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Event Companies: Are You Billing Fixed Amounts for Variable Costs?
Whether you’re upside down or your margins are too low, many times this occurs because you are billing a fixed amount when you have variable labor costs.
In AV Matter’s article, “Selling from Cost: What Are Your Services Worth?”, Tom Stimson talks about how companies in the Event space can lose money on their labor. He mentions that when you compare your labor revenue to the direct expense of your labor, you may be upside down as you are not accounting for the inherent risk and necessary overhead needed to provide for that labor.
Whether you’re upside down or your margins are too low, many times this occurs because you are billing a fixed amount when you have variable labor costs. Variable costs for the industry is a fairly new concept as more and more companies are choosing to become compliant and employing their crew vs. using independent contractors. When it comes to pay rates for the industry, many companies are still asking if they are paying enough or too much. Check out LASSO’s Crew Pay Rate Survey Report to compare what you are paying for labor vs. the rest of the industry.
So, just how variable can your labor costs be? There are numerous elements that can make your labor costs vary. For example, just a simple thing like a crew member’s state of residence can impact tax rates, workers' compensation costs, and even the overtime rules you have to comply with. Are you considering these things when building your quotes?
Additional conditions affecting costs are things like their classification, are they working a minimum, or will they hit premium pay during their shift? It is a challenge to manage so many of these dynamic conditions that can drastically impact your cost. An hourly or daily rate for your crew is almost never really the actual cost associated with that individual.
Billing fixed costs isn’t as easy as just adding your profit margin to the pay rate. Unless you understand how to calculate your true costs ahead of time, you could be leaving money on the table or more importantly losing money on your event.
This is where we can help. Through the LASSO platform, Event Service companies are able to determine the TRUE costs of your crew prior to your event so that you can better forecast and more accurately provide quotes and invoices to your customers. The real-time analytics through LASSO’s event workforce management platform will give you insight into the actual profitability of your events. In turn, no more upside-down events or minimal labor margins. You will finally have more control over your variable labor costs prior to an event. You will also have actionable data at your fingertips that will help you make more strategic decisions that could impact your bottom line throughout the event.
More profitability for your business is always a good thing. Request a demo to start learning how to truly cost out your events.