Developing an event budget is a crucial element when planning your meeting or event. It’s the next step after setting your overall event objectives. To begin building your 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 possible expenses and revenues that will likely occur at your event, and keep your cash flow in mind. Once you have developed your budget, you will have to track and review it on a regular basis to ensure you stay within the allocated resources. Let’s take a look first at how you can determine what financial success means for your meeting or event before talking in more detail about cash flow.
Determine What Financial Success Means For Your Meeting or Event
One of the first steps for every event planner is the preparation of 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 the objectives for that event. The table below describes the three scenarios in more detail.
Let’s look at an example based on financial success being equivalent to breaking-even with your event. Fixed and variable costs will be explained further down.
Before planning your budget any further, you should understand your organization’s needs for a break-even, loss leader or surplus event. Your event budget is really a forecast or projection of all expenses and revenues that you 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 on some of the most common expenses and revenues is necessary.
Plan a Budget For Your Meeting or Event
When planning your budget, it is paramount to identify which items represent expenses and which items are sources of revenue to 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 and 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. The chart below shows an overview of the most common expenses for meetings and events.
Your meeting and event is about the attendee experience and as such, you have to ensure where you want to spend your money and what adds value for 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 a great experience and F&B is a large component of attendee satisfaction. PCMA suggests spending 55% of your budget on F&B, AV and speaker/entertainment as these items have a direct impact on the overall attendee experience.
Fixed and Variable Costs
Thinking back to our break-even calculation earlier, you also need to differentiate between fixed and variable expenses or costs.
|Number of People||200||400|
|Food & Beverage @ $35/person||$8,000||$16,000||Variable|
Sources of Revenue
In order to cover expenses, different revenue avenues can be leveraged, for example:
- Advertising revenues (event program, internet web site)
- Concession (food and beverage and merchandise sales)
- Donations / Philanthropy
- Exhibit or exposition booth rental fees
- Gifts in kind (actual fair market financial value)
- Grants and contracts
- Management fees
- Merchandise sales
- Registration fees
- Sponsorship fees
- Technology income (from advertising)
- Vendor commissions (hotels)
Despite multiple technology solutions on the market, most meeting and event planners use Excel or Google Sheets for their budget planning process. You want to assign specific titles or categories to make tracking and reporting simpler. You will 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 average numbers as a starting point. It is crucial that you understand all the numbers in your budget and can explain where they come from. Always save all invoices and receipts to back up your budget.
Another fundamental line item in your budget should be a contingency fund; it is 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 is no point in planning your event any further unless you have a proper budget in place and you 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.
How to Calculate Cash Flow For Your Meeting or Event
Elements often overlooked when forecasting expenses and revenues for your meeting or event are 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.
You are planning a city festival and have starting cash of $1,000. You want to rent a tent that can hold up to 500 people. In addition, you want to bring 4 musicians to perform. Your event takes place on August 15, and tickets will go on sale one month before. You have to book the tent as well as the musicians by June 1 which costs you $1,500 in total.
This means, by June 1, you already have expenses of $1,500. Once you start selling tickets on July 15, you start making income from pre-selling tickets at $20 which continues throughout the event (tickets, merchandise, food and beverages, etc.).
Review and Track Your Event Budget
Planning your event budget 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.
EVENT PLANNER PRO TIP:
- Start creating a master vendor list with main contacts and fees; vendors will often give you discounts if you use them more often
- Leverage your vendor master list and get additional quotes from multiple vendors in order to select the most cost effective solution. Keep in mind that there might also be cost savings if you go through a single vendor
- Ask vendors to invoice you closer to the event date when you have more cash coming in
- Once your conference is finished, offer exhibitors the opportunity to sign-up for next year’s conference right away; offer them a discount in exchange for early payment. This will help your starting cash in regards to your cash flow
- Plan early and, if possible, be flexible with your event dates and location
- Decrease printed material by promoting your event using social media, and use technology solutions such as an event app instead of offering an event brochure
- Choose budget savvy menu options
- Negotiate speaker contracts carefully and be clear about expenses speakers can claim
- Double check room layouts, audiovisual requirements, as well as table and decor set-ups
Mistakes in your event budget are not an option. The importance of an event budget cannot be overemphasized. A well-planned budget takes time but it can mean the difference between a successful event and an event that can easily result in a financial nightmare.
Need tips on how to budget for an event app? Watch our webinar How To Get Approval for Your Event App