Just recently, we bid on a meeting for a major software company. As the proposals were handed out, everyone turned past the creative ideas, past the designs, past the schedule, and right to the budget.
The bottom line will never be ignored. As a brand manager at Procter & Gamble, I learned this all too well. We regularly outsourced everything, from advertising to special events management, and proposals that featured only a single line item for the budget were a pet peeve of mine. Typically, at the end of the proposal, I read something like this: "We will perform all of the tasks described in this creative proposal for $250,000.*" The asterisk, of course, referred to travel, office, and every other expense.
So, the first rule of budgeting is to know what you a paying for. It is not too much to ask for a detailed line-item budget from your vendors. A typical technology meeting for 2,500 attendees should have line items for everything from catering to crew fees. When it comes to a budget, less is not more.
When clients know what they are paying for, they can make informed decisions about what to add or delete. Do you really need IMAG? Knowing what it costs will help you decide. In addition, this detail will help you make comparisons among vendors, because you will know how the proposals stack up, apples to apples.
Piece of the Pie The second rule of budgeting is to know exactly how your vendor makes its money. In my experience, there are several different scenarios:
* Mark-up. Marking-up means that every projector, every piece of wood, and every hour of local labor is marked up by some percent. There is no "average" mark-up rate. You have to ask. This money more than covers the vendor's fees.
* Fixed price for services. Using this method, a vendor generally charges a set fee for creative and/or project management. The fees are based on the effort put against these elements. All other expenses, from audiovisual equipment to local labor fees, are passed along to the client at cost.
* Hourly.vendors can also bill by the hour. Rates can vary from $75 an hour to $150-plus. Some companies also bill a daily rate.
So, what's the best pricing method? The most common seem to be mark-up and fixed price. I prefer fixed price. It may be uncomfortable to know exactly what your vendor's fees are, but it's honest and up-front.
More Rules The third rule of budgeting is to know who you're working with. Every production requires trusting a vendor. When you ask yourself, "Are they telling me the truth?" The answer must be, "Yes!" Never underestimate the value of a trusting relationship.
The fourth and final rule of budgeting is to know your audience. When developing a budget, every element should be added or deleted after asking yourself this question: "Is it good for my audience? Does this increase the value of the event?"
In the end, these meetings are for your customers. If an element won't benefit the audience, cut it. If an element will benefit the audience, keep it. This may sound like an over-simplification, but it will help you make the difficult decisions. "Which is more important to my audience, a theatrical set or IMAG?"
So next time you open a proposal, flip to the back page, and scan the bottom line, keep these rules in mind. If you're not satisfied with what you see, ask questions and get answers that you understand before you go any further. After all, the bottom line is the bottom line.