How you manage your financial assets may determine whether your business succeeds or fails. Your capital is not merely a collection of money and property, but a powerful business tool deserving your careful attention. Because going into business for yourself is such a risky proposition, this capital should yield a higher rate of return than an ordinary investment would. Making capital work for you requires careful management of your business, especially of your current and future assets. Storytelling for business could make your website shoot off!
Keeping good records helps generate the financial statements that tell you exactly where you stand and what you need to do next. The goal in pricing a service is to mark up your labor and materials costs sufficiently to cover overhead expenses and generate an acceptable profit. How, you may ask, are the above-mentioned fees-for-service calculated? Event planners we interviewed price their fees-for-service (the total cost to the client) using a “cost-plus” method. They contract out the labor, supplies, and materials involved in producing an event and charge their clients about 10 percent to 20 percent of the total cost of the event, with 15 percent being a rough average.
A word of caution concerning this method of pricing. Ideally, the percentage you charge above cost should provide you with a sufficient amount to cover that event’s share of your overhead, as well as produce a profit. Overhead comprises all the nonlabor, indirect expenses required to operate your business. In general, overhead will be anywhere between 4 percent and 6 percent of the total price of the event. Your actual overhead expenses may vary depending on your own market conditions. Should your overhead expenses be too high, you will have to raise your commission to maintain sufficient profit. By raising your commission, you could become less competitive. It’s a good idea to closely control your overhead expenses so they don’t become too high relative to the price of the event.Financial management is an area many small-business owners neglect. They get so caught up in the day-to-day running of their businesses that they fail to take a good look at where their money goes. When you consider what percent of the total event to charge a client, examine your role in planning the event.
Planner Joyce Barnes-Wolff notes that the rule in the industry is to charge, on average, a commission of between 10 percent and 15 percent, depending on what the event involves. She evaluates the amount of her time and energy spent on the event. “My Rolodex is worth something, but if my role is simply picking up the phone and making calls and showing up for an event, I don’t think it rates that kind of coordination fee.” But if the event is complicated and creativity is what matters, then 10 percent to 15 percent is “very fair,” she says. Industry markups vary widely, ranging from 100 percent and up. Markup rates depend mostly on overhead costs, but the health of the economy also affects them. In troubled economic times, markups (and therefore profit margins) will be lower.