What Are You Worth? Helping Independents Find Their Value – Part I

September 1, 2006

WhatAreYouWorth

By Michael Humphrey

Note: Part I is on meeting planners and caterers. Part II will focus on photographers and floral designers.

If you’ve started a meeting planning business, chances are there’s a cultural paradox you have encountered:

1) Our work’s value is often equated to dollars.

2) Most clients are looking for the lowest possible price that still provides value.

This creates a dilemma for every entrepreneur. Whether we’re selling products, services or both, success is attained by walking the tightrope between undervaluing or overvaluing ourselves.

In the meetings and events industry, the great variety of services and client types only tightens that rope. There are so many kinds of events – from informal reunions to high-class incentive trips. There are so many kinds of meetings – from small staff retreats to mega-conventions. Figuring out how to insert yourself into the mix – and charge the right price – takes research, savvy and experience.

So, what are you worth? Any professional in the meetings and events industry will quickly tell you, there’s no easy answer.

Independent Planners

“I think it’s very difficult to break into the planning business if you don’t have prior experience,” says Patti Jo Gaughan, a Kansas City-based independent meeting planner and presenter of “Meetings and Events 101” at the Missouri Meetings & Events 2006 Kansas City Regional Expo. “You need a client base to begin with or at least a good network.”

The reason is, she says, is that it is hard for planners to price themselves in the correct range without a sense of the cost of business. But there’s good news for would-be planners looking to price their services.

“The basic research is out there,” Gaughan says. “And I have found that planners in this area are very willing to help.”

For one, most planners are a gregarious bunch and understand the value of building bridges, even with would-be competition. But also, Gaughan says, new planners who undervalue themselves not only hurt their own futures, but the industry as a whole.

“Bidding for jobs with unreasonably low fees might get your foot in the door,” Gaughan says, “but eventually it will smash your toes. It also sets up false expectations for clients getting bids from experienced planners, who understand the hidden costs.”

An experienced planner is also going to know there are many different kinds of contracted jobs out there. One client might want a soup-to-nuts approach, including finding all of the other suppliers for a meeting, getting out invitations and hiring enough staff to manage the meeting. Another client might simply ask you to manage the meeting on the floor. Yet another kind of client, one that Gaughan specializes in, might need a long-term independent planner who works on a series of meetings over several months.

That doesn’t even count the event planners’ various roles. And guess what. Some event planners say charging low prices actually can help their industry.

“Not everyone who needs a planner is going to be able to afford my services,” says Josie Littlepage, owner of Cosmopolitan Events in St. Louis, which does everything from weddings to corporate meetings. “It’s nice to know that clients who can’t afford my services can still find a planner who will help them for a lower fee and get valuable experience for themselves.”

Planners: The bottom line

It’s difficult to nail down just how much an independent planner can expect to make in salary. Part of the problem is that independent planners are slow to report their salaries in surveys. Meeting Professionals International, in its 2005 salary survey, received a very low response from independent planners.

Those who did reply reported an average ranging between $66,000 and $79,000 per year in salary. Those averages need to be seen with some important factors in mind. Years of experience will play a major role in how high the average goes. Also, Midwest averages will skew lower than the coasts’. Finally, those averages won’t necessarily factor in overhead expenses that come with being an independent contractor.

There are three typical ways that independent planners charge for their services.

1) Per hour or per day fees. In the Midwest, independent planners reported they are charging anywhere from $30 per hour up to $100 per hour, plus the cost of expenditures. Per day, planners said they charge from $300 to $1,000.

2) A fixed fee. In this case, planners will normally fit into a percentage of the overall meeting budget, anywhere from 10 to 20 percent for domestic meetings and higher for international ones.

3) Hotel commissions. Some planners make a percentage of the hotel’s room revenue, based on a previous agreement with the hotels to bring in business. The average agreement is around 10 percent, though many say this form of compensation is unpopular.

Caterers

In some ways, pricing yourself as a caterer is more cut and dried. But pitfalls abound.

Here’s the basic formula: Product Costs (i.e. food and beverage) + Overhead (everything from the kitchen to insurance) + Labor = Expenses

Then next part goes like this: Expenses + Profit percentage / People served = Price per person.

Sounds easy enough, right? The issue is that several of these costs are forever in flux. The cost of food changes constantly, labor charges will vary based on the size of the event you are catering and even some overhead can sneak up on you.

Another obvious example is the cost of fuel.

“Everything we do and supply is affected by fuel,” says Kathy Costello, director of catering sales for Russo’s Gourmet Catering in St. Louis. “We’ve had such a significant increase over the past year that we had to address it.”

The big question is, does a caterer sink the cost of fuel into the food or separate it into a line item?

“We decided to add a fuel surcharge,” Costello says. “I was a little concerned at first, but we’ve heard little more than a murmur. I think that’s because people understand the cost of fuel and how it’s affecting business. It’s affecting everyone.”

Another complication: Just like planners, the kind of event you are helping to create will affect how many ancillary costs there are. If you are delivering food alone, that’s one thing. But if your client expects you to supply tables, or wants linens, china, etc., that’s another matter.

One option, says David Gordon of Grandma’s Catering in Kansas City, is keep your niche focused.

“We don’t do parties or weddings, nor do we do anything fancy or gourmet,” Gordon says.  “We offer quality hot meals, boxed lunches, baked goods and party trays.  We don’t provide linens, flowers or ice carvings and all food is eaten on foam plates with plastic utensils.  Our people set the food up but do not stay and serve or clean up afterwards. By specializing in this one very focused segment, we have been able to provide ease of service, accuracy and short notice options – we can feed 100 people at lunch with a simple phone call by 8:30 a.m.”

This makes Gordon’s pricing formula pretty set and that’s reflected for the customer.

“Since 99 percent of our orders are for our standard menu items, the potential customer can find his or her exact expenses in advance,” Gordon says. “They can even order online and get their final prices that way if they prefer.”

If you are looking to create a high-end catering business, factor back in those variables mentioned above and then make these critical decisions:

1) How much of your expenses are tucked into food and beverage?

2) How much of your expenses are line-itemed and become surcharges?

3) How much of a profit margin do you want to add into the pricing?

“People think there’s a huge upcharge in our business,” Costello says. “Actually the catering industry works with a pretty low margin. The problem is that there are a lot of expenses that the client never sees.”

Costello’s answers those questions this way:

1) Food and beverage prices basically reflect the cost of products, hard overhead costs, labor and profit.

2) Russo’s will line item such things as table linens, rentals, fuel, center-pieces, entertainment, extra logistics and tax.

3) They don’t really want to publicize their profit margin.

One final point. With some catering occasions being reserved many months, even a year, ahead of time, you might want to add a set percentage that the prices could rise, in case the cost of business spikes over that year.

Bottom line: Catering

Fortunately, the competition is easy to gauge for caterers – most companies have menus and prices online. Most everyone charges per person, unless they are serving something that comes in bulk – like lasagna or pizza.

For boxed lunches, average prices begin at $6 per person, plus tax for large groups, and move up to $15 to $20 per person depending on group size and the menu.

For buffets, prices begin at $15 per person for something light, and run between $50 and $75 per person for full meals with several options, depending also on beverage options, location and additional services. (Most caterers set a minimum number for a solid per-person price. Russo’s, for instance, quotes only 100 and above for its Sunday through Friday services and 150 for Saturdays.

Full-service, plated menus begin at $45 person and run up to $100 per person and more, again, depending on beverage service, location and additional services.

So, it all comes down to profit margins. The real trick is to look at the competition around you, caterers say. Look at the price of doing business – food, location, staffing, licensing, advertising, all of it – and see where the margin lies.

“We don’t worry about being undercut,” Russo says. “I don’t think any established caterers do. If you undercut the local prices, you won’t stay in business very long.”

(Michael Humphrey is the Contributing Editor from Kansas City, MO.)

 

About the author

The MEET® Family of Publications

The MEET® Family of Publications produces regional and national publications that keep corporate, association, medical, education, independent, and religious meeting and event planners informed about relevant industry suppliers, news, tech innovations, and resources that impact and influence how and where they plan their upcoming company function(s).