Business Plan. "Jazz'n'Roses" Art Gallery and Jazz Club

Table of Contents

Executive Summary

Company overview

Vision

Mission Statement

Business Environment

Industry Analysis

SWOT Analysis

Competitive Analysis

Market Analysis

Marketing Plan

Operations and Management Plan

Legal structure and taxation

Financial Plan

Income Statement

Break-Even Point

Balance Sheet

Statement of Cash Flow

Appendix

References

Abstract

The aim of this business plan is to assess the viability and profitability of a potential art and entertainment business in Ukraine which would provide an authentic mix of experiences to modern artists and people interested in art. Jazz’n’Roses will be an art gallery and jazz club combining live music venue, exhibition space, and bar. The business will be located in Lviv, Ukraine, and will operate in art, entertainment, and recreation industry. Jazz’n’Roses will connect artists and art-lovers through authentic experience of music, art, and unconventional creative activities. The target market of the business are medium and high income novelty-seeking citizens of Lviv belonging to age groups 18-24 and 25-49, favoring jazz music and modern art. Jazz’n’Roses will aim to satisfy the need of artists for promotion and convenient setting for performances, and the need of art-lovers for aesthetic experiences, communication, and creative expression. The analysis of the industry and business environment in Lviv, Ukraine, indicates that the conditions are favorable for starting a business in creative, art, and entertainment sector. The competitive analysis reveals that there are businesses providing similar services, but none offers the same service mix. Jazz’n’Roses will cooperate with amateur artists and freelance performers as well as seek support of Lviv National Academy of Arts and Lviv School of Jazz and Modern Music. The main value of Jazz’n’Roses will be the creative activities which will engage the visitors into the process of generating artistic experiences, giving them opportunity to connect with artists and become co-creators.

Keywords: Art gallery, jazz club, exhibition, creative activities, artistic experience, bar, live music, Lviv, Ukraine

Santrauka

Šio verslo plano tikslas - įvertinti potencialaus meno ir pramogų verslo Ukrainoje gyvybingumą ir pelningumą, kuris suteiktų autentišką patirties mišinį šiuolaikiniams menininkams ir žmonėms besidominančiais menu. „Jazz'n'Roses“ bus dailės galerija ir džiazo klubas, kuriame bus derinamos gyvos muzikos vietos, parodų erdvė ir baras. Verslas bus įsikūręs Lvove, Ukrainoje, ir dirbs meno, pramogų ir poilsio pramonėje. „Jazz'n’Roses“ prijungs menininkus ir meno mėgėjus per autentišką muzikos, meno ir netradicinės kūrybinės veiklos patirtį. Tikslinė verslo rinka yra vidutinių ir didelių pajamų naujovių ieškantys Lvovo piliečiai, priklausantys 18–24 ir 25–49 metų amžiaus grupėms, mėgstantys džiazo muziką ir šiuolaikinį meną. „Jazz'n'Roses“ sieks patenkinti menininkų poreikį reklamai ir patogios vietovės pasirodymams, meno mėgėjų poreikį estetinės patirties, bendravimo ir kūrybinės raiškos reikmėms. Lvovo, Ukrainos pramonės ir verslo aplinkos analizė rodo, kad sąlygos yra palankios verslui kūrybiniame, meno ir pramogų sektoriuje. Konkurencinė analizė rodo, kad yra panašių paslaugų teikiančių įmonių, tačiau nė vienas nesuteikia tokių pačių paslaugų mišinio. „Jazz'n'Roses“ bendradarbiaus su mėgėjais menininkais ir laisvai samdomais atlikėjais, taip pat ieškos Lvovo nacionalinės dailės akademijos ir Lvovo džiazo ir šiuolaikinės muzikos mokyklos paramos. Pagrindinė „Jazz'n'Roses“ vertė bus kūrybinė veikla, kuri lankytojus įtrauks į meninės patirties kūrimo procesą, suteikdama jiems galimybę bendrauti su menininkais ir tapti bendra-kūrėjais.

Raktažodžiai: Meno galerija, džiazo klubas, paroda, kūrybiniai užsiėmimai, meninė patirtis, baras, gyva muzika, Lvovas, Ukraina

Executive Summary

Jazz’n’Roses will exist as an unconventional creative space combining live music venue, art gallery, and bar. The business will enter the market of art, entertainment and recreation and will operate in the sub-sector of creative, art, and entertainment services. While there are numerous galleries, art-centers, and clubs in Lviv, they rarely satisfy the needs of people with specific taste. Jazz’n’Roses will be consistent in genre and style offered and will target the audience favoring jazz music and modern art. The distinctive feature of the business will be the triple service mix. Jazz’n’Roses will deliver authentic experience of modern art and jazz music and connect artists and art-lovers through engagement in creative expression activities like collective wall-painting, blindfolded painting, and live installations. The target market of the business will be artists and art-lovers valuing novelty, community, and creativity. Jazz’n’Roses will focus on customers seeking aesthetic experiences and opportunities for creative expression. The needs that the business will satisfy are the need of artists for promotion and convenient setting for performances and the need of art-lovers for aesthetic experiences, communication and artistic expression. Developing the business will require obtaining substantial starting capital, gaining brand awareness, and building wide network of partners among artists and music bands.

Company overview

Jazz’n’Roses will be an art gallery and a jazz club located in Lviv, Ukraine that will offer authentic experience of music, art, and entertainment by combining live music venue, exhibition space, and bar. The club will exist as a creative space for people who are interested in jazz music, modern arts, and unconventional forms of artistic expression. Jazz’n’Roses will be designed to bring together artists and art-lovers - these are the two groups the business will serve. While the musicians and artists will get a convenient setting for performances and an opportunity to attract audience, the visitors will be able to interact with the artists and enjoy their performances as well as participate in experimental artistic activities like blindfolded painting, collective wallpainting, game “Silent Talks”, and live installations.

Jazz’n’Roses will consist of five parts, each offering a different service or activity, that will combine into whole versatile experience of the place. The central part of the place will be the live music venue with the stage where musicians and bands will perform. The club will contract with several bands performing on the regular basis and will also invite other local bands. The music will be selected from jazz, blues, funk, and related genres. The space around the bar will be encompassed by the art gallery which will host the exhibitions of contemporary artists and have a creative space where visitors will be able to interact with artists and take part in unconventional artistic activities like collective wall-painting, blindfolded painting, and live installations. The gallery will lead to open-air terrace planted with roses which are featured in the name of the club and are part of its brand image.

Vision

To be an unconventional creative space combining live music venue, art gallery, and bar which offers authentic experience of jazz, art, and entertainment.

Mission Statement

To provide artists and art-lovers with opportunities to connect through music, modern arts, and unconventional forms of artistic expression.

In highly competitive Arts, Entertainment and Recreation sector, Jazz’n’Roses will stand out due to its distinctive design and artsy image. While there are numerous conceptual bar lounges in Lviv, most of them offer mainstream music and do not satisfy the needs of people with specific taste. Jazz’n’Roses will target the audience with specific taste in music and art and will be consistent in genre and style offered. Art galleries and concert halls in Lviv rarely engage the visitors in any sort of creative activities. In Jazz’n’Roses, the artistic activities will satisfy visitors’ need for creative expression and interaction. Finally, there is no gallery or concert hall that serves drinks and no bar that hosts exhibitions. Jazz’n’Roses will be the business that combines jazz, art, and bar in one place.

The business model canvas is presented below. The template describes key activities and resources of the business, value propositions, partners, customer relationships, channels, cost structure, and revenue streams.

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Business Environment

Having undergone a period of recession and severe political crisis, Ukrainian economy is slowly achieving macroeconomic stabilization. Ukraine’s real GDP growth resumed due to the inflow of investments. The World Bank reports that Ukrainian GDP has grown 1 percent over the last year and is expected to grow by 2.9 percent by 2020 (World Bank, 2018). According to Trading Economics, there is also an increase in consumer spending in Ukraine. The index grew from 174 thousand mln UAH in the first quarter of 2018 to 181 thousand mln UAH in the second quarter of 2018 (Trading Economics, 2018). As stated in the annual report of Economic Freedom of the World, Business regulations in Ukraine improved over the last years and it reflected on the ease of starting business (EFW, 2018). The World Bank reported that Ukraine has moved from 76th position in the category of starting business to 20th position in last two years (World Bank, 2018). This implies that the market entry has become easier. However, bankruptcy procedures remain tough. Ukraine is ranked 150th out of 190 economies in this category, moving down two spots compared to the previous report (World Bank, 2018).

Economic Freedom of the World Report lists Ukraine in the group of least economically free countries (EFW, 2018). Since 2016, the public policies in Ukraine are directed towards the development of business-enabling environment (BTI Country Report). The government reduced the level of interference by tax and other authorities in business operations thus promoting small and medium enterprises (BTI Ukraine, 2018). The prosecutor’s office lost the power to engage in general supervision, and the expected outcome of this is inclusive economic development and decreasing opportunities for corruption (BTI Ukraine, 2018).

World Bank, OECD and other international institutions agree that the competitiveness of any country is formed at the regional level. The regional differences are great in Ukraine; therefore it is necessary to analyze the business environment of the specific city in which the business will be started.

Lviv is the cultural capital of Ukraine and the largest city in the western part of the country with the highest population density (2.5 mn citizens per 21.8 thousand km²). Natural conditions, rich historical heritage, and proximity of EU border promote to the high tourist and recreational potential of the region (RBEI, 2016). According to State Statistics Service of Ukraine (2017), the number of tourists visiting Lviv is the highest in the country. The number has been increasing for the past ten years (State Statistics Service of Ukraine, 2017). This is an important indicator because tourists constitute a significant part of the target market of the business and their spending would reflect on the business’ revenue. Unian Economics (2017) reports that in 2017, 2.6 mn tourists visited Lviv spending over EUR 600 mn.

In Regional Business Environment Index of Ukraine (2016), Lviv occupies the 4th position after Kyiv, Dnipro, and Kharkiv which signifies that it is one of the best locations for starting a business in Ukraine. The city ranks 7th position in economic activity - mainly due to the inflow of tourists, great level of competition in services sector, and positive changes in regulatory policies (RBEI, 2016). In terms of public administration and legislation, Lviv’s rating (5th position) indicates that the quality of local authorities is satisfactory (RBEI, 2016). The 4th position that the city takes in infrastructure and technology signifies that Lviv has one of the best levels of infrastructure and is ahead of other western regions in technology development and its implementation (RBEI, 2016). The city is also above the country’s average in terms of education and human resources (5th position) (RBEI, 2016).

These indicators characterize Lviv as a favorable environment for the development of business. fDi Intelligence (branch of Financial Times Ltd) describes Lviv as “haven for SMEs” (Bender, 2017). However, there are disadvantages that should be taken into consideration - the level of corruption among private businesses is still high, bureaucracy and delays in the offices are quite common, legal fighting against corruption is a complicated process (RBEI, 2016). These shortcomings are true for other regions as well and are the specifics of doing business in Ukraine.

Industry Analysis

According to State Statistics Service of Ukraine (2018), country’s GDP in Arts, Entertainment and Recreation sector amounted 4 thousand mn in March 2018. It is a slight decrease after the all-time record of 5 thousand mn in December 2017. This amount combines the output produced by stage performances, amusement parks, museums, concert halls, sport clubs, gambling events, and other types of businesses that provide cultural, entertainment or recreational services. Practically any activity that occupies a person's leisure time, excluding the viewing of motion pictures and video rentals, is a part of this industry. In 2017, there were 1926 active enterprises in this sector in Ukraine - this number has grown since its previous record of 1705 in 2016 (State Statistics Service of Ukraine, 2017). As of II quarter 2018, in Lviv, the volume of sales in art, entertainment and recreation amounts 85 310 600 UAH out of which 50.8 percent were sold to the population, 42.5 percent to the enterprises, and 6.7 percent to the other categories of users. State Statistics Service of Ukraine (2018) divides arts, entertainment and recreation sector into following categories: creative, arts and entertainment activities; libraries, archives, museums and other cultural activities; gambling and betting activities; sports activities, amusement and recreation activities; other service activities. Jazz’n’Roses can be attributed to the first category. According to State Statistics Service of Ukraine (2018), the demand for creative, art, and entertainment services has increased over the last year. In III quarter of 2018, the increase in turnover was identified in 44 percent of enterprises in the industry - this is the highest indicator for the last three years. However, for half of the enterprises current level of demand is still insufficient. 39 percent of surveyed entrepreneurs reported that the business situation in the sector is improving but only 11 percent expect the demand on their services to increase over the next 3 months (State Statistics Service of Ukraine, 2018). The other services for which low demand is the prevailing problem include travel agencies, tour operators, sports activities, museums, water and air transport, video and television. Many of them deliver experiences that are considered discretionary, therefore the demand for such services depends on the size of disposable income. Current economic conditions make Ukrainians selective in what they spend money on. Monthly expenditure on culture and recreation in 2017 constituted 1.6 percent of the monthly income (State Statistics Service of Ukraine, 2018). However, there is improvement that is expected to increase the amount Ukrainians spend on discretionary services - as reported by the State Statistics Service (2018), the average disposable monthly income per individual amounted to UAH 3,790, increasing 32 percent compared to the previous year.

SWOT Analysis

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Jazz’n’Roses will have to dedicate significant marketing efforts to distinguish itself in a mature market. Right positioning is required to avoid misperception of what the business offers. The unique combination of experiences will be designed to satisfy the needs of the customer segment which is small but potentially profitable. To deliver the experiences of high value and benefit from the location, the business will require large starting capital – Jazz’n’Roses will not be launched until sufficient funds are obtained. To withstand the competition with the businesses providing alternative leisure services, Jazz’n’Roses will have to keep the content fresh. One of the key roles of creative director will be to reach out to artists and bands ensuring that a new exhibition happens each month and another band plays each weekend, while Jazz’n’Roses’ regular bands will play in between the sessions of invited bands.

This will require developing wide network of partners which – if accomplished successfully, will expand the customer base by including the audience of music bands and artists. Additional profit gained from sales of branded merchandise can outweigh the low profit from outsourced bar. When the business will reach the stage of maturity, it may introduce the service of facilitating sales to the artists and expand into art retail market.

Competitive Analysis

Jazz’n’Roses will compete in the industry of arts, recreation and entertainment. The direct competitors of the business will be Lviv art-centers and galleries. Indirectly, Jazz’n’Roses will also compete with bars and restaurants with live music that offer creative activities and host art events. These are the businesses that provide similar services but position themselves differently and therefore have different audience. The galleries that set up the expositions in a conservative manner - even though they are exhibiting modern art - generally attract older segment of the market. One of the galleries-competitors “Zelena Kanapa” targets particularly artists and experts interested in buying artworks. It is designed for the people who come for art specifically and value it for its own sake, so they don’t need additional entertainment. By contrast, another competitor, “Museum of Ideas” practices more innovative approach to set up of expositions and has authentic atmosphere. It doesn’t only display the artworks but places them into the well organized and original space which also has artistic value. “Museum of Ideas”, however, has little presence in the media and doesn’t offer interactive events - which cuts off a significant part of younger audience. The restaurants and bars-competitors, including “Libraria”, target customer segment that is broader because it is not limited to people interested in art. It also doesn’t depend much on the music preferences of visitors – they come to “Libraria” as to a bar and music is important but it is not crucial for them what kind of music is played there.

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