As we come to the end of the year, it is time to think of the annual budget (well actually it was several months ago and it actually depends on your year end or budget cycle, but what better message for the holiday season). Event budgets can be very challenging to create and administer since there are so many variables such as sources of revenue, number of participants, unforeseen costs, etc.
When we build a budget we operate by the mantra “estimate expenses liberally and revenues conservatively”, and not just because we are headquartered in the nation’s capital where politics sometimes seems a blood sport.
To build a budget you first need to identify the financial objective of the event:
- Revenue generating (makes money)
- Revenue neutral (the money you collect offsets your expenses)
- A budgeted expense for your organization (limited or no revenue is collected as the organization is paying the bills)
Now set your mind to determining what your expenses are going to be.
If you have a budget from a past similar event, then this is a good place to start. If not, the following categories of expenses will help:
- Facility Costs (rental, accommodations, electrical power, internet, security, dock master, package delivery, etc.)
- Food and Beverage (meals for participants and staff, breaks, receptions, etc. based on a percentage of total attendance using historical data)
- Audio-Visual (including projection, sound, lighting, rigging, computers, set-up and dismantle, labour)
- Show Services (for exhibit-related costs and decor)
- Marketing and Promotion (e.g., graphic design, website, e-blasts, mobile app, paper mailings if you must, Final Program and Show Guide, signage)
- Program Development (e.g., speaker fees and travel, abstract management system, committee meetings, entertainment, facilitators)
- Professional Fees (e.g., event management, photographer, interpreters)
- Registration (on-line processing fees, credit card fees, kit bags and gifts for participants, badges, lanyards, temporary staff)
- Miscellaneous (shipping, parking, meeting expenses, etc.)
The final expense category you should always include is a contingency fund. There are always things you did not budget for (e.g., a social media campaign) or cost more than you expect (e.g.,the service charge based on a union contract increases unexpectedly). A contingency fund will cover you for these little (and sometimes not-so little) surprises. Depending on the history of the event, as little as 5% should cover it, but if the event is a first time occurrence, I would suggest 10% unless you are really in uncharted waters (such as an event in another country).
Now you know how much the event is expected to cost. Assuming that your event’s objective is to make money or break even,
You will next want to calculate your expected revenues.
- First to consider is your sponsorship revenue. Based on a viable sponsorship plan determine what the minimum amount of money you will be able to raise from your partners in exchange for marketing exposure.
- Second is whether you will have any exhibit revenue which, again, you should estimate on the low side.
- Excluding registration or participation fee revenue, determine if you have any other sources of revenue (such as a silent auction, sales of merchandise, etc.).
- Add together sponsorship, exhibit and other revenue along with any desired profit. Subtract this amount from the total expenses and you will now have your registration revenue target. Determine what the minimum number of attendees is likely to be (and maybe reduce it by 10% to be safe) as well as the split between paying and complimentary attendees. Divide the required registration revenue by the number of paying attendees to determine your average registration fee. Based on your required categories and their relative weight (e.g., professional member, non-member, student, etc.) and other inducements (e.g., early-bird discount), you can use a spread sheet to determine what each fee should be.
Depending on the organization’s taxable status, you may want to include taxes as a line item, but make sure they are included (at the appropriate rates) for both revenue and expenditures. Don’t forget that in Canada the provincial tax regime that applies to revenue is the one in which the event is delivered.
You don’t want any nasty financial surprises at the end of the event, so it is not only politically correct to estimate expenses liberally and revenues conservatively, but it also makes sound financial sense.
Written by Phil Ecclestone, CMP