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.

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