Event Management (Bhct-212) Vaibhav Verma

UNIT 4 :Planning & Budgeting - 

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Planning & Budgeting of an event:
 Event Budget The event budget is a projection (forecast) of the income and expenditure that the event will incur based on plans made and information gathered.
The preparation of a budget is an essential part of event management. It is fundamentally important that Event Directors are able to predict with reasonable accuracy whether the event will result in a profit, a loss or will break-even. This is achieved by identifying and costing all probable expenditures and by totalling all expected revenues (income). By comparing expenditures and revenues, it then becomes possible to forecast the financial outcome of the event.

There are some rules that should be observed while Budget prepration:

•  Budget to avoid making a loss
•  Be realistic about event incomes
•  Have a financial contingency plan i.e. what happens if the sponsorship is not forthcoming?

Financial Analysis:
 From the development of realistic event budgets to the post-event financial analysis that measures your success, event finances with a comprehensive suite of services include the following:

1.  Creation of an appropriate event budget 
2.  Management of your finances 
3.  Accurate accounting for all income and expenditure
4.  Provision of updated accounts whenever required
5.  Fast, efficient processing of delegate and sponsor registration fees (cheque or credit/debit card payments)
6.  Timely payment of all event expenses 
7.  Payment of event profit to your nominated budget code 

 Categories of Event Revenue

1. Government Grants
2.  Sponsorship
3. Merchandising Sale
4. Participant Fees
5.  Raffles
6. Spectator Fees

Different costs related to budget

Break Even Analysis Break-even analysis helps to find the point where the costs incurred in an event will be equal to the revenues earned from the project. It is the point from where profit starts coming. When a company starts a particular event, it will have a fair idea of costs to be involved. There are onetime costs of material that will be used in the event; and there are also certain costs that cannot be consumed in one event, such as costs of assets like generator etc.

All event managers must be aware about the level of turnover at the event so as to cover all the costs and know at what point profit will start being made.

 To construct a break-even chart or statement for an event, the following information is required:

1.  The number of customers per week:This can be calculated from the cashier’s analysis sheet which shows the total number of covers as extracted from the customers’ bills.
2. The average spending power of the customer: This is calculated by dividing the total sales  by the number of the customers served.
3.  Fixed Costs: Expenses such as rent, rates, insurance, depreciation, wages salaries can be divided by 52 (number of weeks in a year) to calculate the average fixed costs per week. 
4. Variable Costs: This can be calculated as a percentage of the turnover figure. 
5. Assumptions of Break-even Analysis The break-even analysis is based on the following assumptions: 
6.  All costs can be separated into fixed and variable components. 
7.  Variable cost per unit remains constant and total variable cost varies in direct proportion to the volume of production. 
8.  Total fixed cost remains constant. Selling price per unit does not change as volume changes. Productivity per worker does not change. 
9.  There will be no change in the general price level. 
10. Then there is the concept of contribution. Contribution is the difference between sales and the variable cost. 
11. The formula for contribution can be shown as: Contribution = Sales – Variable Cost Also, contribution = Fixed cost +/– Profit/ Loss Therefore it implies, Sales - Variable Cost = Fixed cost +/– Profit/ Loss

Cash Flow for an Event:

 Capital is needed to set up any business uni, and even more so in the event business, since the planning phase is often long and the period for capturing revenue is very short,e.g., an event team may spent a year planning an event during which period cost will be incurred, all of which have to be paid long before there is an opportunity to re-company money. After having spent a year planning it is possible that ticket will be sold at the venue and that all venue will be collected on the one day. This outcome is in contrast to an everyday business in which there is a more even cash flow. 

Monthly expenses and projected revenue need to be entered into a spreadsheet to establish cash flow can best be managed. 

A funding crisis just days prior to an event is not rare in this event industry

Sponsorship of Events : For some events it may be appropriate to seek external sponsorship, particularly those that require a large budget or may offer mutually beneficial benefits to an external individual or company.

 Sponsorship of an event or activity can comprise of in-kind support, financial support, or a combination of both. However, with sponsorship comes a lot of extra responsibility for the event organizer in all stages of the event process; including the planning, organization, execution and post-event activities. 

The following outlines important elements of sponsorship:

 Strategic Planning. Consider the aims and objectives in relation to the purpose of seeking sponsorship, identifying and prioritising potential sponsors and determining a strategy as to your approach. 

Sponsorship Agreements. These must include deliverable benefits from to the sponsor, outline timing, terms and conditions and any other arrangements specific to the event. They should be included in the initial sponsorship proposal 

Restrictions on Sponsorship. Number of external individuals and companies that are not suitable to sponsor an event or activity.

Examples: Political Parties ,Tobacco Companies &  Gambling Services

 Review Questions 

1. What is meant by event finance? 

2. What is event budget? 

3. What is meant by available budget? 

4. How is preparation of a budget is an essential part of event management?

 5. What are the various costs associated with the events?