Budgeting & finance

You need to be clear about how much it costs to open your museum – just opening the doors, switching on heat and light costs money and you should know this amount. If you pay expenses or salary to volunteers or staff this should be included in your calculations. (If you can, set up a way of recording the time that volunteers spend on the museum. Although there is no monetary exchange, it shows the investment in the museum in time and how valuable it is.)

Set up a cash flow so that you can cover your outgoings over a year:

• List all expenses and outgoings you have in a year e.g. utility bills, staff costs
• List all predicted income throughout the year and when it will come in.

You will start to build a picture of months in the year when things will be tight and other months when you may end the month with a balance in the bank.  The cash flow will show how your year will probably pan out and give you an indication of income levels you must achieve if you want your spending levels to be at your budgeted amounts.

• Review this cashflow monthly noting if there were any surprise expenditure. It may make you re-adjust your cashflow for further months down the line.
• Your cashflow may show that you cannot afford all of the things that you want to achieve. Planning ahead should raise this issue in good time to be able to look around, ask people such as your Museum Development Officer etc about ways of covering these potential shortfalls. It may be that lack of cash flowing leads you to re-planning timescales for projects.
• Elsewhere in the toolkit you will find information about funding. Remember to keep in touch with you county MDO for information about funding possibilities.

For further general business advice you can contact various business support organisations. These organisations may be dealing with a variety of businesses and a variety of turnover levels. Often museums are disinclined to interact with these organisations because they are seen as working with other business sectors but not the museums sector. The trick is to use the advice given and adapt it to the sector and your specific knowledge.

Sources of business advice (31 kb)

Legal Issues

Structure: The museum is your business and should have some form of legal format. If you are a group of people who have come together to create a museum to promote your collection or support your community you should ensure that you are aware of your legal standing so that you know of your personal liabilities with regards to your personal involvement in the museum. For further information contact:
www.businesslink.gov.uk
www.companieshouse.gov.uk
www.berr.gov.uk (Department for Business Enterprise and Regulatory Reform)

There are various forms of structure:

• Unincorporated institutions: This structure is most informal and individuals have individual liability for the actions of the museum in this format. Trusts can be set up to legally hold ownership of property and an unincorporated institution can apply for charitable status if it has charitable objectives. This structure cannot raise finance (individuals have to take on that liability), take on a lease, take on employees etc.
• Self-employment: This is less likely to apply to the museums sector unless you are a private individual opening a personally owned collection to the public. If you have control over the work that is done, the availability of the collection to the public and you have personally made the investment in the business then you are self-employed and should be registered with Her Majesty’s Revenue and Customs. Registration should be within 3 months of beginning this form of work – there may be a fine for failure to register on time.
• Sole trader: This is much the same as self–employed. You must register as self-employed as the individual working within your business. Any profits made are taxed as income to you as an individual and you are personally liable for any debts that the business incurs, because you are the business.
• Partnership: In a partnership two or more people who are self-employed have come together to work together. Although it is advisable to have a written agreement between the partners all are personally liable for the business actions (debts etc). It is advisable to consult a solicitor for the writing of the written agreement that forms the partnership.
• Limited Liability partnerships: A limited liability partnership means that the members of the partnership are limited to the amount that they have individually invested in the partnership. This form of partnership must be registered with Companies House and must file accounts annually. As the partnership members are self-employed they must return an annual self-assessment form to Her Majesty’s Revenue and Customs etc.
• Limited Liability Companies: These companies exist separately from the individuals involved and must be registered with Companies House. Limited Liability Companies have to have at least one director and there are rules about who can serve in this position. For more information contact Companies House for further advice.
• Social Enterprises: The term social enterprise refers to the social objectives of the organisation involved. The organisation still needs to have a business structure (see above). A social enterprise re-invests in the business and/or the community rather than sharing profits with shareholders or individuals involved in the business.

Other legal considerations:

• If you are an employer you have legal responsibilities.
• The museum has legal responsibilities for its visitors.
• The museum has responsibilities for any products that it sells.
• The museum has legal responsibility for health and safety issues on your premises.
• There is a legal responsibility for the use of electrical equipment on your site and the disposal of such. All equipment on site must be safe and secure fro the use of your volunteers or staff.
• The museum must take responsibility for the correct use of Intellectual Property on its premises. You might include rules on copying etc in a staff information pack.

Your business plan should address each of these issues, showing how (and by whom) they are covered.