“When we started our business, I attended a class for entrepreneurs,” recalls Sue Micensky, co-owner of the Conference Connection, Negaunee, Mich. “The instructor suggested that we determine the amount of annual income we needed to be profitable and divide that by the number of clients we expected. Then we were supposed to divide that by the number of hours we would work on each event.
“What a daunting puzzle,” she says. “Every one of those numbers was an unknown to us at that point.” Instead, Micensky and her business partner, Andy Silver, developed a formula of their own. They considered the hourly rates they had been earning in their previous positions and added 30 percent to cover their overhead, including office expenses, Social Security, insurance, and utilities. That equation worked for Micensky and Silver once they figured out the X factor: the number of hours they needed to budget for each job.
“That's probably the toughest thing a new planner needs to learn,” says Micensky. “It's important to get as much information as you can before finalizing a proposal so you don't lose your shirt on an event. Even if clients don't have historical information from previous events, they can help you to compile estimates based on the number of expected attendees, the number of speakers you'll be working with, the number of brochures and other marketing pieces, and the method of distribution.
“It's also important to verify your exact responsibilities,” she adds. “If the client has a planning committee, what is the committee's function? How often does it meet? Will you be required to attend all of the meetings or just a select few? You need to clarify your chain of command, so you understand the decision-making process.”
10 Percent Trouble
Citing the sometimes unpredictable nature of commissions, Carol Krugman, CMP, CMM, president and CEO of St. Petersburg, Fla.-based Krugman Group International Inc., avoids earning her money that way if she can. “We rarely work on commission unless a client specifically asks us to,” she says. “Most of our clients prefer to see a fixed fee up front, so they know the only variable will be the actual expenses, which are documented at the end of the project. When we do work on commission, we establish a minimum fee to guarantee that we receive at least that amount.
“Sometimes attendee numbers drop,” she cautions. “On a straight commission budget, the fee drops commensurately. The first time that happened to me, I worked for months and barely ended up covering my expenses.
“What I didn't realize was there is a certain amount of core work that must be done, whether you're planning a meeting for 50 people or 500 people,” she says, citing such things as travel and post-meeting reporting. “After that, costs are incremental.”
Sandy Biback, owner of Toronto-based Imagination+ Meeting Planners Inc., endured a similar trial. “You learn by your mistakes,” she says. “I made $7 an hour for my first conference.” Now, more than a decade of experience later, Biback relies on project fees as her primary billing method. “I know how much I want to make an hour,” she says. “I get all the information I need from the client, then I figure this task will take X number of hours and that task will take X number of hours. I set the project fee based on the total number of hours, then I add a 10 percent contingency fee.”
Don't Back Down
Once the fee is on the table, the prospective client can accept it, reject it, or try to negotiate a lower rate.
So what's negotiable? That varies from planner to planner and from client to client. “Rather than negotiate a lower fee, we'll explore cost-cutting possibilities that will reduce our responsibilities and therefore reduce their costs,” says Micensky. “For example, some organizations have volunteers who will stuff envelopes or create conference signs.”
Biback cautions independents to consider carefully what tasks they are and are not willing to relinquish. “I have to be comfortable with what I'm giving up,” she says. “It's about maintaining quality. It's my reputation.”
Dianne Davis, a Tulsa, Okla.-based meetings and marketing consultant, says she doesn't negotiate her fee. She will, however, offer to spread payment over a period of months, or perhaps accept 25 percent up front with the balance due upon completion. “That has created amazing goodwill, and I've yet to be burned,” says Davis, who also makes it a point to track her time and expenses in monthly reports issued to clients.
Krugman also counsels independents to spend the time — whether they're paid or not — on the professional extras. If, for example, clients say they don't need or want a post-meeting report, it may be worth the effort to prepare one anyway, she suggests. Or at least send a letter summarizing the event and requesting an evaluation.
Biback agrees. “That's a great way to get testimonials and even learn where I need to improve. It also gives me an opportunity to suggest that I do their next meeting and ask for referrals.”
Lisa Matte is a freelance writer based in the Boston area. Editor of Business Traveler-e, Matte specializes in writing about travel and travel-related issues.
Project Billing Wins
The results of an informal survey conducted by the Independent Meeting Planners Association of Canada in May 2003 reveal that billing by the project is by far the most popular way that independent planners make their money, with “setting an hourly rate” coming in second in the select-all-that-apply list of options.
The confidential survey was sent to 93 independent meeting planner members and received a 66 percent response rate, or 62 useable surveys. The membership is predominantly Toronto-based, but includes meeting planners from all over Canada.