National Museums Liverpool (NML) is a charitable organisation managing eight different museums across Merseyside. This includes the Museum of Liverpool, World Museum, International Slavery Museum, Maritime Museum, Walker Art Gallery, Sudley House, and the Lady Lever Art Gallery. In 2017/2018, the group saw its highest annual visitor figures of 3,305,671 across its sites.
The National Museums Liverpool Trading (NMLT) is NML’s wholly-owned trading company that delivers site-specific events, refreshment, food, and souvenir retail, providing an income to the charity through commercially generated profit.
The ability of the company to trade was halted by Covid-19 and the resultant closure of all museum sites. Concerns were raised over the ability of the company to continue to trade in the short term, the impact this would have on income for NML, and the potentially difficult decisions its Board may need to consider in order to mitigate these impacts.
C.Co was commissioned by NML to undertake a commercial review of its trading arm NMLT. The review outputs were to inform future operational decisions of the company, and were determined through:
- An analysis of the current market, determining what guidance and research is available for the sector, and informing the assumptions to underpin any financial modelling
- Consideration of the impacts of social distancing and other guidance on the behaviour of customers and their likely return to visiting museums and galleries. Also, importantly, their wish to visit cafeterias, spend money in gift shops and book events, etc.
- The identification of obvious opportunities to streamline and realise efficiencies and/or savings.
- The identification of new or growth market opportunities and alternative delivery models.
The focus of C.Co’s approach to this commercial review was twofold.
The first involved an analysis of the cultural market. This utilised industry publications and other desk-based research, to determine a broad understanding of the impact of Covid-19 upon museums and galleries and plans, where known, for reopening. The second was the financial modelling itself. The object of the overall approach was to inform financial modelling assumptions, which in turn would support outputs to enable informed and evidence-based decision-making.
C.Co used industry-based research, as well as primary research with key stakeholders at NML. This helped to develop a financial modelling tool that enabled variation in assumptions and input parameters, to determine the impact that changes in delivery and approach would provide.
NML was presented with a number of recommendations that included:
- Take no action
- Invest to secure future operation
- The acquisition of a commercial loan/funding
- Shrink to fit/grow and prosper
- Consideration of alternative delivery models
- Closedown and restart
Following the completion of the initial review of NML and its trading company NMLT, NML recommissioned C.Co to provide break-even financial modelling and forecasting for each of the business units where NMLT provides events, retail and/or catering services. As part of this commission, C.Co offered to provide ‘critical friend’ analysis to both the profit, loss and cashflow forecasts that were being produced, internally, by NMLT.
This allowed NML to consider the scenario/assumption-based options analysis and consider the most appropriate way forward for the organisation.