Being the numbers girl that I am, I really perked up when he talked about event profitability… specifically managing your event budgets. I’m not talking about your client’s budget – tho it does apply. I’m talking about the budget that you have established for each event. You have that, right?
This is what I’m talking about…
client is paying you $20k to design their event
your cost budget for this event is $6k… meaning you have $6 to spend on materials, labor, etc.
If you track your profit and cost margins (and you should), you’ll know that a $20k wedding sale minus $6 k in costs, leaves you with $14k… or a 70% profit margin*. Nice!
You need to have a profit margin benchmark when preparing to service your client… this applies to you whether you are an event designer, or a photographer, or a filmmaker, or a stationer. If you’re a filmmaker, you need to know upfront how much money you have to work with when hiring a second shooter, when outsourcing to an editor for post-production. How much of a cost budget do you have to work with for a $5k job vs. a $10k job?
And… then… the trick is to manage that event’s cost budget… watch it closely. Being successful and profitable with events is so heavily reliant on that profit margin… the bigger the better. (We aren’t selling bulk widgets here at 10% margins… services need to have nice hefty margins.)
What’s a ‘good’ profit margin? Ahhh… it depends on so many factors: what you do, what you sell, who your clients are, what your overhead expenses are, how much you want to earn from your business. You need to find that profitability sweet spot that works with YOUR business model!
What are your thoughts on this? Have you seen this in your business? (Confused? Need help figuring out your profitability sweet spot? Shoot me an email and I can help: firstname.lastname@example.org .)
*Profit Margin is calculated like this:
Gross Profit / Sales = Profit Margin %
Profit from one event / Sales Price = Profit Margin %