That budget time of year may not set you to dancing in the streets, but you'll celebratethe results if you compose a budget that accurately reflects your cash flow.In fact, your show budget can be your best management tool.
Every show manager has establishedgoals, such as projected number of exhibitors, attendees and square footagesold. Budgets help focus on these goals. They can be an effective tool forillustrating a show's viability, measuring results, and setting future goalsand objectives. Budgets also aid in evaluating performance. Come in underbudget, and you're showered with praise. Go over budget and you'll needto provide backup material demonstrating valid explanations for the overruns.
With all of this riding on a budget, every show manager is obliged todevelop the most thorough and rigorous approach to budgeting. In other words-- no shortcuts! Do the necessary research. By putting effort up front inthe budgeting process, you'll be fiscally responsible and have a firm foundationfor future budgeting.
Have a good plan
Our business is so diverse, each show reflects the industry that it represents.Consequently, show plans and budgets will differ dramatically within eachindustry and for each show type, such as consumer, trade or start-up. Ourdiversity precludes the creation of exact budget standards. Basic businessprinciples and common-sense practices, though, facilitate the budgetingand planning process.
The first element of a realistic budget is a complete, detailed showplan and schedule. Start with the actual date of the exposition and workbackward -- do not exclude any items. From the moment planning activitiesbegin, through the show and until the last invoice is paid, schedule andlist every activity in chronological order.
In most show plans, the sales and marketing strategies will drive allother aspects of the plan. If booth sales must start one year prior to theshow opening date, then collateral must be prepared in time to support thesales staff efforts. Similarly, the schedule for the attendance promotionwill dictate the timing for brochure copywriting, layout, printing and mailing.
A detailed, thorough plan helps identify budget items and forces youto think through the show. Consequently, surprises, which always cost moneyand lots of it, are minimized.
Incremental vs. zero-based
Once the plan is done, and you have a list of budget items, you can choosea budgeting method that best suits the show and the organization. The twomost commonly used methods are incremental budgeting and zero-based budgeting.
Incremental budgeting requires that your show have a budget history.A percentage based on an annual inflation factor (usually decided upon bythe organization's treasurer or comparable position) is then added to theprevious year's budget figure. Incremental budgeting, which is especiallyeasy to use with shows that repeat facilities and cities, may not necessarilybe the most accurate form of budgeting. It does not induce you to scrutinizeshow expenses.
Zero-based budgeting means starting from scratch. Most show managersagree that zero-based budgeting provides the most effective and accuratemethod for projecting revenues and expenses. Each line-item expendituremust succeed on its own merit; there are no arbitrary figures or expenses.Obviously, start-ups, which have no history, must operate from a zero-basedbudget. This method is strongly recommended for shows that travel, occurringin different cities and different facilities each time.
Ideally, for show managers whose budgets must be formulated two or moreyears before show dates, a combination of zero-based and incremental budgetingis most useful. Quite often, contract negotiations with suppliers have notbeen completed two or more years out, so starting with a zero-based budgetfigure and adding an agreed upon inflation rate is acceptable. A realisticzero-based budget should be developed for the show as soon as possible,no later than 12 to 18 months from opening.
By far, zero-based budgeting, which forces you to re-evaluate each expenditurefor effectiveness and value, results in the most cost-efficient plan.
Revenue projections
Whether you use an incremental budget or a zero-based budget, projectionsare important in both. Projecting revenues requires research and lookinginto the future. It is not surprising that we have far more control overexpenses than revenues. As show managers, we have absolutely no controlover a myriad of factors which impact our show revenues.
Shows reflect the industry they represent. Consequently, exhibit andattendee revenues can be, and are, impacted by the economic conditions ofthe industry, airline or hotel strikes, inclement weather, etc. You mustintimately know your show and have an astute awareness of the outside factorsthat can positively or negatively impact the show's revenues. Consider thecity, location of the facility, speakers and competing shows. If the showis established, study the history and trends. If it's a start-up, be thoroughin the market research and know the potential of the audience. By learningthe demographics of your show, you'll be better equipped to make projections.
Details provide a clearer picture of the origin of your income and helpin planning for the next show, so be as detailed as possible in projectingrevenues. For example, break down attendee revenues into specific categories:member, non-member, full-package, partial-package -- include every option.If booths are sold at different rates, break down revenues for each configuration(corner, in-line, etc.).
Project cash flow on a monthly basis -- when money will be paid out (asin printing, postage, etc.) and when revenues will be coming in (deposits,final booth payments, registration fees, etc.). Monitoring cash flow servesas a good barometer as to whether or not projections are on target.
Most show managers are asked to project a profit. In the for-profit world,some show managers decide how much profit they want to make and immediatelysubtract that amount from projected revenues. The remaining dollars aredistributed among the expense items. A more common approach is to computeexpenses first, then calculate the registration and exhibit fees neededto make an acceptable profit. Use the method best suited to your show typeand to your organization.
Expense shortcuts
Simply stated, there are no easy shortcuts. What's more, shortcuts usuallyresult in inaccuracies.
Research is extremely important for each budget line item. Collect data,talk with other show managers, ask your general contractor lots of questions,ask your convention center and hotel contacts for help. Ask, ask, ask! Themore you learn, the more accurate the budget will be. Pay particular attentionto areas that can cause the most overruns, such as catering, printing andpostage.
Call your caterer. Are price increases projected? Does your contractguarantee certain prices? Don't forget to budget for gratuities and taxes,and check the exact gratuity and tax percentages in the facility. Some statesallow gratuities to be taxed on banquet checks. That will make a major differencein your calculations, so find out what your facility does. Review past recordsto assess no-shows. If you have a new show, start building your history.Most importantly, review all costs up front, from carvers to bartendersto serving stations.
Printing can be outrageously expensive and is easy to overrun. In someareas of the country, paper has seen an increase of about 12 percent inthe last two years. Check with printers -- are they experiencing this increase?Work closely with the printer. Tell him about any constraints and ask forcost-saving ideas, especially in paper stock. Ask about economical pagelayouts and if placement of color will affect pre-press costs.
Printing rates also vary dramatically from city to city. In competitivemarkets, rates may be lower. Shop around, even out of state. It may be moreeconomical to print out of state and then ship to the final destinationor have a local mail house mail from there.
Postage can be a budget destroyer. Become educated on the latest mailingrates and regulations that became effective July 1, 1996. And be sure themail house you use is up to date, too. The post office has published a booktitled Max It, outlining the latest information. Get the book -- it couldsave you hundreds, possibly thousands, of dollars.
How much for marketing?
Marketing is another major budget concern for show managers. The questionmost frequently asked is, "What percentage of my budget should go tomarketing?" Again, the diversity of our industry precludes any setstandard. A small show may budget as little as 3 percent, while a show with250,000 square feet or more may spend at least 17 percent. Obviously, whatmay be appropriate for a mid-size professional medical trade show will noteven closely meet the needs of a consumer bridal show or a start-up show.
Before you create your marketing budget, you must have a realistic anddetailed sales and marketing plan. Know your audience. Know what similarshows in the industry are doing. And know the cost of sale -- how much doesit cost to acquire an attendee? An exhibitor? Then, be sure you budget thedollars needed to support the marketing activities in your plan. An aggressiveplan will require an aggressive budget.
How do you know if the marketing plan works? Robert F. James, GeneralManager of William J. Kirchner & Associates in Washington, DC, recommendsa "payback analysis." Payback analysis measures projected salesagainst associated costs. If the dollar investment, compared to projectedsales, can't be justified, rethink your plan and budget and re-examine yoursales objectives, marketing objectives and marketing mix.
Be prepared to change your budget and marketing plan if, after completinga payback analysis, you have determined that either you are over budgetor your marketing plan is not paying back at the expected rate.
Are you making money?
For most show managers, communications from the treasurer, comptrolleror CFO who oversees the finances is reduced to, "You had a profit ofXX dollars," or "a loss of XX dollars." Without going intoan advanced accounting course, it may be helpful to you to know some ofthe budget measurements used to evaluate the finances of a show. We havetalked about revenue as the income from sales (registration, exhibitor,etc.). Other measurements include:
Direct Expenses -- expenses directly traceable to the production of revenue,and can include direct salaries (e.g., show manager)
Fixed costs -- costs which do not change regardless of the size of theevent, (e.g., office space, utilities, staff salaries and other overheaditems)
Variable costs -- costs that change in direct relation to the number ofbooths sold and the number of attendees (e.g., net square feet for exhibithall rental, security, registration processing fees, etc.)
Gross Profit -- revenue less direct expenses
Gross Margin -- gross profit divided by revenue
Indirect Expenses -- Expenses that are not directly traceable to specificrevenue items. This will include overhead, indirect salaries (e.g., receptionist,mailroom clerk) and taxes. Most organizations have an automatic overheadpercentage that is charged to all projects.
Operating Income -- Gross profit less indirect expenses. This is the show'sprofit from operations.
Operating Margin -- operating income divided by revenue
Other (Income) Expense -- includes income and expenses that are not directlyrelated to the operation of the show
Are we having fun yet?
Think of developing your budget as a treasure hunt -- have fun with it.When it is done accurately, and you make your numbers, it's like findinga treasure.
More importantly, through the budget research, you have a golden opportunityto learn more about your show and, consequently, become a more effectiveshow manager. Work closely and communicate with your organization's treasureror comptroller or financial manager. They are there to help you.
Don't think you have to live and die by a budget once it's written. Abudget can and does change, often dramatically, several times during thecourse of planning any show. It only makes sense, if the budget is basedon the plan, and the plan changes, that the budget will change -- updateyour budget regularly.
A budget is not a statement of fact of what will be. It is an assumptionof what could be. So, always try to make it your best!
Sidebar: Budget Line Items:
The following is a list of revenues and expenses from both consumer andtrade shows. Obviously, not all items will necessarily apply to any oneshow. The list, though, should be helpful in developing a customized listof budget items for your show.
REVENUES
Exhibit space sales
Registration fees
Special event tickets
Tour tickets
Sponsorships
Concessions (novelties, T-shirts)
Directory/program advertising
Registration mailing lists
Award/competition fees
Hotel/travel rebates
Cancellation fees
Interest
Miscellaneous (tape sales, etc.)
EXPENSES
Advertising (excluding direct mail promotion and production)
Agency/PR Fee
Print/display (newspaper, trade and consumer magazines, outdoor billboards)
TV/radio
Production (copywriting, photography, typesetting, graphic design and studio costs)
Public relations (press releases)
Other
Awards/Competitions (new product, marketing or design competition andaward programs)
Awards/trophies
Equipment (display, signage, etc.)
Judging (honorariums, expenses)
Labor (general contractor to set up area)
Other
Computer/Web Site
Web site design and implementation
Web site maintenance
Directory/Program (exhibitor directory, meeting program and addendum)
Production
Printing
Commission for advertising sales
Other
Facility
Rental
Permits (city, state or county, floor plan approval, assembly permits)
Telephone (temporary service for show management office, reg area, etc.)
Maintenance (any janitorial services required during and after event)
Other
Special Events (banquets, golf tournament, receptions, etc.)
Audio-visual
Catering (include gratuity and tax, if applicable)
Entertainment (includes travel)
Production (sound and lighting)
Labor (from general contractor)
Decoration
Special effects (such as laser show)
Other (green fees, tennis court fees, etc.)
Mailing Labor (direct mail: collating, labeling, sorting, posting and delivery to post office)
Attendee materials (confirmation materials)
Attendee promotion (brochures and reg information)
Tickets (printing of special tickets for spouse/guest activities)
Other
Transportation
Rental vehicles
Shuttles (buses and mini-vans)
Limos
Other
Miscellaneous
Attendee refunds
Broadcast faxes
Business licenses
Check service
Credit card fee
Insurance
Legal fees
Message center
Novelties (T-shirts, mugs, etc.)
Photographer
800# inquiries
Telephone
Other
Donna Tschiffely began Donna C. Tschiffely & Associates in 1986,after more than 13 years with the American College of Radiology. She providesconvention, trade show and exhibit management services to a wide varietyof profit and not-for-profit organizations. She also serves as ExecutiveDirector of a small organization comprised of filmmakers and producers,where her first task was to revise their annual budget. On behalf of IAEM,she has taught CEM Modules on "The Business of Running Your Business,""On-Site Operations" and "Planning and Budgeting." Contacther at Donna C. Tschiffely & Associates, 11709 Bowman Green Drive, Reston,VA 20190; (703) 904-6932, fax (703) 437-8631, or e-mail DonnaTInc@aol.com.
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