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Usually a HR employee calculates the budget, sometimes together with an accountant.
It’s not the best move to try and save money on corporate events, cancelling them or reducing them to a few drinks in the office; that way you drive down your employees’ loyalty and their involvement in the company’s operations.
In this article we will tell you how to optimize your event expenses and what to keep in mind when calculating your budget.
Below you can find some old-school screenshots and an opportunity to download a sample cost estimate.
Stages of budget calculation
The algorithm for calculating your budget includes 5 steps. You should take them one by one, to make sure that you didn’t miss anything.
1. Consider the event’s objective and format
Are you going to organize an “employee only” event, or an open one for your clients and partners? Is it going to be a banquet with an expensive menu, or a thematic party?
Based on the event format, you can draw up a tentative list of the things to spend your money on.
2. Decide the number of guests
Is the event going to be for all employees or for one department only? Will your employees attend alone, or with their families/spouses? How many partners, clients, mass media representatives will attend?
The final budget will depend on the number of employees you are going to invite.
3. Define your budget limits
It is recommended to know beforehand, which amount the company is able to allocate to organize an event.
Sometimes the budget for all corporate events is approved once a year. In that case the cost of the event is calculated beforehand based on the number of events scheduled for the year, and their cost. That means that you will have a specific amount, which you could take as a basis even in the very beginning, when calculating the event’s objectives and format.
It also might happen that your company does not have a dedicated event budget. The financing is allocated specifically for a given event, a few months beforehand. In that case, you should clarify the upper limit, which is not to be exceeded. You may also ask in advance, if the company is able to find any reserves in case the limit is exceeded.
A person who wants to and can spend a lot of money
4. Draft a cost estimate
The cost estimate should include direct and incident expenses. It is imperative to include every position, on which the money may be spent.
First, you should choose a few venues suitable for your event, learn about their rent cost, menu and services prices. After that you should find a host and the artists, choose, what your show program will include and clarify how much that is going to cost you. In the end, calculate the transport expenses, the staff services, the decorations and other small, but important details of your future party.Download a sample cost estimate (MS Excel)
5. Agree the budget with the company management
Budget approval by the company management is the last stage before the preparations for the event could start. After that, the cost estimate is forwarded to the accounting, so that the company allocates the required amount and records it in the accounting and tax reports.
Major cost items
Regardless of the format of your event, the main cost items are the venue, the show program, the staff services, food and beverages, photo and video recording, souvenirs and transport expenses.
Let’s look at those main cost items in more detail.
The venue and the decorations
The venue rent is a considerable part of your event’s total cost. You will have to rent a hall of an appropriate size, or find an open-air location suitable for the number of your guests, the format of your event and other factors.
Venue decorations are a separate item in your budget. Sometimes all the hall needs are standard holiday decorations with flowers and banners. For thematic parties you might need complex, expensive props.
Record you cost items according to their priority
You can easily clarify the rent cost from the venue staff. We recommend you start searching for the venue a month before the planning event date, and 3-4 months in advance during the holiday season.
Menu and catering
Menu budget depends on the type of meal you are going to have: a buffet, a banquet or a coffee break. Even for a teambuilding session, or for a corporate sports game, you should think about what your guests will snack on during breaks.
You don’t need the exact menu to calculate the budget, telling the venue staff the number of guests and your general suggestions should be enough. You will be offered a few menu options together with their average cost per guest. The service cost for a banquet or a buffet is about 10% of the total order cost.
If your chosen venue does not provide for food services, you will have to contract a catering agency. Catering companies will also offer you a few menu options differing in average cost. The price of catering services goes up if you have to organize an out of city trip.
You will need light and sound equipment to organize your event. You should include the rent and transportation costs for that equipment in your cost estimate. Sometimes you’ll have to pay separately for the equipment already installed on site; clarify, if the cost of using that equipment is included in the rent or not.
Organizing special displays, interactive system, quests is a separate cost item. You have to have a detailed breakdown of the activities your guests are going to be engaged in, and provide the cost of every entertainment element.
For example, the cost of the sound equipment rent will start from ₽20,000. Photo area equipment, with costumes and professional photographer’s services will cost about €150,000. If you want to organize a master-class, its price will depend on the number of the guests invited, the props used, etc.
A show program for a party might take up a significant part of its budget. A host is very important for a quality party.
A fee for a good host, who is not a media celebrity, starts from ₽50,000. Outside of the holiday season you may be able to find a host for cheaper. If you want to invite a celebrity to be a host at your event, you should be prepared to spend up from ₽500,000 for a night.
The artists’ fees also depend on their popularity. The fees of famous artists and singers starts from €12,000 for a 45 minutes long performance. Various small show programs, such as a magician’s performance, will cost you upwards of ₽40,000.
Photo and video reporting for an event are mandatory: a photographer’s services will cost you upwards of ₽30,000 for a few hours of shooting.
The costs might also include services of a DJ, artists who will entertain the guests during breaks between shows or competitions, rent for costumes, food for staff, etc.
The costs are conveniently categorized
During away events, you will have to pay for transportation. You will have to transfer your own employees to the venue and back, as well as pay for delivery of equipment, artists and service staff.
If your event involves alcohol, it might be prudent to think of cab services: it might so happen that some of your guests will be unable to get back home on their own.
If you invite employees from other regions, you will not only need to pay for their trips, but also provide them with accommodations and out of pocket expenses.
Some companies have a traditions to make gifts for their employees for the New Year and other major holidays. We recommend making the cost of such souvenirs a separate item. If your event involves a competition or prize drawing, you might also need the money to buy the prizes.
The incidental expenses might include the cost of PR campaign, if you invite your partners or clients to your event, or it might happen that you will need additional advertisement for your event.
You might also need to book services of a security company, if your event is taking place at a venue that doesn’t provide security. Sometimes you might need invitations or lottery tickets, booklets, etc.
On your own or through an agency
It’s not easy to organize a large scale event: you will have to communicate with several contractors, and if anyone of them defaults, your entire event might be in jeopardy. The event agencies have their own networks of reliable contractors; the only people you will have to deal with will be the agency’s representatives. Furthermore, you will be offered a few program options, based on the amount that your company is willing to allocate to organize a corporate event.
The service packages offered by event agencies, usually include a show program, decorations, technical support for the event, catering and a number of other services. On average, the agency fee costs about 10% of the total event budget.
Agency fee and the total cost
To prepare an event on your own will not always be cheaper, but will always be harder. Id your own employees organize an event, often they get distracted from their daily duties, and their performance might suffer as a result. An unprofessional organization and glitches in the program might lead to emergency expenses. Besides, the agency representatives are aware of every pitfall that you might encounter while interacting with the contractors, such as hidden markups or superficial, unnecessary services.
Where can you cut costs
Before you start looking which costs you can cut, you have to outline the priority expenses and the expenses that are possible to reduce. To do that, you should remember your event’s objective.
For example, if you main objective is to make noise with your event, to attract the mass media’s attention and impress your partners, you shouldn’t be stingy with the show program and the venue decorations. If you are planning a small celebration inside the company, you may save some money on visual appeal, while paying more attention to the event’s benefit to the employees and the company itself.A corporate event without an objective means money wasted
Main budget items where it’s possible to cut costs:
- Save money on the main budget items: rent, food and drinks, the show program. Those are the ones that take up to 90% of your budget. For example, by inviting a bad photographer or not printing the invitations, you will save very little, while souring the impression made by your event. It would be better to invest and detail and save your company’s money by optimizing the significant cost items.
- Try holding your event outside of the holiday season or not on the hottest date. For example, you can organize your New Year celebration in the early December, or in January. During the high season the cost of rent goes up 1.5 - 2 times. The price tag for the artists’ services on Fridays and weekends is higher compared to weekdays, sometimes by 40-50%. There is another advantage to scheduling your corporate event outside of the “hottest” dates: you will have better choice of venues and artists, and less chances that your preferable venue or host are already booked.
- The catering format: a buffet is always cheaper than a banquet, the difference might reach 30%. A sitting buffet is a good option: your guests are sitting down, but the food is served piecemeal like a buffet. Also in restaurants it’s usually cheaper to pay a corking fee and bring your own alcohol, then order drinks at the bar.
- Sober holidays: festivals, quests, sports competitions, which do not require alcohol or a lot of food might be cheaper than typical banquets, and more beneficial to the company through better employee engagement.
- “By proxy”: visiting an event organized by someone else. It could be, for example, a collective theater visit, for which the company buys out the entire audience hall, followed by a modest buffet dinner. Alternative options include circus or entertainment centers offering bowling or karaoke.
- Contractors’ discounts: sometimes, at the client’s request, a contractor will make a discount if a large amount of services is offered or the bill is high enough.
Most common mistakes when making a budget
The most common mistake is not not recording the trivial expenses; that’s why can easily exceed the budget cost. Additionally, many companies forget to budget 2-3% for emergency expenses. You have to so that, because no one can foresee every possible force majeure circumstance. For example, the number of guests can rise unexpectedly, or some employee returns from maternity leave.
Check the amounts you’ve calculated against the annual budget allocated for corporate events, if any. You would be better off refusing the services of an expensive contractor beforehand, and finding a replacement, than discovering that you went over budget with your expenses, when the event preparations are about to start.
Balanced cost allocation is very important. For example, it’s not a good idea to spend your entire budget on star artists and skimp on food. Equally bad would be to invest everything in the expensive delicacies and leave the entertainment program empty. The cost estimate should be prepared in such a way that the guests would be entertained, would not leave hungry and would have a great time.
How to defend your budget before your boss
Before you start preparing for the party, you need the management to approve the budget. For that, you should prepare two or three calculations:
- minimum: the most budget-efficient event program, with the lowest prices and a truncated entertainment format;
- preferable: the costs that would ensure the sufficient quality of the event;
- maximum: additional costs that would make your event striking and unforgettable.
A fearsome boss (who is nice on the inside)
If your management have a choice, your budget will be approved quicker and easier. Your boss will see that you have provided multiple options and decide, what is more important for the company: save money, or have the event organized with a lot of pomp. Attach your calculations, the cost estimates requested from the contractors and other supporting documents to your budget.
So to calculate the budget of your corporate event in the right way you have to:
- Understand how many employees will be invited to the event, and what amount your company is able to allocate to organize it.
- Clarify the services’ cost with the prospective contractors: the venues you are supposed to rent, show program organizers, etc.
- Request price lists from the event agencies, indicating your company’s approximate budget. It’s possible that an event organized by a service provider would cost you the same as an event organized on your own.
- Draft a detailed cost estimate, indicating and substantiating all the expenses.
- Ensure that you’ve provided for all cost items, cut all costs it’s possible to cuts and did not make any mistakes in the calculations.
- Defend your budget before your management, accountant or financial director.
Your objective is clear; your budget has been approved. Now you have to start preparing for the event. If you go to an event agency, you will have to fill in a brief. Many companies have their own brief templates; you will also request it from the agency representative.
From our next article you will learn why you need a brief and how does one fill it in without overlooking any important details.
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