I am fairly certain
that if I visited the office of every meeting planner I know, I
would be hard-pressed to find one without a budget book or
accounting primer within reach on his or her bookshelf. And that’s
as it should be. Solid event budgets are our primary source of
credibility, our selling tool and the blueprint of every event.
Textbooks might show you how to format
a budget, but it’s impossible to create an accurate, viable budget
with textbooks alone. Some things numerically magical can be
learned only through experience. Furthermore, some of us have an
inherent talent for numbers, while others struggle to calculate
vending machine change. Fortunately, those of us who are
technically and/or algebraically slow typically have a sixth sense
allowing us to pull accurate numbers from virtually nowhere.
Therefore, relying on the science alone
and shunning the innate “force” of the budget inevitably will leave
both your face and your balance sheet crimson red.
While I addressed budgeting nuts and
bolts like Generally Accepted Accounting Principles in
M&C’s Back to Basics column last month, this article
focuses purely on tapping into that supernatural insight that
ultimately drew most of us to this industry. Hoping to shave at
least 10 or possibly 20 years off your trials and tribulations, I
have compiled key lessons that I learned over the years, including
several purposefully (and some accidentally) debunked myths.
Let me start by saying that perfect
budgets frolic with unicorns and magical gnomes. Almost-perfect
budgets, while elusive, are realistic and attainable.
In order to master near-perfection,
however, you need to recognize that budgets generally exist in four
major stages, and each phase has its unique strengths and
Projected budgets are created in order
to anticipate what the event will cost. In addition, projections
function to assist in prioritizing an event’s initial goals and
objectives. For example, many projected budgets will adjust
registration fees, while others might reduce sponsorship goals.
Below-the-line expenses (“optional” program costs such as upgraded
attendee gifts or an additional band playing at the gala dinner)
that may or may not be included in the final program budget would
be shown in the projected budget.
budgets often are used as part of a pitch, either to sell an event
internally or externally. Projected budgets very often suffer from
overly conservative calculations. Either the budget is too low --
driven by concern that high numbers will scare away prospective
clients or senior management -- or it is estimated far too high,
out of concern that it may not include every possible expense.
budgets very often have hidden costs.”
There is no such thing as hidden costs.
A hidden cost is merely a cost you have neglected to include. A
projected budget is often an incomplete budget.
The final projected budget that
everyone agrees upon becomes the locked budget. A locked budget is
also referred to as an “as sold” budget for
independents/agencies/third parties. This budget becomes part of
the contract/agreement that you have with either your internal or
external stakeholders. Even without an accompanying legal document,
such as a memorandum of understanding, you are essentially agreeing
to match or stay under this budget. Most importantly, the final
locked budget represents the blueprint from which change orders
Hazard: The locked
budget should not have any “below-the-line” costs listed except
those that will be paid for by another department or individual,
unless these expenses need to be shown for posterity and
Myth: “Locked budgets
do not need to have their formulas checked on a regular basis for
Locked budgets might not be as
vulnerable to errors as working or projected budgets, but they
still require regular checks and balances.