Establishing an event budget is a crucial step during the planning phase, right after setting your goals and objectives. A budget is a detailed forecast of what will be happening financially at your event. It helps control your expenses and revenues, and measures the success of your meeting or event performance.
The importance of an event budget cannot be overemphasized. Although a well-planned budget takes time to create and manage, it can mean the difference between success or failure.
According to a report from Meeting Professionals International (MPI) and audio-visual company PSAV, when event planners were asked about their organization’s overall capability for event budgeting, here’s what they said:
- 6% stated that they are ‘lucky to have a process’
- 30% said processes exist by project only
- 33% mentioned that standards and processes exist for the organization
- 28% replied that their organization manages resources and processes for them
What’s the Starting Point of an Event Budget?
When building your event budget, it’s best to determine what financial success means for your event and how you want to measure it. In order to achieve this, you need to list all the possible expenses and revenues that will likely occur from your event. Always keep your cash flow in mind. Once you’ve developed your budget, you’ll have to track and review it on a regular basis to ensure you stay within the allocated resources.
Determine What Financial Success Means to You And How It Relates To Your Event Budget
One of the first steps for every event planner is preparing an event budget and predicting as accurately as possible if the event will result in a profit, loss or break-even. However, determining what financial success means for your event depends on the type of event and objectives. For example, a leadership summit is often a loss leader, association events are usually events that break-even, and trade-shows are often the best opportunity to yield a profit.
Before planning your budget any further, you need to understand your organization’s needs. Your event budget is really a forecast, or projection, of all expenses and revenues that will incur at your event. You won’t be able to forecast all expenses and revenues from the beginning, and some of these might even change over time. Nevertheless, planning your budget with consideration for the most common expenses and revenues is necessary.
Event Budget: Quick Steps to Planning yours!
When event budgeting, it’s paramount to identify which items represent expenses and which are sources of revenue that can cover costs. In addition, you need to distinguish between fixed and variable costs in order to effectively forecast a budget for your next event.
One of the key challenges for planners is to ensure that you carefully manage expenses and revenues to achieve the financial goals that have been established by your organization, as well as accurately measure your event success.
According to a Professional Convention Management Association (PCMA) survey, 36% of all expenses are for food and beverages (F&B) alone. This chart shows an overview of the most common expenses for meetings and events. Note that event technology can be incorporated into all of these common expenses. For example, an event tech app can help with marketing and promotion by allowing event planners to push notifications about keynote speakers and registration.
Your meeting and event is about the attendee experience, so you have to ensure that where you spend your money adds value to your target audience. Attendees don’t care if you pay $140 for a gallon of coffee or $25 per person for a continental breakfast. They do, however, care about an overall great experience, and food and beverage is a large component of attendee satisfaction. PCMA suggests to spend 55% of your budget on food and beverage, audio visual, and speaker/entertainment in total, because these items have a direct impact on the overall attendee experience.
Fixed and Variable Costs
It’s also crucial to differentiate between fixed and variable expenses, or costs. Fixed costs are costs that do not change based on the number of attendees. These costs are calculated as a total amount. Variable costs are costs that change based on the number of attendees. These costs are calculated on a per person basis.
Sources of Revenue
In order to cover expenses, different revenue avenues can be leveraged. For example, advertising revenues, concession, exhibit or exposition booth rental fees, management fees, registration, and sponsorship fees would be considered sources of revenue. This is by no means a complete list, especially for sponsorship revenue.
Recommended Read: How to Create a Sponsorship Strategy that Maximizes Event Revenue
Despite multiple technology solutions on the market, most meeting and event planners use Excel or Google Sheets for their budget planning process. Each of the expenses and revenues mentioned above would each be one line item in your budget. Group your expenses and revenues in a way that makes sense for your specific event. For example, ‘site’, ‘decorations’, ‘publicity’ and so forth could be potential categories.
We recommend assigning specific titles or categories to make tracking and reporting simpler. You should also have two columns for estimated and actual numbers. The most practical way to forecast expenses and revenues is to look at past years, and use an average of those numbers as a starting point. It’s important to understand all the numbers in your budget and be able to explain where they come from. Always save all invoices and receipts to back up your event budget.
Another fundamental line item in your budget should be a contingency fund; it’s always better to plan for additional unforeseen expenses so you’re prepared for the unexpected during your event. Think about what could trigger additional cost and develop a plan to address these.
There’s no point in planning your event any further unless you have a proper budget in place. It’s critical to know if your meeting or event is financially viable. Once the budget has been determined, you can then consider your venue, promotions, equipment, staffing and any other elements related to your meeting or event.
Calculate Cash Flow For Your Meeting or Event
Two key elements often overlooked when forecasting expenses and revenues for a meeting or event: cash flow and starting cash. Especially for events, expenses will most likely occur before the first revenues are generated. When booking venues, you often have to put down a deposit; an expense that will likely happen before you sell your first ticket. In short, you need to be able to pay your bills while you await payments.
To calculate your cash flow, add up all your revenues and subtract the uncollected accounts receivables (money that is owed to you for services/work performed). This is your cash on hand before expenses. If you then subtract all of your accounts payable (money you owe for services/work provided to you) from that number, you will have your cash on hand. If the number is positive, you have a positive cash flow.
Cash Flow Calculation
All Revenues – Uncollected Accounts Receivable = Cash on Hand Before Expenses
Cash on Hand Before Expenses – Accounts Payable = Cash on Hand
Starting cash is the amount of money you have readily available at the start of any given period. Below is a simplified cash flow example.
Review and Track Your Event Budget
The planning stage during event budgeting is just the starting point. As mentioned earlier, not all expenses can be forecasted and your budget will most likely change during the event planning process. This makes it crucial to review and track your budget. If possible, it’s a good starting point to arrange a meeting with your company’s accounting or financial officer to review the format of your budget. Depending on the size of your company, you might want to meet with the owner instead. This way, you can ensure that you are in good shape before continuing the event planning process. As demands for your meeting or event might change, it’s also a good idea to confirm in advance who would have the authority to spend beyond the approved budget. However, the earlier mentioned contingency fund will come in handy when dealing with unplanned expenses.
Tracking your budget throughout your event, including the planning stages, is important. There are a number of helpful technology solutions on the market that will support you in this quest like Expensify.
One of the many ways that technology can help you achieve your financial goals is through the real-time speed and accuracy that allows you to communicate and collaborate with your team. Transferring all of your financial systems to a cloud-based system will literally enable you to manage your financial operations anywhere, and anytime.
There are a range of products and services available to support your current and future financial management needs, such as CendynArcaneo, FreshBooks, Certify, or Money Owl. Before making a decision on a particular product, ensure that you have spoken with all stakeholders within your organization. Ask yourself if the technology solution can be easily implemented or if training is necessary. In addition, you should have processes in place that will help you evaluate past performance and forecast future financial performance.
Analyze The Financial Performance of Your Meeting or Event
Once your meeting or event is over, you need to close the loop and add up all expenses and revenues. This is not only important to show your stakeholders but also for you to learn from your experiences and improve your next event by analyzing your financial performance.
First, go back to your success measures and benchmarks that you set before your event to determine if you were successful. In the past decade, the emergence of new technologies has enabled planners to measure the overall performance of an event in multiple ways. Using qualitative and quantitative event data you are better able to quantify the performance of your event and show impact.
Return on Investment (ROI) is a performance measure used to evaluate how successful your event was. It is a percentage that shows the return of your meeting or event relative to the costs that occurred. Moreover, there are additional options for you to measure non-monetary business impacts that will help you calculate your event ROI, for example:
- Social Listening
- Event Surveys
- Event App Insights and Engagement
- Sponsor Recognition
The ability to evaluate and analyze your overall financial performance is complex but simultaneously ripe with opportunity to promote continuous improvement through careful scrutiny of your past efforts. Prioritize which measurement areas are most important and then assign a key performance indicator (KPI) to target each of these crucial areas. Your KPIs should be chosen based on relevance to the measurement area as well as the ability to accurately track and measure that indicator. After that, you can measure your performance year over year and also set a target for an overall aggregate measurement of your financial performance.
Event budgeting tools are just one aspect of how today’s planner is taking advantage of event technology.
To become an expert in meeting and event technology, talk to an event marketing consultant today.