Profit Margins For The Wedding Industry
This topic is largely speculated in the wedding industry- and one of the biggest questions we get asked from students is ‘How Much Should I Charge For My Services?’
Well- the question really evolves around how much profit you will make for the job. To further expand from the previous module, this unit will cover the topic of profit.
Event profitability is a closely guarded secret… its actually how much you are really making from the job or service or product- once you take out all your costs..
Here is an example…
The client is paying you $20k to design their event
your cost budget for this event is $12 k… meaning you have $12k to spend on materials, labor, etc.
If you track your profit and cost margins (and you should), you’ll know that a $20 k wedding sale minus $12 k in costs, leaves you with $8 k… or a 40% profit margin. Nice!
You need to have a profit margin benchmark when preparing to service your client… this applies to you whether you are an event designer, or a photographer, or a filmmaker, or a stationer. If you’re a filmmaker, you need to know upfront how much money you have to work with when hiring a second shooter, when outsourcing to an editor for post-production. How much of a cost budget do you have to work with for a $5k job vs. a $10k job?
And… then… the trick is to manage that event’s cost budget… watch it closely. Being successful and profitable with events is so heavily reliant on that profit margin… the bigger the better. (We aren’t selling bulk widgets here at 10% margins… services need to have large margins.)
What’s a ‘good’ profit margin? Ahhh… it depends on so many factors: what you do, what you sell, who your clients are, what your overhead expenses are, how much you want to earn from your business. You need to find that profitability sweet spot that works with YOUR business model!
________________________________
*Profit Margin is calculated like this:
Gross Profit / Sales = Profit Margin %
or
Profit from one event / Sales Price = Profit Margin %
Industry Averages…
What your profit margin is really depends on the value that your client has for the product and service, and how much they are willing to pay. You need to consider your costs involved in delivering that service, to know how much you can really charge the client. Here are some examples below:
Industry Examples
Wedding Planner Service Profit Examples:
If you are a wedding planner, doing on the day wedding planning and coordination, and overseeing suppliers and …
Your invoice total is: $2,000 – then your profit margins should be high, as your costs will be low- as it is mainly your time that the client is paying for. So you should be aiming for a 70-100% profit margin. ( so you will make after your costs a minimum of $1,400 up to the full $2,000.)
If you are a wedding planner doing full wedding planning, and booking in the suppliers, and using the brides full wedding budget- of say $30,000…
Your invoice total is $30,000– then your profit margins should be low, as your costs are high. You are booking in multiple services on behalf of the bride, and you are really just managing her budget. Your profit margin should be at least 10%- and you may get up to 30% if you are able to get some really great deals for the bride, and get better pricing from the suppliers.
Wedding Decorator/ Stylist Examples:
If you are a wedding decorator/ stylist, you will have additional costs involved in your invoice, as you need to provide the decorating items that are in your invoice. You may already have a large amount of supplies already in your warehouse that you use all the time, but there will be additional costs specific to the wedding- like candles, casual staff to help set up the wedding and give you man power, linen, and any fresh flowers. You may even have laundry or cleaning costs of cleaning the vases/ candle holders after the wedding.
Presuming say you have the decoration stock for the reception/ ceremony styling already, (and your not buying it specifically for the wedding)
Example 1:
Lets Say Your Invoice is- $2,500 for the Reception Styling:
Your costs are:
Fresh linen table cloths- $120
Casual Staff- 3 hours- 2 girls= $120
Fresh Flowers- $80
Tealight Candles- $20
Washing- chair bows- $20
Total Costs= $360
Profit = $2,140
Profit Margin= 84%
Example 2:
Lets say its the same wedding details as above, but you have to buy some of the decorator supplies to do the job. Lets say you have to buy the vases that the flowers go into, and the tealight candle holders, and a wishing well. Because you are buying your decorator supplies at wholesale price, this allows you to still have a good profit margin. You can also keep the vases after the wedding, and use them again for another wedding.
Your costs this time are:
Fresh linen table cloths- $120
Casual Staff- 3 hours- 2 girls= $120
Fresh Flowers- $80
Tealight Candles- $20
Washing- chair bows- $20
Glass Vases: $240
Tealight Candle Holders: $70
Wishing Well: $120
Total Costs= $790
Profit = $1,710
Profit Margin= 68%
Both are acceptable Profit Margins, and even at the lower profit margin, you are building your stock that you can use again.
Retail/ Product Profit Margins:
With retail or products that you are selling, you should aim for a minimum of 50% profit margin- to 70%.
So- if you sell a wedding favour for $5, your profit should be at least $2.50. This means- you should be buying your wedding favour or bonbonniere for $2.50 or less.
DIY Hire Items- Profit Margins:
For the DIY hire market of the industry, your profit margins will be close to 100% after you purchase the item.
You hire price should at least be 30% of the cost of the item to buy.
This means- after 3 hires- you have the item full paid off, and you are making a profit,
Here is an Example:
You buy a beautiful arm chair/ french provincial chair- to hire out for weddings and events as cocktail furniture.
The arm chair cost you $800 to buy.
Your Hire price for the arm chair should be at least 30% of this cost- which is $240.
Here is another example:
A Wedding Easel and Frame costs you $150 to buy. ( $70 for the easel and $80 for the ornate frame)
You should hire the Easel and frame out for at least $45.
Of course- if the market allows you to charge a higher hire price then this- go for it! But the minimum you should charge is 30% of the cost of the item for you to buy. You also want to make sure that before you buy an item- that it will be popular enough to get more than 3 hires! ( because remember- you only start making real money after 3 hires!)
Profit Planning By Working Out Your Average Price
Not achieving your financial goals? There are so many factors that go into profitability and financial sustainability in a small business. In the wedding business, pricing is a critical component… NOT ONLY how you are priced, but also the profit component that you make per wedding.
You may have incredibly solid pricing structure and strategy. But the mix of products (or services) that you end up selling matters just as much.
Here’s an example of how it works… (and for purposes of this example, we’ll work with round numbers)
You have 3 ‘packages’:
PACKAGE PRICE PROFIT PROFIT MARGIN %
- $2500 $1800 73%
- $5000 $3000 60%
- $8000 $5,000 62.5 %
How To Plan Your Profit:
Using the information above, the average package or invoice price is ~$5000, but the profit is $3,000.
So, if you want to make $80k salary this year, you need to set a target to do 26 weddings, with a gross sales/ invoice target of $133,000.
Make sense?
Assessment:
1. Devise package pricing and individual pricing for each of your products and services you will be offering in your business. Work out your costs to provide each service, then work out your profit margin. If your profit margin is too low- compared with the examples above, raise your package price to give your self a better margin.
You can use an excel spread sheet to calculate your costs, and profit margins, and use it to refer back to in your business.
Send your pricing lists and profit margins in to admin@lamodecollege.com.au to gain feedback.
2. Plan a target of salary or profit that you want to earn for the next year, and work out how many events or hires or products you need to sell to make your desired profit target.