April 2005
Step-by-Step: Budgeting for a new show

Five steps for creating a budget and projecting revenues and expenses

By Dawn J. Grubb

Putting together a financial plan for a new launch where unknowns abound can be a daunting task, especially if you’re a novice. Our experts share this advice for creating a new show budget.

Step 1. Start with a blueprint
1. Develop a list of line item revenue sources and expenses either from an existing show’s budget, or from resources such as the International Association for Exhibition Management (IAEM) financial benchmarking study (www.iaem.org), the ABM/SISO Tradeshow & Events Financial Cost Report (www.siso.org) and EXPO’s Financial Benchmarking Study (www.expoweb.com). 

2. Set profit expectations. What’s your goal? Will you be happy breaking even in the first year? Is your organization willing to lose money? A show with solid investors in a new industry might be willing to wait three years to be profitable in order to be first in the market, whereas a show without deep pockets might need to put more emphasis on profits in the first year. Most new show ideas don’t turn a profit in the first year.

Step 2. Set rates and project revenues
When setting pricing for new shows, there are two schools of thought. Some believe you should conduct market research, find out what similar events are charging, and what attendees and exhibitors are used to paying, and charge slightly under that amount. Others believe you should position your event as having more value and charge accordingly. There’s no formula for projecting revenue for a new show, but there are few considerations to keep in mind:

Exhibitor revenue. The best way to project revenue is to identify the exhibitor universe, estimate how many you expect to exhibit, and evaluate how much they typically spend on other events. Also, keep in mind: Everything is negotiable. You might offer a reduced booth fee or show program ad in exchange for an exhibitor’s mailing list. You cut expenses; your exhibitor gets more ROI. Don’t expect all revenue to come from exhibitor fees.

Sponsorships. New shows generally have a harder time selling sponsorships. To increase visibility and to launch the program, consider inaugural show packages or discounts for sponsorships. If the launch is part of an existing brand, try selling a sponsorship for multiple events, including the new show.

Registration/attendance. Marketing surveys and focus groups can help you hone in on the potential attendee universe and the percentage likely to attend. If you survey 50,000 potential attendees and ask if they’d attend a show like the one you’re planning, perhaps one in a thousand will respond yes — thus an attendance figure of 5,000.

Ancillary revenue. Don’t forget about revenue from show directories, show dailies, Web advertising, etc. Be realistic about expectations, however. Do you have the staff to sell these in addition to booth space? A trade magazine partner or outsourcing the show daily or directory may allow you to devote more time to sales and help you make reasonable projections.

Step 3. Project expenses
Identify upfront expenses that will need to be paid before revenue is generated, such as promotions, facility deposits, insurance and salaries. Identify deadlines for outgoes and plot them against expected revenue flows. Will you be able to tolerate the resulting financial picture?

Special budget considerations for new shows include:
1. Budget more for promotions. It’s cheaper to market to a former attendee than a new one. To lower these costs, identify partners such as industry associations and trade publications that are willing to offer you their lists.

2. Market research costs could be more for a new concept show. It will take more effort to understand a never-before-defined audience. And you may have to spend more on research to convince new exhibitors.

3. Negotiate for flexibility with your facility and contractor, but you may have to pay more for such flexibility.

4. Consumer shows spend more on promotion, an average of 18.1 percent of gross revenues on attendance promotion alone for an existing show. Experts suggest a new show might need to budget as much as a third of
expected revenue for a first-time event.

Step 4. Plan on reforecasting
Reforecasting can be as much of an art as it is a science, but some things to consider include:
• For a new show, experts suggest reforecasting either once a month, or after each step in the launch process. For example, if you’ve made initial projections, then performed additional market research, reforecast taking into account what you’ve learned. Also reforecast if you make large changes to your initial business plan, such as redefining the scope of the show or adding a conference track. Formulate a schedule for reforecasting, and stick to it.
• Develop forecasting ranges consisting of a best case, and worst-case scenario.
•  If the reforecast looks gloomy, review to identify whether any changes would improve the outcome — such as redefining the audience or adding a conference track.

Step 5. Deciding to launch or cancel
At some point, if you’re not hitting your budgeted numbers, you’ll have to make a decision on whether to proceed with a new event. Some factors to consider include:

1. Would you be able to cover show costs while you wait for profits? If the show is part of a bigger brand, perhaps the profits from these other properties can sustain a new event for a set amount of time.

2. Is your company, or your investors, still comfortable with the show’s profitability timeline? (This may have altered along the way.)

3. Have there been any changes in the marketplace since the development of the business plan that could alter results?

Meet the experts
Christine Fletcher, Executive Producer Encore! Event Management

Mary Beth Rebedeau, Executive Director of SISO

Lori Robinson, Group Show Manager George Little Management

Doug Gold, Vice President of Business Development IDG World Expo