THE SCHOOL OF HARD KNOCKS counts a fair number of independent meeting planners among its graduates. Lessons on finding and retaining clients, budgeting time, and running — and growing — a lucrative business don't always come easy. One of the biggest challenges is the inexact science of figuring out how to charge for services. Should it be an hourly rate or commission? A set fee plus commission? A project fee determined by the size and scope of the project?
The answer is all of the above. And more.
Some of the most respected and successful independent meeting planners had to learn their trade by trial and error.
“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 a client doesn'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 otherpieces, 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.”
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.”
While commissions are a sticky issue, some planners still factor them into their overall compensation — when it makes sense. “Hotel commissions are now a major challenge. For small events, I sometimes just ask for non-commissionable rates and pass the savings along to my client,” says Bruce Cole, president of Plum Communications Inc., Thornhill, Ontario.
“In any event,” he advises, “do not hide the fact that you are getting a commission. Yourmust state whether or not you earn part of your fee through commissions.
“Certain supplier rates include a commissionable sale value,” he adds. “For example, audiovisual rental companies' retail rates have a built-in commission, so ask your producers for a discount.”
Once the fee is on the table, your prospective client can choose to 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 says it is rare for her to work with a client who tries to negotiate a lower fee. “We explain our budgets carefully and explain our fees carefully,” she says. “If we are asked to lower our fees, we ask the client which of our services he or she would like to omit. That either ends the discussion or, by the time we have walked the client through everything we do, he or she understands what they're paying for.
“Still, everything is negotiable,” Krugman adds, but she notes that she is not averse to pulling the plug when the effort required to complete a project begins to exceed its value. “If a client asks for a lower price or a lower fee, we do our best to adjust the budget within his or her expectations. Every once in a while, when we find a client is becoming too labor-intensive for what he or she is willing to pay us, we will phase out of the relationship.”
Across the board, experienced planners' advice is to ask questions, questions, and more questions. And when you're out of specific questions, simply ask “What else?” It's all in the details.
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 gives me an opportunity to suggest that I do their next meeting and ask for referrals.”
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 choice 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.
“The results revealed that 46 out of 62 bill by the project,” says Sandy Biback, owner of Toronto-based Imagination+ Meeting Planners Inc. and vice president of public relations and marketing for the 8-year-old association. “Twenty-four of 62 bill an hourly rate; 14 of 62 work on commission; 11 of 62 use markup; and five of 62 use other methods.”