Creating an event budget is a crucial part of the event planning process, but how do you create a great one? In this article we’ll cover what you need to know to create an event budget, why it’s important, and challenges to expect along the way.
What Is an Event Budget and Why Is It Important?
An event budget is basically an outline of all expected expenses by category, as well as an estimate of how much revenue your event might bring in. It helps event planners effectively manage resources to get everything you need for your event and to make the event a success. An event budget is also important because it can make it a lot easier for you to hit your profitability goals for your event, which can justify more events in the future.
What Are the Challenges of Setting Budgets for Events?
There are many challenges that come with setting a budget for events. For example, almost half of event planners say that rising costs are the biggest obstacle they have when planning events, which can make creating an effective budget even harder. But rising costs are not the only challenge event planners face. Here are other common challenges that come with setting event budgets:
- Estimating expenses and revenue: Predicting your revenue and expenses accurately can be tricky, due to things like fluctuating attendance numbers, unexpected costs, and increasing prices.
- Tracking expenses: There are often many different expenses that come with planning events, and tracking your spending can be difficult if you don’t have a good system.
- Adjusting your budget: Sometimes expected costs change while you’re in the middle of planning an event, so adjustments may be necessary to account for these changes.
- Dealing with uncertainties: Events are always subject to changes and uncertainty. Some of these might include weather, technical issues, or last-minute cancellations from key attractions like a DJ or guest speaker. These can make your expenses and revenue change unexpectedly, so preparing for their possibility is key.
- Learning from mistakes: Having an efficient way to access your data to learn from your mistakes and successes can be challenging. And because there are plenty of other things that must be done after an event is over, this step is often overlooked.
What Are the Benefits of Accurate Event Budgeting?
There are many reasons why you can benefit from accurate event budgeting. Here are a few:
- Prevents overspending: Managing your expenses more effectively will prevent overspending that can hurt your event’s profit, while securing your financial control over your decisions.
- Improves decision-making: An accurate event budget can help you optimize your resources and allocate money to the areas that will have the greatest impact on your event’s success and your attendee experiences.
- Improves stakeholder confidence: Any event planner understands the importance of keeping your stakeholders — such as sponsors, partners, or investors — happy with you and the event. Having an accurate budget can help build your stakeholders’ confidence.
- Prepares you for changes: Being flexible is crucial for any event planner. Having a clear, accurate budget can help you figure out where you can make adjustments if needed without jeopardizing the overall financial health of the event.
- Improves chances of success for future events: Since your current event’s budget helps to inform your next event’s budget, keeping an accurate budget can also be key to a future successful event.
How To Create an Accurate and Viable Event Budget
Now that you understand just how important event budget planning can be for the success of your event, keep reading to learn how to actually create one.
List All Event-Related Expenses
The first step in the budgeting process is to create a list of all your expected event expenses. This event cost breakdown may include things such as staffing, a venue rental, catering, marketing, equipment rental, security, insurance, permit fees, and more. Even list the things you don’t know if you will need, as you can always remove them later. By carefully listing and estimating each expense category down to the smallest detail, you can begin to create an accurate event budget.
Separate Expenses in Fixed and Variable Costs
To create an accurate event budget, it’s essential to separate expenses into fixed and variable costs. But first things first — what’s the difference between the two?
Fixed costs are costs that remain constant regardless of factors like how many tickets you sell. These might include things like venue rental fees (since you will likely have the venue before you start selling tickets), insurance, and permit costs. Regardless of how many people end up showing up to your event, you will pay the same.
On the other hand, variable costs fluctuate based on factors like attendance and the scope of the event. For example, catering expenses and the amount of staff you’ll need may change depending on how many tickets you sell. Paying for catering before you know how many attendees you’ll have may leave you with not enough food and frustrated guests, or too much food and waste — and the same goes for other aspects of planning.
Separating these expenses can help you plan a more precise event planning budget, as you’ll know which expenses may end up changing down the road.
List All Your Sources of Revenue
After estimating your event’s expenses, it’s time to list all of your expected sources of revenue. This may include ticket sales, sponsorship agreements, merchandise sales, exhibitor fees, and donations. Make sure you list everything you can think of, as these numbers can help you develop a realistic budget and calculate cash flow to improve your chances of a financially viable event.
Calculate the Budget and Add a Contingency Fund
After you’ve done all the preparation and estimations from the previous steps, you can calculate your budget — that is, what you can spend in each category so that your event hits your profitability goals.
While your estimates from previous steps are crucial, remember that every budget needs a contingency fund, which serves as a buffer to cover unforeseen expenses or emergencies. It’s generally better to expect the unexpected when it comes to budgets, and a contingency fund can help you avoid going over budget and handle unexpected situations without compromising the event success.
Write an Event Budget Proposal for Your Stakeholders
Making sure that your stakeholders understand your budget is crucial for maintaining transparency, building trust, and securing support. You can do this by writing a proposal. The proposal should include a clear overview of the financial plan, as well as detailed information about anticipated expenses and revenue sources. Additionally, justify the proposed budget by explaining how it aligns with the event’s mission and event goals. By reviewing this budget proposal, stakeholders can gain confidence in your ability to manage event budgets and deliver the return on investment they’re hoping for.
Keep Track of Your Event and Adjust the Allocated Budget
Even after you’ve set up your initial event budget, your job is not over yet. An important step is to actually keep track of your event’s budget by monitoring expenses and revenue in real time. This will also help you adjust the budget if needed, as there will be times when one category requires more funds than initially thought. Figuring out how to reallocate funds and possibly make more cost effective purchases in another category can help prevent overspending.
There are also times when you may have a leftover budget, and you’ll want to use unexpected funds. There are plenty of options you have with your leftover budget, including social media promotion, upgrading your event website, or even saving the money for your next event.
Gather Insights for Future Events by Reviewing Performance
There is still one more crucial step to do with your budget after the event — gather insights for future events. One of the best ways to create an effective budget is to review past events’ performance and figure out what worked and didn’t work. Not only can you analyze your event expenses report, revenue, and profit, but you can also analyze attendee feedback to see aspects of the event they liked, so you know which investments were worth it.
It would be great to get your budget completely right the first time around, but that likely won’t be the case, as estimated costs and actual costs can be very different. The good news is that you can create budgets that are more accurate, viable, and aligned with the goals of future events when you review the performance of previous events.
Master Event Planning and Execution With the Right Platform
Mastering event planning and execution requires the right platform, and Events.com offers just that. As an event management technology, Events.com empowers event planners to manage, market, and monetize events of all sizes. Regardless of your type of event, from massive music festivals to small-scale 5k runs, Events.com provides end-to-end event management solutions.
Its suite of tools includes sponsorship, marketing, and ticket selling features, giving organizers access to everything they need to execute an event budget. Schedule a demo to learn more.
