Real business stories
Real business stories
The Cavern Club 2020
“Our world-renowned galleries, museums, heritage sites, music venues and independent cinemas are not only critical to keeping our economy thriving, employing more than 700,000 people, they’re the lifeblood of British Culture.”
– Rishi Sunak, Chancellor of the Excequer
For more than 30 years, Liverpool’s Cavern Club, made famous by The Beatles. has been a beacon for the economic development strategy of an entire region. It’s a business that is totally ingrained in the cultural fabric and identity of its city and community, and associated with a band so iconic that news of its closing due to COVID-19 was reported not just in the UK but worldwide.
The Business Finance Guide was interested to learn how the business originated from a conversation with an accountant, and how solid business practice and financial management has helped it endure the greatest test of all.
On 23rd March 2020 Britain went into lockdown in response to the coronavirus pandemic. The following six months have seen the Government come to the assistance of embattled British businesses with a series of financial countermeasures.
Having been in tier 3 lockdown for several weeks, and now joining the rest of the country in a second national lockdown, never has there been a greater need for solid financial management – and for sound advice.
We were privileged to interview Bill Heckle, owner of The Cavern Club. Here is the venue’s story in Bill’s own words.
The renaissance of Liverpool
I was six years old in 1962 and vividly remember being a massive Beatles fan. My two aunties used to go to the Cavern Club all the time and I would get a Beatles album or single from each of them at Christmas and birthdays. The Beatles had been a local phenomenon long before they were shared with the world after 1964 with global Beatlemania. Liverpool, strangely, felt betrayed when the Beatles left Liverpool for London in 1963 and there was a lot of resentment in the city that the group had deserted their roots. In the aftermath of the Second World War, the city was a different place to that of today. It was dark and introspective, and its very name was associated with crime, violence and poverty.
The renaissance of the Cavern Club (which originally opened in 1957) and of Liverpool as a city, began with the tragic loss of John Lennon in 1980. Following a global outpouring of public grief, with no official grave site for John Lennon in the UK, places like Strawberry Field and Penny Lane took on more meaning than simply being the lyrics of the songs.
All of a sudden, people were interested in John Lennon’s birthplace, his school and sites of significance in his life. Liverpool City Council originally operated the Magical Mystery Tour as part of what was a very basic economic development and tourism function. At the time, having studied economics, I was working as a teacher, but saw a massive opportunity to branch out and do something related to my Beatles passion, and so I became one of the first tour guides in 1983.
From a conversation with an accountant to a global brand
I talked to an accountant on Castle Street. My aim was to ensure that I was paying the right amount of taxes because I had a second income from being a tour guide, on top of my salary as a teacher.
He suggested that I start my own business and so I set up Cavern City Tours. Dave Jones has now been my business partner for 35 years and my school friend, George Guinness, joined us in 1991 when we acquired the Cavern Club. 14 years later, Julia Baird, John Lennon’s sister became a director of the company. Almost 30 years since we first launched, the venue is now globally recognised as the birthplace of the Beatles and an incredible live music venue.
The company also operates the Cavern pub, the Cavern Festival restaurant, the Magical Mystery Tour and organises many international music events and festivals. The company has grown alongside Liverpool’s economic development and tourism offering. In 2008, the city was named the European Capital of Culture and subsequently has become a tourist destination for people from across the world.
For the last nine years, we’ve been open seven days a week, with three stages playing live music. Significantly, we spend over £1 million providing live music by 25 local musicians and bands. Prior to the government-imposed lockdown the business was turning over £9 million every year.
The impact of COVID-19
In each of the last two years, we’ve made over £2 million annual profit. Now, due to COVID-19, we’ve been closed for nearly six months. As it stands, we’ve lost around £800,000, and the projections for the year are that we’re set to lose over £1.5 million. In March 2020 our projected profits were circa £2.5 million. Thus from an expected profit to the predicted losses over the financial year, this is tantamount to a £4 million turnaround. This has huge implications.
We currently employ over 100 people, all of whom have families. We tried not to make redundancies, but as the situation continued to get worse, we did have to let 25 staff go. We continued to assess everything in the business and after six months, the real challenge emerged that, even if we could open tomorrow, those jobs weren’t there anymore.
The Cavern Club is a global brand. We thrive on tourism as well as local trade. We would open at 11 o’clock on a Monday morning with as many staff as most clubs would have on at 11 o’clock on a Saturday night. And we’d be packed throughout the days, particularly in the summer months.
With international tourism shot down almost entirely, even when the pandemic recedes into memory as we hope it will do, our comeback simply won’t happen overnight.
On a personal level, the greatest challenge has been that throughout my whole life and career I’ve been a decision-maker. I take a lot of pride in looking after people. We’ve been in business for 37 years and until this year, for every decision I made, I had all of the relevant information in front of me. This year, that information just hasn’t been available. It’s been impossible to plan.
Immediately after lockdown in March, news that The Cavern Club had closed spread globally. We had people reach out to us from America, Brazil, Argentina, China. And the Cavern’s closure featured in articles in global media such as Rolling Stone Magazine and The Melbourne Times.
We applied for and were granted two government loans of £250,000. The government loan schemes have been excellent, and while I think it could be two or possibly three years before we trade at the same level again, the interest rates are such that there will be less of an impact on finances when we do return to healthy trading. The Government took steps to significantly lessen the risk of borrowing.
When the government grants became available, we applied for £525,000 and it was well publicised that we received it. In the first instance, the grant only covers 20% of our accumulated losses. In the application, we had to complete one cashflow forecast based on our being open and a second forecast if the business was closed. The grant application was split into two parts. half of the grant was to cover some of the losses the Cavern had incurred but significantly the other half would be ring fenced to support our musicians and sound engineers. Indeed, now we are in second lockdown in November these musicians are playing on the cavern stage and live-streaming every performance around the world and therefore earning much needed income. We currently employ seven musicians directly and contract another 20 that are self-employed.
Saving the soul of our nation
When Boris Johnson announced a £1.6 billion arts funding package in July 2020, it saw the largest ever one-off investment in UK culture. Culture Secretary Oliver Dowden described the grant programme as protecting the “soul of our nation”.
Thousands of live music venues, theatres and other arts venues were facing permanent closure due to the coronavirus pandemic.
“From iconic theatre and musicals, mesmerising exhibitions at our world-class galleries to gigs performed in local basement venues, the UK’s cultural industry is the beating heart of this country.”
– Boris Johnson, Prime Minister
Keeping cash in reserve
We’ve seen good times and bad in business.
When we endured our toughest times in early 2000, we learned the importance of having cash behind us. I completely understand where some businesses currently find themselves in terms of cashflow and not knowing whether they are still going to be there the next month.
Our board agreed from 2004 onwards, after emerging unscathed from a turbulent period, that we’d always strive to build up a healthy cash reserve. As such, we had £2.3 million in reserve this year. Interestingly, to have any more would have been a risk to the business – if we’d had over £3 million, HMRC would have deemed us to be holding too much cash. A challenge came our way at the start of the year.
Covering costs and securing the future of the Cavern Club
In January 2020, we only had eight years left on our lease, which was a risk to the business. Having taken all the appropriate advice, we decided to purchase a 99-year lease at a cost of £1million which reduced our reserves to £1.3 million .We completed in January 2020, in the knowledge that, by early summer, with the projections for the business, we would be back up to our £2 million reserve.
Then, in the middle of March we had to close the business in line with lockdown. The £1.3 million that we had left in reserve, plus the loans that we’ve secured and the grant money that we’ve received, will see us through until the summer of 2021.
When I reflect on 2020, I think the level of government support for businesses has been phenomenal. I have an economics background and the scale of the relief effort has been incredible. I don’t know how the Government could have given more.