What is the Starting Point of an Event Budget?
The starting point of an event budgeting process is determining the objectives of an event. When you set objectives about different aspects of an event, including a budget, you will know your priorities and the attendees' expectations. You will also know whether you are planning a not-for-profit event or a profitable one.
Essential Steps to Planning Event Budgeting
As event budgeting is a major task, it needs to be divided into several steps to make the process easier to read through and implement. Here are some of those steps.
Get an Estimate of Revenues
There are several estimated sources of revenue that are related to an event. They include but are not limited to, sale of merchandise, sale of event tickets, revenue from sponsorships, sale of food and drinks, exhibitor income, etc. Make sure you don't overestimate or underestimate the revenue.
Try to be as realistic as possible and realize that the estimation of sales can be affected by different internal and external factors. Examples of external factors include inflation and competitor moves. Think of all variables and different scenarios that might affect the revenues.
Make a List of Expenses
The next step is to make a list of expenses included in the event. The event budgeting process is incomplete without this step. Make sure that you include every expense you can think of, such as the venue contract, the fees of the speaker, the cost of food, the entertainment costs, the furniture costs, and even the giveaways you are offering. A smart way to go about it would be to make an expense checklist that you can modify as you come across more expenses.
It is a smart idea to divide the expenses into two sections fixed and variable costs. Fixed costs include costs that remain constant with time and need to be paid no matter what. Examples include the cost of marketing (speaking of marketing, check out this ultimate guide to Webinar Marketing), venue charges, fees of the speakers, salaries of the employees, etc. Variable costs are those which vary with time and can change even at the last minute. Examples include the catering costs, printing costs, registration fees (that change if there are more or fewer attendees.
Also, make a note of the contribution margin. What's that? It is the amount that you can contribute towards the fixed costs after you have paid up all the variable costs.
Set Measurable Goals and Keep an Eye on ROI
By now, you must have a clear idea of what event budgeting is, how your budget should be, and the main list of all the vendor contacts. So, now you need to start setting measurable goals and keep an eye on the ROI. For instance, if you plan to sell tickets for your event, you need to track how many people are signing up for it after registration begins so that you can track the incoming funds. Similarly, if you plan to have the event sponsored, you need to create detailed and creative packages for each sponsor. Some other tips can be used from this useful article.
If you are planning an event to make a profit, set measurable profit goals and make sure you know all the sources of income. Also, keep track of your spending by managing a budget sheet that is updated daily so that you avoid overspending. Finally, if you detect an unapproved expense, talk to your team about it and ensure that such instances don't happen often.
Be Ready for Any Contingency
When doing event budgeting, you need to ensure that you are ready for every situation by creating a rainy day fund. It should include all the unforeseen expenses like costs of moving an outdoor event indoors due to unforeseen weather changes or the cost of bringing in more food if the number of attendees rises sharply suddenly.
Name the funds set aside for such instances as a contingency budget and ensure that your team knows that they can only touch it after your approval or in certain situations. Usually, the figure of the contingency budget could be anywhere from just one percent to up to twenty-five percent of the total budget. Train your staff on event budgeting and contingency budget so that they can make a judgment call on purchasing something out of the budget with wisdom.
Consider the Price and Risk Sensitivity of the Attendees
While learning event budgeting, you need to remember that a lot depends on the attendees. If they change their mind, your event's success might be at risk. Therefore, a smart way to deal with such a situation is to consider the price and risk sensitivity of the attendees.
To do that, you should ask yourself some tough questions like the ones mentioned below:
Will your loyal attendees come to an event even if you increase the registration fee?
Will your target audience respond well if you spend more on marketing?
Should you invest more in social media ads to boost conversion rates?
Are "Limited Time Offers" worth the price?
Do special offers help in boosting the registrations?
Asking these questions and performing a sensitivity analysis will allow you to know where to spend money to get the best results and where you can cut back without impacting the event negatively.
Figure Out the Capital Requirement
A key element of event budgeting is to estimate the capital requirement for the budget. You need to answer the most crucial questions- How much money do you need and when you need it. Doing so will allow you to know whether the budget you have prepared is workable or you need to do any modifications.
It would be best to think about the capital only after budgeting the costs, sales, and investments. Then, as an event planner, you need to decide how much equity is required for investment into your event, how much capital you need from the lenders, and which financial milestones should be there. For those unaware, equity is the difference between the total value of assets and the total value of liabilities.
Focus on Cash Flow
Imagine a situation where you have to pay off a vendor, and you run out of cash. You wouldn't want that, would you? It is why event budgeting should include a focus on cash flow. It will help if you maximize the cash flow until all the necessary payments have been made. You also need to ensure that you have a simple cash flow statement that you can refer to know where your cash is coming from and where it is going. It is also smart to make a list of sources you can tap in case you run out of cash.
Be Smart and Track Your Event Budget
Tracking your budget, even in the planning stages, is a key element of event budgeting. You can make use of technology tools to know where your money is going. You can also use a technological tool that will help you to stay connected with your team and let them know sticking to budget is vital. Some of the most reliable technological tools you can use to streamline your event budgeting efforts are cloud-based solutions. They allow you to access your event budgeting data from anywhere on the planet. In addition, as this data is saved in real-time, you can make changes to it quickly, and your team will see it quickly.
When looking for a tool that can help you track your event budgeting data, do some research, and consider tools like Expensify, FreshBooks, Certify, CendynArcaneo, and Money Owl. Before buying a technological product or service, make sure it's worth the money, needs minimal training, and is user-friendly. It would also be a smart move to ask your key stakeholders as it's a vital investment that might bring in results in the long run.
Analyze the Performance of Your Event
After finalizing all the costs and making the necessary payments, the next step in event budgeting is to revisit the final numbers. Just follow these steps, and it would be done in a few minutes.
Identify the Total Money Spent
You should add every penny you have given to others, be it vendors or speakers. Then, if possible, share this number with the key stakeholders so that they feel they are kept in the loop.
Highlight the Savings
If you have managed to spend a little less amount for something than earlier planned, it will be your savings. So, whether you saved money by negotiating with a vendor or saved some money from the marketing budget by choosing social media ads, you need to add those here.
When planning an event budget, you can't have an estimate for everything. It would help if you had the scope of overages. That's what contingency funds are for. So, if you have some areas where you went beyond your budget, you need to make a list of them as well. It will help you to do better event budgeting from then on. Also, share the data with the stakeholders as they can guide you on how to reduce overages in the future.