February 01, 2002
Meetings & Conventions: Planner's Portfolio February 2002 Current Issue
February 2002 Independent LifePLANNER'S PORTFOLIO:

Independent Life

By Robert C. Brenner


Before agreeing to meet face-to-face, calculate the expense to your business

In their zeal to maximize the bottom line, small-business owners sometimes overlook the cost of meeting with prospects and clients.

Every action related to winning a job has an associated cost. Client meetings are often the hidden profit crunchers that make some jobs just not worth taking.

Before agreeing to meet, do a cost-benefit analysis.

The cost of meeting with a prospective or current client can be determined with a relatively simple formula. Put this analysis into a spreadsheet to plan for and track the cost of any meeting you’re considering.

First, estimate the costs for each person in your company who will attend. If one makes $10 an hour, another $25 an hour and a third $30 an hour, your total payroll cost for the meeting is $65 an hour. Now add in the cost of fringe benefits vacation pay, sick leave, group health plans, dental and vision care, retirement/pension plans and other benefits your company provides. One rule of thumb in figuring the total cost per employee is to assume your business has required deductions and fringe benefits that add about 38 percent to each person’s hourly rate. Thus, an employee earning $10 an hour actually costs the company $13.80 per hour.

Program the spreadsheet to multiply the salary costs per hour by the percentage increase allocated for required deductions and benefits (in this example, 38 percent). The result is a total pay and benefits cost of $89.70 for each hour.

Next, address overhead costs associated with planning the meeting. This includes time spent discussing strategy, writing and designing the presentation, creating visuals and “invisible” expenses incurred by those who attend (for example, interruption of another project).

Two hours of prep time for a one-hour meeting yields a planning overhead of 200 percent. If every person attending the meeting takes two hours to prepare, multiply the hourly pay and benefits figure by two to get $179.40 as the preparation cost. If only one person must prepare, a major percentage is allocated to this person, and a minor percent (say 5 percent) can be allocated to the other attendees. For our example, we’ll assume that all three people must prepare equally (hence $179.40).

Now consider expenses such as transportation, food and materials. One car driven 30 miles, one hour of travel, five cups of coffee, 25 sheets of inkjet printer paper and six overhead transparencies add to your costs.

Per this example, a local, one-hour meeting with a prospective customer can cost more than $400. Such knowledge can help you decide whether to agree to the gathering, cancel it or find ways to go ahead at a lower cost.

You might change the meeting’s duration, use a different form of interface (perhaps teleconferencing or videoconferencing) or have fewer people attend. Another option: Invite the client’s decision-makers to meet in your offices, rather than taking your team on the road.

The financial benefit of client meetings rises if you assign costs to whether goals were met. What opportunity did you gain or lose? Was time saved because a face-to-face meeting clarified a misunderstanding? Did you obtain good market intelligence that helped you develop a successful strategy for penetrating a new area? Did the customer refer you to others?

While you can’t always put a dollar value on face-to-face contact, these measures can help you make decisions that will protect the profitability of your business.

Robert C. Brenner is the San Diego-based author and publisher of The Small Business Guide to Pricing (Brenner Books; www.brennerbooks.com), to be published this spring.

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