Sunday, 26 August 2007

Something to Think About: What Really is a "Special Event?"

Isn't it a bit strange that the special events "industry" has only been in existence for about 25 or so years, yet what most of us would define as "special events" have been around since pre-historic times? I know this is not a question most people entering the industry ponder about very much, but it begs an answer because what has emerged in the industry is a mixed set of definitions and a lot of confusion about what is and is not a special event.

In my books and teaching, I have personally defined a special event as "a gathering of human beings, generally lasting from a few hours to a few days, and designed to celebrate, honor, sell, teach about, or observe human endeavors." This is my personal definition and it is intended to be as all-encompassing as possible. Dr. Joe Jeff Goldblatt, a pioneer in special events, has a similar definition, perhaps more general, when he says “a special event is a unique moment in time celebrated with ceremony and ritual to satisfy specific needs." Donald Getz, another Canadian educator, on the other hand, offers two definitions, from each of the event organizer’s and the guest’s point of view, respectively:

1. "A special event is a one-time or infrequently occurring event outside normal programs or activities of the sponsoring or organizing body,” and
2. To the customer or guest, a special event is an opportunity for a leisure, social or cultural experience outside the normal range of choices or beyond everyday experience."

Now, none of these definitions is inherently wrong or right; they just approach the subject slightly differently. Where we run into problems is when we try to state what is and is not a special event based only on these definitions, in other words, when we try to apply some degree of undefinable "specialness" to them.

Let's consider what this "specialness" is. Supposedly there must be some sort of uniqueness to events in terms of categorization and size, they must use one or more dedicated organizers, and they must somehow fit into a very limited scale of repetition. For example, is a weekly church service a special event or just the Christmas Eve service? Is a public hanging in the 1800s a special event even though many would say it is not a celebration per se (which many event practitioners might argue for)? Is a Rolling Stones concert a special event, even though it is one of many on a worldwide tour? Is a space shuttle launch and flight a special event even though it is not a typical celebration that we in the industry are used to? As you can see, these are not easily answered or universally agreed on.

Some academics such as Leo Jago and Robin Shaw from Australia, have tended to consider special events as only pertaining to tourism and to include large-scale "major" events, "hallmark" events, "mega-events," festivals, and minor events. Unfortunately, their research has not considered the impact and importance of the large - or perhaps more importantly, lucrative - private special event market that also includes incentives, association and corporate meetings, fundraisers, and large social and life events, all of which form arguably the lion's share of business for actual practitioners in the special events industry.

As a result, we on what may be called the "operational side" of the industry (as opposed to the "academic side") are still left in a confused state and searching for a more complete definition of the term "special event." My personal belief is that as the industry matures - and it is still very much in the maturation stage - a more enlightened definition will emerge, most likely one that categorizes special events in more detail and in alignment with still-developing internal industry specialties.

Friday, 17 August 2007

Making a Profit: Part Two

Hourly Fee Method

This method is sometimes used by event producers in the following situations.

1. When the amount of work is fixed
2. When the work is of a specified duration and the event producer can devote his full-time efforts to the task
3. When the event producer is hired for his specific expertise and the market will bear his fee, in spite of competition.

To determine what an event producer’s time is worth in the simplest manner, the producer should calculate what his or her entire company overhead is worth for the whole year, including personal salary - or salary goal - and divide it by 235 (the approximate average number of working days per year, allowing for 104 weekend days, 11 statutory holidays, and an average 15 working days vacation), then divide the result by 8 (number of working hours per day) to get the final answer.

As an example, if an event producer operates as a sole proprietor with only himself/herself to pay, let us consider how this formula would work. If the event producer’s total company overhead is $24,000 (e.g. $2000 per month), and the personal salary goal is $50,000 per year, then $74,000 is divided by 1880 to arrive at an hourly fee of $39.36. This, of course, only ensures a break-even situation if the manager works 100% of the time, so adding extra may be required, especially if a profit is desired over and above the producer’s personal salary. However, if the contract will be for a specified time and the producer will be devoting 100% of his/her time to the project during that period, then the fee of $39.36 per hour is both justified and reasonable.

If there is more than one salaried event producer in the company (note that we only use the persons who generate income for the company), then the above formula must be multiplied by the proportional share of each individual producer’s salary to arrive at that individual’s hourly fee. However, once an hourly fee is calculated, it must be modified by other variables such as productivity, experience and what the market will bear.

Wednesday, 1 August 2007

Making a Profit: Part One

A lot of company owners in the event industry have trouble with understanding profit. Event managers and producers can earn income either as contractors or as employees. As an employee, a producer does not have to be concerned with profit. However, for an independent contractor, there are two possible methods that may be used to obtain a profit, the supplier markup method and the hourly fee method. Today, we'll examine marking up supplier costs.

Markup of Supplier Costs

This method is representative of the majority of events for which producers are contracted. The producer is normally the only person in direct contact with an individual supplier and all communication and contracting goes through the producer. The event organization deals directly with the producer and has no dealings with the supplier. In other words, the producer is in an agency relationship with the supplier. There are separate contracts between the producer and each individual supplier and usually a single contract between the producer and the event organization, the producer’s client. Because the producer is taking all the risks associated with the contracted delivery of the supplier’s services or products and because the producer must of necessity also arrange for payment to that supplier, the producer is entitled to a fee or markup for the service of being a “one-stop shop.”

The industry norm for markups is in the range of 20 to 35% of the supplier cost. This markup may be calculated in two ways. The first is to multiply the supplier cost by a given markup percentage. For example, if a dance band costs $2000, the producer may choose to markup that amount by 25%, or multiply by 1.25 to arrive at a figure of $2500, which would then be the price the producer would quote to the client. The second way to calculate a markup is to divide by a fixed amount. Again, if the band costs $2000 and the producer wishes to make 25% (also called the gross profit) of the funds available for dance entertainment, then the $2000 must be divided by 0.75 to arrive at a cost of $2666. This number would typically be rounded to the next higher multiple of 5 or 10 for easier working, so that the price charged to the client would be $2670.

There is no right or wrong way to calculate profit in the markup situation. It is simply a matter of preference for the producer in terms of what is needed to survive (i.e. to pay the producer’s company’s bills) and what works the easiest in budgeting. It is important to understand, however, that there is a difference in the end amount. A markup of 25% does not yield a gross profit of 25%. Again, to illustrate with a simple example, a markup of 100% on a $500 cost gives a price of $1000 which yields a gross profit of 50% ($500) based on the final price. It really depends on whether the calculation is referenced to the supplier cost or the final price.