Special thanks to Source One Management Services for this guest post
An event budget is a moving target. There are numerous factors influencing the final cost for your event that are continually changing throughout the course of your planning and up until the day of. As a result, oftentimes final budgets are not reconciled until a few weeks post event, making it difficult to pinpoint an exact cost for your activity. In addition to that, these budgets can include a number of line items and components, depending on the complexity of the event. All of this can make it difficult to accurately track spend in different areas when there are multiple moving parts at the same time.
For example, planning for an event begins months before the actual event date and it is during this time that marketers work with their agency to fine-tune ideas, develop creative content, contract with venues, etc. Along the same lines, event attendance impacts certain components of the budget, such as catering costs, and may not be finalized until the day of the event. Each of these activities and decisions plays a role in the final budget figures. However, before you can agree to move forward with a concept, you need to understand, to some extent, what the event will cost.
The first step in understanding your event budget is collecting an initial proposal from your agency based on the scope of what you are looking for. Now this scope may not have all ideas ironed out, with each of the different pieces clearly outlined, but should give the agency an idea of the type and scale of the event you are looking to execute. It is based on this initial budget that you will be able to formulate your idea of a realistic cost and hone in on the areas of most importance/impact for your event.
Once you have an estimate of what your event will cost, the next step will be to ensure that the pricing is competitive. But how do you negotiate a budget that is continuously changing to ensure that you are getting the best deal for your marketing dollars?
First, it is important to understand how the budget breaks down. How much is being spent on catering? Venue costs? Entertainment? Décor? Once you identify the areas where the majority of the dollars are being allocated, then you can develop your strategy for evaluating the budget.
While you can have your hand in negotiating the costs with caterers, hotels, asset fabricators, etc. these are all services that can be performed by your agency and are a core component of the value they bring to your event by leveraging their partners and third party relationships. Therefore, the focus of your negotiations should be on the agency compensation component of your budget.
There are multiple fee structures that an event management or experiential agency may apply to your event, including the following:
- Time & Materials: Similar to other marketing agency services, the agency will bill you based on hours worked per position according to a pre-established rate card. This structure provides transparency into the how many individuals will be working on your account and for how long. It is important to get an upfront estimate of the time required to execute your event and agree to a NTE fee amount based on that. A key consideration when working with a rate card structure is to ensure that you understand how event expenses are billed, whether that be a pass through or with a mark up.
- Mark Up: Typically, this is calculated as a percentage applied to the overall total of the pass through expenses. This structure allows for a mark up to be applied to the total cost of expenses, rather than each individual line item, providing you with visibility into actual costs. Additionally, through this structure the agency is not confined to a set amount of hours to work on your event. However, it is difficult to get a firm grasp on the fee until all expenses are reconciled post event.
- Hybrid: Occasionally, agencies will apply a combination of a rate card structure and mark-up or fixed fee to cover other services, such as contract negotiations, vendor management, overall contingency, etc. By using a combination fee structure you are able to have visibility into the hours and individuals working on your account, while still maintaining the transparency into actual costs for expenses. It is important to consider that a portion of the fees is a variable cost based on the event total.
Event agency compensation structures can take many forms; however, the key consideration when evaluating these methodologies is transparency. Understanding how will be working on your account and for how long is important to ensure that the resource allocation aligns with your expectations as the client. Similarly, it is essential that you have visibility into how you will be billed for all components of your event costs and that there are no hidden costs embedded within other areas of the budget.
An event budget is a continually changing figure with numerous variables impacting the total cost from planning through post event reconciliation; however, that does not mean that portions of the costs are entirely out of your control and there are ways to ensure cost competitiveness.