by Helen Brewer
โA Budget is a mathematical confirmation of your suspicionsโ source AA Latimer
The (a) conceptual and (b) logistical planning has been completed.ย Service Level Agreements (SLAs) should be in place with lee-way for possible updates going forward.
Based on (a) and (b) the financial budget needs to be determined.
Event planning budgets are more complex than may be realised by the average accountant.
The type of budget depends on the type of event.
Questions need to be asked- Is the event an undertaking:
- with a set budget to ensure the objectives are met? Predominantly corporate & public sector
- in which a profit is to be realised? Pre-dominantly association sector
These are the two most pertinent questions which need to be answered.ย At The MICE Academyโs knowledge bubble sessions, the first definitive quote shared with participants is: โMaking a profit or breaking even is not easy โ realising a loss is quite simpleโ.
SET BUDGET SCENARIO
In accordance with the conceptual & logistical aspects, the first item is to determine all the expenses.ย The key to developing the expense budget is thoroughness.ย Make sure all possible expenses are listed. ย ย Items that are easily overlooked include contracts/agreements which state wording – usually in fine print – which could equate to contingency fees, attrition or cancellation fees.
Remember overhead admin charges, credit card fees, various planning meetings, site visits, legal fees, gratuities, insurance premiums, parking fees and on-site health & safety services. ย The bottom-line of expenses must be as accurate as possible in order to avoid some serious shocks.
The tricky aspect is where the bottom-line is exceeded by a predetermined budget. The requirement is to go over each item more diligently and reduce only where practical and not where it will be detrimental to the overall objectives and outcomes.
PROFIT BUDGET SCENARIO
All the non-variable costs are listed.ย These are the costs that remain the same whether 100 or 120 participate such as: Room rentals / Print materials / AV production / Brand designs and backdrops / Professional speaker fees / Social media communications / Personnel fees / Registration set-up and the like.
The variables are the per participant charges such as: meals / beverages (average) / registration badges etc.
The total of the variable expenses per participant is deducted from the attendance fee per participant.
The total variable expenses per participant is deducted from the charge per participant.
The difference between the two is divided by the non-variable costs to arrive at the minimum number of participants required to breakeven.ย The lower the breakeven figure the more likely it will be to show a profit.
Large events have a greater challenge in realising a profit.ย Yet if the topic/s or the entertainment has been investigated to be a major draw-card the profit margins can be significant.
It is a fine line – as event costs are rising annually.ย It means planners must be astute in the realisation that the mounting of the event is justified.ย This can only be answered through diligent pre-planning
* Helen Brewer from The MICE Academy, is an independent contributor and articles do not necessarily reflect the opinions and views of The Planner.
