsible for?
Bills, rent, rates,
I have to buy stock,
I have to buy bags.
Everything that you see here is sort of
stuff that I've bought and had to sort of literally price up and
physically put in the racks. You're responsible for everything.
Even though they're their own boss,
sole traders like Jake have a lot of responsibility on their shoulders.
For starters, they decide what to sell.
They source their stock and make sure they've got
enough of it. They price and market
their product, and to top it all off,
they physically sell it too.
And like every business, they need to make sure VAT, income tax
and National Insurance payments are in bang on time.
That's a lot for one person to take on,
but, believe it or not, the majority of businesses
in this country are sole traders.
And they're not all involved in selling products.
Some provide a service, like plumbing or hairdressing - or music.
Genevieve Wilkins is a percussionist. She's played with
huge stars including Lionel Richie and Akon, and also performs in West End shows.
But today is her lucky day, because she's got the chance to teach me.
This is one of my favourite instruments around.
It's called a cajon. And it's the Spanish word for box.
Because Genevieve is a sole trader, she's responsible for everything.
Cool. So what do I need, a flat hand?
From advertising her services
to giving lessons.
And then you can start...
that's it! I'll keep going like that
and you can just add in things like that. That's it!
-Now we're rocking.
the advantages of being a sole trader?
I can have a variety of what I do for a living, so I can do pop gigs,
I can do classical music gigs, I can do some teaching..
And the nicest thing is that
I can pick and choose
to do the projects that I love. I'm never really doing
any of them just for the money.
You're your own boss. It's brilliant.
So how did you become a sole trader?
I was really lucky to get a part-time teaching job
in a really good music school,
and as I graduated university, and I started performing as well,
you have to be a sole trader. You've got so many incomes from so many different places.
Being your own boss sounds great,
but there are financial and legal implications.
Sole traders have what's called unlimited liability.
This means they have a personal responsibility for everything
to do with their business.
If they go bust and owe money, they could have to sell
everything they own to pay off their debts.
In the worst case, that could include cherished possessions
like their TV, car or even house.
Jake is well aware of the pressures that come with being his own boss.
If people don't walk through the door,
you don't earn money.
And that comes with its pressures -
your security is in the hands of the general public, as it were.
But the pros often outweigh the cons.
I'm the boss, I'm the performer,
I'm the accountant, I'm the manager,
I have to find some gigs for my duo.
You have to do sort of do absolutely everything,
so the skills have been really good.
I've learnt lots of different things I thought I'd never learn how to do.
It can be hard work and long hours, but for many,
the dream of owning their own business makes it all worthwhile.
Putting all the hard work to one side,
there is one great advantage to being a sole trader.
You alone are responsible for any money you make
and it's yours to do what you want with.
So, put the hours in, and that record shop or drum kit
could be your passport to a great profit!
Of all the businesses trying to make a little cash at Reading,
from the T-shirt vendors to the burger vans
and noodle bars, there's one that's different from all the rest.
And it's not because of what it sells,
but because of the special way it's set up.
Ice cream is a festival staple -
particularly when the sun is out,
and Dominic Daniele knows how to cash in
on this captive market.
He's dishing out gallons of the stuff to the hungry crowds
from his seven Wall's ice cream vans around the site.
And what makes his business different
is that it's a franchise.
We've all heard the word before, but how many of us
actually know what it means?
What's a franchise? I don't want to look stupid.
It's when one company develops a string of companies, like McDonald's is a franchise.
A franchise is a business which is owned by yourself,
it's a big business which is owned by individual people.
It's a simple idea, really.
You pay an established company a fee
and that gives you the right to use its name and sell its products.
Franchises are common on our high streets.
The burger you wolfed down at McDonald's for lunch,
or that pizza from Dominos and the photos printed off at Snappy Snaps
were all bought from franchises.
In fact, there are an estimated 897 different franchises in the UK.
What is the advantage to having a franchise like this, then?
We've got a multi-million pound company
that is basically doing all of our advertising,
and we do have the bestselling products
in the ice cream line in the UK.
We've bought five brand-new vans,
and our sales and our purchasing power has increased.
Are there any disadvantages?
The only disadvantage is cosmetic,
because when you own a business, you want your name in lights,
but after five or ten minutes
of Walls' products flying out of the window,
that passes right away, so there's hardly any disadvantages.
I'd feel like I'd do myself an injustice if I'm
at an ice cream van chatting to the owner and not having a go.
Please can I have a go?
I've always wanted to.
Sure, hop on in.
There you go, sir,
you can have that one.
Anyone else want one?
Oh! Look at that!
One shot, one shot, and a shot in the middle.
That deserves two flakes.
That's one, and that's two.
Anyone want...a lunch and dinner?!
Fortunately for Dominic, given my huge servings,
it's not just the number of ice-creams he sells
that's crucial to the success of his business.
But there is one important group he has to impress
to ensure he keeps his vans on the road.
And that's the franchisor.
The franchisor is a big and well-established company
that charges a fee to franchisees like Dominic,
giving them the right to trade under its name, and sell its products.
In Dominic's case, the franchisor is Wall's, part of Unilever,
a multinational company worth billions of pounds.
Franchisees like Dom seem quite happy with their lot,
but what's in it for the franchisor?
Bob Bhartiya is Dominic's boss. He's franchise manager
for Walls. It's his job to keep an eye on the 15 franchises
that run over 200 ice cream vans across the country.
From Wall's point of view,
the benefits of selling franchises are clear.
We can get our product
to market very quickly,
and pretty inexpensively.
Our investment is really around
the graphicing of the equipment
and also on the point of sale. We have
operational standards that franchisees must meet.
We have a very strict code on pricing,
there is a minimum and a maximum size that ice creams should be,
and monitoring those
standards can be sometimes challenging.
That means if a franchisee
mucks up, it's the reputation of the parent company that suffers.
So, to recap, a franchise is a partnership
between two parties and that means there are
good and bad sides to the arrangement.
On the plus side, the franchisee gets to sell an established product,
which means they don't have to take such a risk going into business.
And they don't have to worry about marketing costs,
because that's usually met by the franchisor.
Often, the franchisor will pay for staff training too.
There are some downsides for the franchisee.
They don't get much choice about what to sell
and there's less room for being entrepreneurial.
For Dominic though,
the advantages massively outweigh any disadvantages.
My father-in-law he built the company by himself for 40 years
and we've trebled the business since we joined Walls.
The vans are impeccable, the ice cream is fantastic,
so we just have to sit here and serve the public.
I've learned two things today.
That franchising can be a very effective way of running a business,
but more importantly, that I'm actually not that bad
at making ice cream, and it is quite tasty.
We Brits love nothing more than a weekend of music, mayhem and mud.
Festivals have become so popular that now over 400 take place every year.
Reading is the oldest and attracts some of the world's biggest names.
But Reading is more than just a bit of fun - it's a business.
And for the 200 or so companies that provide bottles of water
and wacky sunglasses, it's an opportunity to make a lot of money.
Though they make the festival experience better, it's important
to know the companies are not all run the same.
To find out more, I'm heading
somewhere pretty special - backstage.
I'm meeting a man who provides something you can't see or touch
but without which there definitely wouldn't be any music at all.
Rob Hutchinson owns Innovation Power, which provides
all the electricity needed to run everything
from the stage lights to the guitars.
This is the main stage supply
so there's not just one big supply to the stage.
There's several supplies. There's the sound,
the lights, the video.
-Not like plugging your Hoover in, is it?
-No, not at all.
So what would happen if I switched off one of these?
I'm itching to in a way, can I do something?
Those people out there would get very angry. Really?
Yeah. I'd be running off in that direction.
Supplying power to Reading isn't straightforward.
Neither is Rob's company structure.
That's because, with an average annual turnover of £1.5 million,
Rob decided to make Innovation Power a Private Limited Company.
It's quite different to being a franchise or a sole trader.
One of the main differences is that an owner like Rob
has a separate legal identity from his business.
That gives the business what's called limited liability,
which means should it go bust, bosses like Rob
would only lose the money invested rather than their personal wealth.
Also, in terms of structure,
a limited company needs at least one shareholder.
The more shares you own, the more control you have of the company.
We started in the '80s as a sole trader stroke partnership.
In the '90s we got busier. We were picking up bigger and bigger events.
I said to the accountant, "If something went wrong,
"what's going to happen?" He said, "Well, they might sue you!"
As you grow, you need to protect what you've worked for
and if you're not limited, you know, if you've not got
that suit of armour on, you're going to lose everything.
You'll be out on the street in your shirt tails!
What are the disadvantages of a private limited company?
Red tape, it's always red tape.
Your finances are more complicated and your accounts are published.
People can go to Companies House, electronically download,
have a look at your accounts and see if you're viable.
You're open to scrutiny.
That's all pretty straightforward so far, right?
However, there's one more important thing to know
when discussing companies.
There's actually more than one type of limited company.
Limited companies can either be private limited companies,
like Rob's, or public limited companies.
Most of the ones around the festival site are private.
It's all to do with who owns them.
All companies are owned by a group of people known as shareholders.
In a private limited company, people can only buy shares
if they're invited to do so by the main shareholder.
You can tell if a company is private
because it will have the letters L-T-D after its name.
But in a public limited company, anyone can buy shares
which are openly traded on a stock exchange.
So it's a good way of increasing investment and expanding quickly.
These companies have P-L-C after their name.
There are around 9,000 PLCs in Britain,
and many of them are household names.
One of those is Future PLC,
publisher of some of the world's most popular music magazines.
With over 200 shareholders and multi-million pound profits,
it dwarfs Innovation Power.
Stevie Spring is the boss.
The main advantages of being a PLC are access to different lines of cash.
So instead of just being able to go to the bank,
we can go to our shareholders and get extra money
to expand, to grow the business.
It might be a good way of expanding, but becoming a plc involves
even more transparency than private limited companies.
Everything from my salary to how much profit we make
to any company that we might be thinking of buying
has to be announced to the public
so that everybody who is buying or selling shares
is doing it with the same information base.
So companies aren't as straightforward as you might think.
They come in all shapes and sizes,
from private limited companies to PLCs.
But they all have one thing in common, and that is to make cash,
whether that's for two shareholders or a thousand.
There's one thing above all else that festival traders dream of -
no, not the chance to headline the main stage,
but taking home a big fat profit.
But doing this isn't as simple as setting up a stall and opening for business.
What if your product doesn't sell?
Or maybe it rains so much that no-one bothers coming to your stall?
Even if you do sell stuff,
it doesn't mean you'll make a profit.
Actually, what is a profit?
-What's profit? Making money!
Making money, isn't it?
Don't know how to explain it...
She's the smart one, ask her!
It's like making money, more than you already spent, isn't it?
So you make money from what... how would you phrase that?
Profit is actually easy to define.
It's simply the money you're left with
after you've covered your costs.
Profit is never guaranteed
but it's the reward you get for taking a calculated risk.
That risk could be anything from adding a new product
to your range or even trading at a new festival.
One man who knows all about making a profit is Simon Baldwin.
For over 20 years he sold hats and clothes from a shop,
but now he's switched to selling at festivals.
It was the chance to increase profits that prompted the move.
The joy of a festival stall over a shop is that the overhead
stops tomorrow, and if a shop is losing money,
you'll continue losing money, whereas a festival,
if it's losing money, you stop, so the risk is less.
It sounds like an obvious question,
but how important is profit in a business?
Profit is ultimately everything.
Profit is crucial, then,
and there's one factor which dictates
the amount a business like Simon's will make -
the selling price.
That's the amount he charges for every product.
And this year, there's one item fuelling Simon's profits.
This festival, they're all mad keen on the animal hats.
They are great, though.
Yes. A very festival item.
-And these go for £10?
-They're £10, yes.
-So my monkey costs me £10 to buy from you.
How much does it cost you to buy?
I get them made in Nepal,
and they cost me £2.50 landed in the UK.
So we make a gross profit of £7.50.
A £7.50 profit seems like a huge amount for one hat.
But, as Simon says, this is a gross profit,
which means it's the TOTAL profit
before he's paid off any of his costs,
and there are a heck of a lot of them.
That £7.50 helps to pay, amongst other things,
for hiring the stall at Reading, for staff wages, and for petrol
for his van to get his products to and from the festival site.
There's nothing to stop Simon
doubling the price of his hats to £20,
but that wouldn't necessarily increase his profits,
because fewer people would buy them at such a high price.
Get the selling price right,
and your business will take off.
Get it wrong, and your business could go bust.
While we'd all love to be loaded, it's not just profits
and the selling price you need to worry about.
To keep a business going you need to have cash coming in,
to cover your costs and to help it grow.
Money coming in and out in this way is called cash flow,
and it's what keeps all businesses ticking over.
Cash coming into the business comes from selling your products,
but also from other sources, like bank loans and personal savings.
Cash going out is also known as your costs,
and can take two forms - fixed and variable.
Fixed costs have to be paid
even when your business doesn't produce anything.
Variable costs change as the business grows.
Mismanagement of cash flow is the failure of most businesses,
and I learnt that myself the hard way
and I run it very, very strictly.
Every week you have to be aware of your cash flow.
And what are the consequences of bad cash flow?
You'll start running out of cash just when you need it
and then you can't pay your suppliers, for example,
you can't pay the bank and they won't take kindly to that,
and they, of course, will pursue you
for that money and that could fold you.
It's important to remember, though, that cash flow
and profit aren't the same thing.
Cash flow is the money going in and out of the business.
Profit is the money left when ALL costs have been covered.
But putting profit to one side, there's one very basic thing
that all business like Simon's want to achieve. That's this.
When a business covers all its costs, it's hit that magic point
called breaking even.
Every sale from then on is profit.
So once you've broken even, you're on your way to making a fortune!
All this talk of money
has made me want to make my own, so I'm leaving the music behind
to do some selling and put everything I've learned
about pricing, cash flow,
break even and profit into practice.
Simon's given me five hats. They cost him a pound each,
so if I sell these for £5 a hat, that'll be £20 profit.
Let's give it a go.
Anyone want any hats?
Anyone for hats at all?
There must be someone!
After a sluggish start with no sales and therefore no chance of a profit,
my luck starts to change.
-You want that one?
-Thank you very much!
Thank you. Have a great day!
With just one £5 sale, I've covered the cost of all the hats
and broken even, and soon things get even better.
My next sale takes me into profit. Can I interest you in that for £5?
OK, thank you very much. There's your hat. Enjoy!
£10 achieved, two hats sold...this is easy!
Two £1 hats sold for £10 equals an £8 profit.
And the great thing is, because I've got no real costs,
that profit is all mine.
But you need to continue working hard to keep the cash coming in.
Unfortunately, I start getting a little distracted.
I sold two hats for £10 and then
people started recognising me and then it became distracting,
the hat sales then dropped off, so actually
the business has stalled for a bit.
I shudder to think what the Lord Sugars
and Richard Bransons of this world
would make of that performance, but I have learned one thing.
It takes hard work to deliver big profits.
Oh, well, it's not all bad. At least I've added
three snazzy new hats to my wardrobe!
Over 400 festivals take place in Britain every year, but as Radio 1's Greg James finds out, there is more to them than just a weekend of music and fun. Festivals are big business and serve to illustrate some key business concepts.
Designed for GCSE business studies students, the programme goes backstage at a music festival to explain five important concepts: entrepreneurship, sole trading, franchises, companies and profit and loss. The films feature interviews with festival traders and key music industry businesses, from an enterprising tent hire company to the ice-cream franchise dishing out hundreds of cones to sweet-toothed festival goers.