What's one of the touchiest issues in special events? What to charge clients and how to explain the fees included in that charge. Failure to face what goes into fees is holding us back as a profession, says Robert Hulsmeyer, senior partner with New York-based Empire Force Events.
Special Events Magazine: What are the common fee structures in place now?
Robert Hulsmeyer: There are essentially two fee structures in use by event producers. The first is a flat price that is inclusive of costs and fees, which are usually calculated as a "markup." The second is a revealed cost plus separate fees, which can be calculated as a percentage, an hourly or daily rate, an arbitrary flat management fee or a combination of these.
With the first price structure, a client requests of a producer a centerpiece for a budget of $100. The planner calculates that the fee for providing the centerpiece is $25, so a $75 centerpiece is ordered from the floral designer. The client is expecting a centerpiece valued at $100 but receives a $75 centerpiece instead.
Using the second pricing structure, the producer informs the client that the fee for providing a centerpiece is $25 and provides a $75-value centerpiece. The client gets what he or she expected and values the producer's abilities and associated fees appropriately.
Unfortunately, most clients don't want to see the fees; they will say, "Just charge me $100 for the centerpiece." Many times this happens because clients have to show our invoice to their supervisor, or in the case of third parties, to the end client, and they do not want to show a "management fee" as an additional cost for something they are supposed to be managing.
Q: What mistakes do event planners make when setting their prices?
A: They undervalue their own time and service they are providing - their knowledge, experience and contacts. They then try to balance it by marking up the cost of the product. The typical way of doing this is taking a $75 centerpiece and telling the client, "I will charge you $100 for it." They should say to the client, "It's $75 for the centerpiece and $25 to coordinate it." That adds to the confusion of the client, who thinks, "That's all I got for $100?"
It's holding us back from being treated as professionals. We need to be more upfront with our fees. We tell clients all the time, "We don't have a cooler full of flowers in the back. We don't have a band sitting in our office waiting to be called. But knowing how to resource, design and deliver these services is the value we bring to your event team."
I believe that pricing is moving in the direction of revealing costs plus professional fees. That structure is necessary for our industry to be recognized as a profession, the way public relations and advertising professionals are recognized and, most importantly, compensated.
Q: What is your position on fees for referrals?
A: In New York social business, it's typically the norm. Planners charge their clients a fee, but then many of the support vendors they bring in - the florist, the caterer - will be paid directly by the client, with commissions paid back to the planner.
But we're just not comfortable with that in the corporate market. Let's say a client who uses us in New York says, "I'm going to Chicago; who should I use there?" Our biggest obligation to the client is to give them someone they will be completely serviced by. And if the client calls [that referral] and they save time and get great service, we look great to our client. Instead of a commission back to us, give that as a discount to my client. Our philosophy is that we earn our fees doing our core business, which is servicing our clients' events.
This is changing as social planners and corporate planners expand into each other's markets and find a different set of rules and expectations. Each of us needs to adjust and review our business practices, hopefully for the betterment of the profession as a whole.
Hulsmeyer will lead the panel discussion "Commissions and Kickbacks: Good Business or Ethical Shortcoming?" at The Special Event 2001, Jan. 10-13 in New Orleans. For more information on the show, call 800/288-8606 or 303/741-2901 or visit www.thespecialeventshow.com. Hulsmeyer can be reached via e-mail at [email protected]m.