Whether you’re starting an event planning business for social events, business events or a combination of both, anyone who is considering their own business should certainly be concerned about establishing a fair rate for services. So it’s important to know how to charge for services.
Unfortunately, the answer isn’t simple. Several factors go into determine one’s rate, including event planning operating expenses, salaries and profits. And the reality is that rates vary based on where you may live, types of projects and what the market is willing to pay.
It also depends on your market. That is, your client or prospect will have a target budget in mind and your services must be competitive within those parameters.
Nevertheless, if you want to start a part time or even full time business, there are roughly five ways to structure your fee schedule so that you make money for your event planning services. Let’s assume you want to earn on average $75 per hour for your services. There are five ways to quote your services for client fees:
- Flat project fee
- Percentage of expenses
- Hourly rate
- Percentage of expenses plus hourly rate
- Commissionable rates
Event Planning Fees Based on a Flat Project Rate
Many clients prefer to know how much a project will cost to provide a service, inclusive of all fees. The event planner must determine a flat fee and determine what services will be covered for that amount.
This puts the responsibility of managing to a budget directly on you, the planner, and requires anticipating a variety of scenarios where circumstances may change. In this scenario, the client may contract directly with the event planner to coordinate all logistics, catering, venue, lodging expenses, etc.
Flat project fees are typically used for packaged events, such as those found with sports marketing programs, and may be calculated on a per person basis with many stipulations and caveats.
For example, assume you are being hired to organize a one day historic city tour for 15 guests. Your client wants you to quote a flat fee for transportation, a private guide, lunch and any/all admission fees to venues; however, she also asks that you provide a high level breakdown of each expense item.
In this scenario, you must negotiate/calculate the cost of all services, including your time, and quote a combined total for expenses. It will be the event planner’s responsibility/risk to identify required deposits, pay for all services, and hold responsibility for all service agreements.
On average, most qualified event planners should feel comfortable with charging between 15-20% of the total cost of an event as part of their fee. Depending on the complexity of the program and amount of time it takes to plan and execute an event, sometimes this is enough to cover a planner’s entire cost and source of profit.
For example, assume you are being hired to organize a private dinner at an exclusive restaurant for 40 guests with an average of $175 per person. Let’s estimate that it takes you a total of 15 hours to meet with a client, plan, attend and complete all follow up on this event. If you charge a rate of 18% of total expenses, you will earn just a little more than your targeted hourly rate (based on the previously identified $75/hour):
$175 x 40 guests = $7,000 x 18% = $1,260
15 hours x $75/hr = $1,125
If the client is contracting with you for all services directly, the Subtotal Event Expense Charge to a Client: $8,260.
Some clients prefer that the event planner identify an hourly rate for services, and estimate the total number of hours to manage and execute a given client program. This may seem similar to the flat project rate; however, it allows for more flexibility on the part of both parties to adjust to changes that may be needed along the way.
Many business event planners will bill this way for services. This allows a client to know just how much money it will cost to hire your services and allow him/her to calculate a reasonable budget. The reason for this, frequently, is because they want to have a better handle on any unexpected expenses, and so that they may properly budget for total expenses on an event.
Always remember to define careful parameters around expectations so that both parties are in agreement as to what services will be provided, and event planners should include a reference to billing for all reasonable business expenses that may be incurred.
Note: some event planners may markup operating expenses such as shipping, car rentals and other miscellaneous expense items by as much as 15-20% while others do not; if you do, you should disclose such markups and obtain agreement with your client in advance.
It is also important to determine how frequently you may bill for your time.
For example, a client is hiring you in October to organize a one day seminar in March. Your services are being contracted to source and negotiate for the venue, catering services, A/V, and contribute to the content creation for a limited number of communications items (i.e., invitations, agenda, evaluation forms, etc.).
Your client is hiring you to provide on-site management. You establish an agreement up front that you will bill for identified services at different times, and will submit invoices for all services performed to date on a weekly, biweekly or monthly basis, etc.
You both work out a detailed statement of work that includes the expected responsibilities of both parties. Then, you may estimate a total budget of so many hours plus reasonable expenses (be clear on what those details may include).
Sometimes you’re being hired to organize an event, and for whatever reason, the client prefers a rate based on a percentage of expenses. However, this isn’t enough to cover the cost of your total time and services. In these situations, it is reasonable to present your fee as a combined cost in two different categories.
For example, a client hires you to organize events associated with a conference. Your assignment is to organize two private dinners and a golf outing, each with 50 guests. The total cost for these combined events run approximately $20,000, but it requires about 60 hours of your time plus the complexity of this project may justify a higher profit margin:
Percentage of Expenses Estimate:
$20,000 x 18% = $3,600
Hourly Rate Estimate:
60 hours x $75/hr = $4,500
Hourly Deficit: $900
Therefore, you may choose to quote 15 hours to manage logistics of multiple outside vendors. Your quote may reflect the following:
Subtotal Event Expenses: $23,600
Flat Fee: $1,125 (based on 15 hours at $75/hr)
In this scenario, you will need to carefully determine that you have estimated your hours appropriately (and account to cover non-standard operating expenses such as personal travel). Few clients are pleased to see increases in expenses later on unless justifiable reasons are provided.
Another way that event planners may collect fees for services is by securing event space through venues that offer a commissionable rate. These are fees typically provided to travel agents for booking tickets, hotel rooms and other forms of transportation.
For example, many hotels may extend a commissionable rate up to as much as 10% for guestrooms and other expenses.
Although some event planners will embrace commissionable rates as a source of income for themselves, savvier may should question the event planner’s sense of loyalties. For that reason, many seasoned planners will limit any planning selections that include a commissionable rate or negotiate non-commissionable pricing for their programs and pass that source of savings directly to their client’s bottom line.
Further, many clients are already aware that commissionable rates exist, and do not expect their outside consultants to bill using any of the identified billing methods previously outlined and still pay a commissionable rate. To be sure, many clients are not aware that hospitality venues and transportation companies may offer a commissionable rate.
However, it isn’t considered good form by many event planners to essentially “double dip” their revenue stream this way.
Generally speaking, if relying on commissionable rates, do not charge your client fees for your services using alternate billing methods.
There are scenarios when this makes the most sense, such as a smaller nonprofit or association that may be hiring your services for a membership event or meeting and the bulk of the fees are paid directly by the attendees rather than the organization.
Another scenario may be if your client is purchasing client gifts from you, and you may also offer promotional items distribution services. In that case, simply negotiate for the promotional items and do not charge for your services on an hourly basis unless your client is aware of all charges up front.
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