Business planning
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Whether your project is a multi-million pound visitor centre or a community café, a business plan is an essential basic tool if you are to be successful. The Heritage Lottery Fund has produced a very clear and straightforward guide to business planning which will be available from January (see box at end). While it is aimed at potential HLF project applicants, the advice in the booklet can, with appropriate adaptations, be applied to most projects seeking lottery funds, so it is an excellent resource for applicants and intermediaries We reprint here Section 6, on ‘the market’

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THE MARKET
This section looks at who will be the users or visitors to your project and how many of them there are likely to be. Together with section 7 (‘Financial appraisal’), it forms the core of your business plan. In assessing the market for your project, you must consider such issues as the following:

  • where visitors are likely to come from geographically, whether they will be tourists staying overnight in the area, visitors on a day trip or local residents;
  • what sort of groups will come, for example the percentages of adults, older people, schoolchildren and so on; l how often they will come;
  • how much time they will spend; l how much they will pay to use or visit the facility (if relevant); and
  • how much they will spend in your shop, café or other outlet (if relevant).

Target market
Your target market is the group or groups of people that you consider will be most attracted to your heritage item. In identifying your target market, you should take account of whether the heritage item that will be on offer is of local, regional or national significance and whether it is likely to interest a wide cross-section of the public or a more limited special interest group. You should be realistic when deciding who should be the focus of your market. For example, a local nature conservation project may well include in its target market local residents, family groups and educational groups. Realistically, it is less likely that it would be able to draw in a significant number of tourists or day visitors. This does not mean that nobody from these categories is likely to visit, but they will probably not be the main market.

Total market size
After you have decided what your target market is likely to be, you should gather as much information as possible on the total size of that market. This is not an estimate of the number of people who are likely to visit your project, but rather the total number of people making up the population from which your visitors will come.

Depending on your target groups, there are numerous different sources of information: 

  • Local councils hold information on the current and estimated population of specific areas.
  • Area and national tourist boards hold information on the number of tourists and other visitors, including day-trippers and business visitors, to specific areas. These sources can also give you information on the number of visits to many attractions within a specific area.
  • Education authorities can provide information on the number of schools and colleges and the number of schoolchildren or students in any area.
  • If your project is likely to appeal to specialist groups, you should contact any local or national associations to see how many local members theyhave.

As well as the sources listed above, there are a number of professional companies that will provide more specific information on visitor numbers and other data, including:

  • the time it takes to drive from home to an attraction; and
  • the percentage of the population in certain socio-economic groups likely to visit attractions.

Although this can be useful information in estimating the size of your target market, it is expensive to obtain. You should, therefore, consider the availability of other sources before approaching professional companies, particularly if you are preparing a stage one application.

As well as assessing the total size of your target market, you should provide information on trends within the market, looking at how these markets have changed in the past few years. For example, tourist boards will have information over a number of years to show the changes in visits by various groups at a regional and national level. Some sources may be able to provide forecasts of how markets may change in the future. Such forecasts cannot be guaranteed, but they will give you an idea of how your markets may change over time.

Comparative analysis
When you have decided on the size of your total target market, you should examine attractions that you can compare your project to. You should consider these attractions on two levels:

  • local; and
  • national. 

In each case the information you gather should allow you to compare your own proposed facility with what else is on offer. The more relevant information you gather, the more confident you can be that the visitor or user forecasts that you make are relatively reliable and that you can defend them. This will also allow you to set a realistic admission charges policy.

In relation to other local attractions, your facility will be competing directly for local residents and groups, day visitors and tourists, of which there is likely to be a stable number, unless your heritage object is of national significance or particularly wide appeal. For comparable national facilities, you should look at attractions which are as similar as possible to your own. However, it could also be useful to consider those on a larger or smaller scale if they are very similar to yours in other ways. Your business plan should set out clearly in simple tables the main information which you have gathered for comparable local and national attractions. Consider producing tables for visitor numbers and admission charges.

For both local and national attractions, you will find the following information useful:

  • the name of the attraction and where it is based;
  • its theme; l how long it has been operating;
  • the facilities it provides;
  • its admission charges (if applicble) for each visitor category (adults, children, students, older people, groups and so on);
  • its visitor figures for the past, say, three years; and l its opening times (for example, does it open every day or is it only open at certain times of the year?)

Using your information about similar attractions, particularly those which are local, you should now be able to set a realistic admissions charging policy, broadly in line with what the market can support. Visitor categories might include:

  • adults;
  • children;
  • family groups;
  • concessions (over-65s, students and unemployed);
  • educational groups;
  • other groups (for example parties of 10 or more); and
  • season tickets.

Penetration rates analysis

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The next step in deciding on your likely visitor or user forecasts is to use a technique called ‘penetration rates analysis’. This is not an exact science, but it allows you to look at the range within which your visitor numbers are likely to fall, comparing them to other local or national attractions. Penetration rates are the percentages of the total number of people in any given population that actually visit or use your attraction. For example, if the total adult population within a 30-minute drive of a local attraction is 500,000 and 5,000 locals visit or use it in any one year, the penetration rate in the local market is 1%.

If you cannot get market penetration rates from comparable attractions, you will have to estimate total visitor numbers and estimate how many visitors will be attracted from each market. You then have to work out the penetration rate. A penetration rate of more than 5% will probably be very difficult to achieve in anything other than exceptional circumstances.

You should consider a range of penetration rates, as these will generate a range of visitor and user numbers representing a high, medium and low scenario. These different scenarios are critical for you to think about the risks you may face and how you can work to reduce their effect to a minimum.

When making your forecast of visitors and user numbers, you must take account of the size of the building or space available to handle visitors. For a stage two HLF application, we expect you to provide analysis based on estimates of the size of the building, the average time spent at the attraction, the opening hours each day and the opening days each year. This will enable you to work out the maximum number of visitors each day or year. Your user or visitor forecasts should not be greater than this figure. Remember that the figures provided by your penetration rate analysis will relate to the visitor numbers that you can achieve once your project is fully up and running and people have become aware of it. 

‘Business Plans, helping your application’ will be published in January by the Heritage Lottery Fund. You may order hard copies free of charge from the website www.hlf.org.uk or phone 020 7591 6042. Alternatively you may download electronic copies from the website.