Money matters

Which event do you think your event company should charge you more for? The lavish, champagne and chandeliers luncheon, or the low-key, sandwiches and sundresses gathering? The truth is, there shouldn’t be a difference.

What clients haven’t realized is that an event company has to put in the same amount of time and effort to manage the event with the expensive trimmings as it does for the same event with cheaper elements.

You should only be paying your event company for the work it does. To make sure that you’re not being overcharged, have a discussion about the key money issues before the work begins.

Fixed vs management fee

In the eventing industry, clients have become accustomed to being charged a fixed fee calculated on a percentage of everything booked and bought for the event. Yet this payment structure is outmoded and most often unfair to the client.

The management-fee model, on the other hand, more accurately reflects and rewards the event company for the service it has delivered. If an event costs R300 000 to manage, the management fee will be R300 000 despite whether the elements cost R2m or R20m.

This structure has two important advantages over the traditional fixed-fee model.

When paying a management fee, clients are almost always charged less for the project. Secondly, the event company will more likely choose the elements of the event (location, performers, catering, etc) which best suit your business objectives, as opposed to selecting elements that would drive up costs.

To ensure that you’re getting a fair deal, request your event architect to provide a detailed budget which lists all the costs and charges. Make certain that you know where your money is going, what it’s being used for, and what you’re actually paying for the management of the event.

Another critical aspect of an event company’s payment model is their mark-ups policy. Too often, event companies charge mark-ups on every item, despite what it took to actually make the purchase.  A fixed fee is then calculated based on these unnecessary mark-ups.

This is something that requires your attention – question whether an item truly warrants a mark up. Unless the event company managed or somehow added value to a purchase, then it probably doesn’t. Making a simple booking online, for example, doesn’t justify a mark up.

Guard your budget

Projects usually require a substantial cash injection at the outset, as event companies need to find the resources to get the event up and running. What too often happens is that event companies dip into money that has been allocated for another event, mostly likely one which is in a more advanced phase of the planning process. And if you’re the client with the bigger budget, you might well end up financing the outstanding costs of other projects.

To avoid finding yourself in this situation, investigate the ways in which your event company handles budgeting. Is your investment in the project going to be protected? How will your funds be released as the project progresses? Ask your event architect if the company has the resources to get through the early phases. Once the project has reached its conclusion and a client review has been undertaken, only then should the profit portion of the fee be paid over to your event company.

While it may be difficult to ask challenging money questions at the beginning of a new project, it will ultimately make the working relationship a more pleasant and enjoyable one. By protecting your funds, you are also protecting your partnership with the event company.

Kim Winstanley

managing director, Eventworx