Numbers are our friends and successful event managers understand how to track, analyze, and report on finances. Although revenue and net are important numbers, the most critical number is operating margin. Operating margin is revenue minus direct costs (promotion + production) and is the money you have left over to support your administration costs and hopefully generate a positive net.
In analyzing an event, your goal is to have an operating margin of 40% or better. So if you manage an event that generates $10,000 in revenue, you want to make sure your production (delivery) costs do not exceed $6,000 or 60%. If your delivery costs are greater than 60%, it will be difficult to support your promotion (marketing) costs, administration (salaries, benefits, rent, and so on) costs, and generate a positive net.
Generating a 40% operating margin means you need to do a good job of pricing and managing costs. A big challenge for events is cost creep. Once the budget is set, you cannot spend more than allocated unless you are going to be generating additional revenue.
The most successful event managers are working to generate a 50% operating margin, thus a stronger net that is their profit and hopefully monies they can invest into their business to grow revenue. If a successful event manager generates $200,000 in a year, the goal is to spend $10,000 on promotion (marketing their business), $100,000 on production, $70,000 on administration, and generate a 10% or $20,000 net.