Figuring Finances for Events

Planning a new event can be fun and exciting. But how do you estimate the finances for something you have never done before? How do you respond when the committee chair asks the question you know is coming: “How much can we spend, and how much do we need to make?”

Depending on the PTO’s annual budget plan, your response might be: “Just break even.” Or you might say, “It doesn’t really matter how much you spend as long as you make $300 net profit.” Or “Cover your costs with ticket and food sales, plus the PTO will spend another $200.”

You then might feel that you have answered the questions, but does that information really help the chairperson? There is a way you can create a tool that will help keep the event on budget, give you some peace of mind, and collect data that will be extremely helpful in the future.

Spring Family Night

Last year our PTO board proposed to revamp the annual spring family night. It was time to try something new, but we wanted to leave most of the detail planning to the committee.

So when we established the PTO’s budget early in the year, we had no idea what form the new event would eventually take. Our decision was to set a fairly conservative target of $300 in profit, based on results from the traditional spring dance that we were replacing.

A couple of months later, the committee announced plans for a family bingo night. As expected, one of the first questions asked by Terri, the committee chair, was, “How much can I spend, and how much do we need to make?” I reminded her that the budget was $300 in profit, but I did not have a good answer for how much she could spend. “Of course,” I said, “that depends on how much you expect the event will bring in.” You might wonder what that was supposed to mean. Fortunately, Terri appreciates the value of a good plan, and as soon as her committee started to formulate theirs, Terri started to build the Bingo Night cost model, which gave us all the information we needed.

The Model

The cost model is a simple spreadsheet that tracks projected and, later, actual costs and income for an event or project. A cost model can be built for any event that generates costs, but the technique is particularly useful for any large, complex event that could put the PTO at financial risk.

The treasurer can help the committee stay on target by providing the basic structure of a cost model. The committee chair or another numbers-oriented member of the committee should keep updating the spreadsheet as plans firm up, eventually developing an accurate history of the costs and income for the event.

Along the way, the cost model will allow the committee to see financial problems before they become crises. The committee will have time to adjust its plans, if necessary, rather than coming to the board with difficult or embarrassing financial news.

You can create the spreadsheet on paper, but a computer-based spreadsheet tool such as Microsoft Excel will make the job vastly easier. (You can also make this and other tasks easier by using PTO Today Finance Manager, easy-to-use web-based software for managing and organizing your group's finances.) Electronic spreadsheets can also be emailed among committee members and the officers. An example of our Bingo Night cost model is shown here (Spring Family Bingo Night, below); you can also download a blank family event cost model spreadsheet from the File Exchange.

Building a Cost Model

When you begin to build a cost model, start with your best guess of the costs and income for your event. The committee had several meetings at which they brainstormed ideas for Bingo Night. What kind of food should we serve? Should we sell dinner tickets or charge a la carte? How many people do we project will come? Should we have other activities besides bingo and dinner? Where will we get the bingo supplies? The basic questions and early decisions formed the basis for the cost model.

The first draft of the Bingo Night cost model had just a few lines of information: projected ticket sales, hot dog cost, taco cost, decorations, and bingo supplies. Even in a simple cost model, it is important to notice that some costs are variable and some are fixed.

In our case, the variable costs were influenced by the number of attendees we predicted. Specifically, food cost depended on attendance, because we would only buy enough food for the number of tickets sold in advance. On the other hand, the costs for decorations and bingo supplies were fixed because these costs were not influenced by another factor. For example, we expected to spend $50 on decorations no matter how many people bought tickets.

The spreadsheet includes fixed costs as estimated by the committee. For variable costs, we multiplied the unit cost (in this case dollars per person for specific food items) by the key factor (number of tickets sold). For example, cost for hot dogs was 33 cents apiece. We expected to sell 390, so the projected cost for hot dogs was $128.70.

We decided to give people a choice between soda and bottled water. We projected that half would drink soda. At 25 cents per can times 195–half the expected attendance–that’s $48.75. Water we could get more cheaply, 13 cents a bottle. Times 195, that equals $25.35. Total beverage cost, $48.75 plus $25.35, was projected at $74.10.

Even in the early versions of the cost model, the committee chair was sensitive to the goal of $300 in profit. She added a line for income (projected number of tickets sold times price per ticket) and compared the total projected costs to the projected income. Terri knew that as long as the projected profit was at least $300, her committee was staying on target financially.