It costs a fortune to run a heritage museum – but they can turn a profit, if the profits are reinvested.
| Entrepreneur |
Peter Hiscock, AM, Executive Director |
| Company |
The Sovereign Hill Museums Association |
| Business type |
Heritage park and outdoor museum |
| Founded |
1970 |
| Head office |
Ballarat, Victoria |
| Contact details |
+61 3 5337 1106 |
Key Learning Points |
|
Financial management
Competent financial management must always remain a high priority.
Profit centres
In a diversified business, profit generators are essential.
Profit re-investment
Re-investing profits in further development builds the asset base.
|
The Sovereign Hill Story
If you had to design a financially successful business, you would probably avoid a high-maintenance, labour-intensive operation. You would also try to make the venture as attractive as possible to lenders and investors. On these criteria, Sovereign Hill - Ballarat's tribute to its Gold Rush past - should have failed financially years ago.
But Sovereign Hill has made a profit every year since it opened in 1970. It employs about 330 staff and puts about $30 million a year into the local economy. It does have a rapidly increasing maintenance bill, although it has never had to borrow to meet those costs. So how does a company limited by guarantee and run as a not-for-profit community-based organisation turn a profit?
Executive Director Peter Hiscock, who came to Sovereign Hill from a large Australian food manufacturer (Petersville Ltd), thinks his business background has helped. Hiscock says: “Sovereign Hill could be managed by a historian with an amateur interest in business, or by a business person with an amateur interest in history, and I am certainly the latter. I think it’s helped with the financial management, looking at the way in which we set up each of the profit centres, the way they are managed, the incentive for people individually managing those, and as well looking at the investment of funds from our Foundation. I think it helps to at least know your way around a balance sheet.”
Sovereign Hill takes itself very seriously as an outdoor museum; it is one of the top ten in the world. All its buildings are based on originals known to have been in Ballarat in the period 1851-1861. There are many with shingle roofs and the site has five original buildings from that period. These assets and the huge collection of early mining machinery and other plant require continual maintenance.
Hiscock says: “The capital expenditure program needs to fund exhibit development - things which enhance Sovereign Hill as a visitor experience on the one hand, and the things which generate a profit on the other.”
Without shareholder pressure to worry about, the Association can afford to concentrate capital expenditure in specific areas for two or three years. For example, exhibit development is important - there must be new experiences and new things to see for the 500,000 visitors each year. Then the Association will invest in improving profit generators, such as more accommodation, restaurants, the kiosk and the gift shop.
Hiscock says: “The best profit generator for us has been the investment in visitor accommodation including facilities for about 250 schoolchildren on-site, and then upmarket accommodation with ensuite facilities for other visitors.”
The Association plans to increase its visitor accommodation over the next five years and will also re-invest in its sound-and-light show. “Not only is this a good [profit] generator,” says Hiscock, “but it has proved a wonderfully effective way of telling the Eureka story.”
Sovereign Hill’s longstanding financial philosophy of borrowing nothing and re-investing retained earnings from profits and depreciation in further development, augmented by outside sponsorships and donations, accounts for slightly more than half its current capitalisation of about $23 million.