The Typical Process: For most competition hosts, the budgeting and pricing process looks a little like this:
- Look at the pricing for similar competitions in the area and match or beat the price.
- Quickly come up with an estimate of costs by considering the cost of t-shirts, prizes, and your software system.
- Estimate your profits by multiplying the price by your best guess at total attendance,which we will call 150 people.
- Subtract your costs from your revenues and you’ll generate a nice healthy profit in the neighborhood of $6k-$10k.
The Issues with the Typical Process
While you might be able to get away with this approach, there are some major flaws that are unnecessarily adding risk and reducing profit.
Issue 1 – Pricing before budgeting.
Budget should drive the pricing, NOT the other way around. For example, if you are renting a stadium, bringing in extra equipment, and giving away healthy cash prizes, your budget will be much higher than if you are using your own gym, equipment, and giving away prizes that were donated to you. Logic would follow that the price for the stadium event will and should be higher than the one in your own gym. Heck, you may even want to charge spectators!
On top of all of that you need to build in profit of course!
All of that said, there is a bit of a back and forth between budget and pricing. Run your budget first, add in your profit, and see what pricing comes out to. If it’s too steep, cut some of the non-essential items in the budget.
Issue 2 – Missing key costs.
There are far more costs to consider, budget for, and make hard decisions about than what you realize. For example:
- Paramedics and Police – Running a competition without paramedics should not be an option on the table. You likely won’t need them, but if you do, you, the athlete(s), and your business will be glad they are there. Similarly, if there is a ton of traffic on a major road you may need a police officer to handle that.
Insurance – you need it and it’ll cost you about $450.
- Marketing Costs – if your competition is new, you will have to market it. We are talking logo design, ad design, printing costs, social media ad costs, etc. The good news is this line item will shrink each year as you build a following.
- Personnel Costs – there will be a lot of effort planning this event. Even if you or your current staff is doing it, you have to account for the opportunity costs. These costs can be as straightforward as the coaching costs you incurred to free yourself up to plan this thing, or the cost to your business because you took time away from marketing, retention, etc. Those costs are real and should be accounted for.
- Hospitality – Your competition can’t happen without volunteers and judges, so make sure they are appreciated and will want to come back next year. It’ll cost you money in terms of food, drinks,and perhaps some swag, but it’s worth every penny.
- Toilets – look we’ve all been there. On competition day the butterflies are fluttering, which makes the facilities quite the popular spot. Yes, you have toilets inside your own gym, but do you have enough and do you reeeeeeally want to clean them after? It’s well worth your time to simply rent porto potties….trust us.
There are plenty more of course, so we suggest using our template to cover off on most of them.
Issue 3 – No contingency
No matter how well you plan, things happen that you just can’t forecast. What happens if registration numbers are only half of what you projected? What happens when a random cost pops up last minute or the thing you budgeted $200 for ends up costing $800?
If you have contingency then you will be fine!
Do this in two ways.
First, add a contingency item to your budget that is 15% of your total estimated costs. 15% is super conservative and you will likely not use it, but it will be there if you need.
Second, run three registration scenarios – worst case, expected case, and best case. Many costs and revenues are affected by total registrations. Your worst case should be the lowest amount of registrations you need to make this event worth doing. Your expected case is your best guess and your best case is the max number of athletes you can handle.
First time competition hosts tend to be eternal optimists (typically a good thing!), so if it’s your first, expect the actual case to be somewhere between the worst and the expected.
Doing It the Right Way
It’s great to know the common missteps, but it’s even better to know the correct process! The great news is we’ve templated everything for you.
- Download our budgeting/pricing template. It has almost every cost you’ll encounter.
- Fill out the budgeting template (we’ve included approximate costs but check them in your area) and adjust the pricing to produce the profits you want.
- Check the pricing vs. other competitions locally. If it’s higher but there is good reason, then you are right on. If it is considerably higher than the rest but very similar to the rest, then make some budget cuts.
If you need any help with this, feel free to book a free 15 min consult with us and we will be glad to assist.