…But Are You Making Any Money?

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I remember the evening vividly — great food, lots of wine, dinner with my parents and my new husband. What could be better than a relaxing night out? Of course, in my family, you are never far from the next business conversation. We started chatting about my company, The Party Goddess!, and I excitedly talked about the A-listers who had attended one of my recent events. I shouldn’t have been surprised when my dad, whose entire schedule does not revolve around Us Weekly’s arrival, asked me, “…but are you making any money?”

What? I thought. How dare you ask me that when I, super party planner, am working with the likes of J.Lo! Financial statements are overrated!

Well, they were overrated to me, anyway. I worked harder than all of them, but I certainly didn’t have as much in my bank account to show for it. Suddenly, I was sick of listening to my family snicker about my profession. I was over it. Done. I decided then and there that those days and my lame profits were history. If I was going to work with A-listers, I was going to get paid A-list prices.

Job Costing for Events

Like most companies, I had an annual profit and loss (P&L) statement, but I certainly wasn’t putting it to much use. So I set about coming up with a plan to systematically track my expenses — a plan that even a “creative type” such as myself could handle. After months of collecting receipts and invoices and writing them down, I came up with a system of assigning a job code to each event and tracking all of that job’s expenses.

You can implement it in your business too. First, come up with a job code that makes sense to you for each event. (Ours assigns a character for the year, month, date and order in which events were booked, in case events occur on the same day). From the moment you start working on a proposal, use that code and include the following:

• All staff hours, tracked in 15-minute increments, associated with any particular job
• All expenses related to that job

Include the obvious expenses like food, beverages, linens and staff, but don’t forget the seemingly insignificant ones as well, like that latte you bought the client while you two were reviewing the proposal or the parking ticket you needed to pay because the meeting ran over, and yes, even the extra shipping charges assessed because you didn’t place your paper order on time.

Keep it simple. Start by just photocopying every single receipt related to a job and putting them in the event folder. Then, at the end of the event, tally them up.

Once you’re sure you’ve captured every receipt, start tallying hours. At The Party Goddess!, all staff members track their time on a spreadsheet in 15-minute increments, just like lawyers do. We write down the job code next to the project we’re working on and at the end of the pay period, we make sure the hours get coded to the right job. The staff hours and other expenses get subtracted from your total revenue.

The longer you work with the job costing system, the more surprised you’ll be. You will realize how many receipts you initially forgot to include. You won’t believe how many “incidental” expenses there really were, or how much postage you forgot to include. Oh, and then there’s the time you spent. Once you take a minute to tally up the staff hours and then tally up your own, you might feel like you would’ve made more on the day shift at McDonald’s.

Boosting your Bottom Line

So what’s the point of all of this? Enlightenment. You’ve now created a system that gives you the profit for every event you do. You will start to determine where you should have charged more money for a particular line item, where the big margins are, and where you could’ve cut expenses or improved efficiency. After a few months of job costing, you can set up your accounting software to do a lot of the work for you. Eventually your software can crank out the P&Ls.

The advantages of job costing are numerous. The system forces you to:

• Review each employee’s time card carefully (including your own) before processing payroll. Is the staff spending too much time on an event whose budget can’t support it?

• Determine where you need to charge more. Were you absorbing the cost of shipping when instead you should be charging it as a separate line item?

• Identify the cash cows — the pure profit areas where you’ve got some room. If the only real expense associated with your venue is the cleaning crew, for example, you might discount the rate in January when you’re slower.
• Know when to say no. Studying the numbers educates you. You can now walk away when the negotiating gets ridiculous because you know how much you can afford to discount your prices without seeing red.
• Fix things before they become crises. You can course-correct much more easily when you’re working from one event to the next instead of waiting for next year.

So pull your head out of the sand. It may be hard to live with the world of finance, but in the world of events, we can’t afford to live without it.

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About the author: Marley Majcher

Marley Majcher is CEO of Los Angeles-based The Party Goddess! Inc. (thepartygoddess.com), a catering and event planning company that organizes all aspects of large-scale functions. Contact: Marley@thepartygoddess.com