Trade Show Business Model Revenues and Expenses
There are literally entire corporations founded on the economics of producing trade shows. That should tell you just how profitable this industry can be, even if you only hold one show a year. But to make money you need to incorporate the right business model and make sure you maximize all of the potential profit streams. Here is a look at the most common revenue and expense items you’ll find in a professional trade show business plan.
- Attendance Fee: This is the price you charge the general public to attend the event. There are several things to consider before deciding on your admission fee. Things like competition projected attendance, and perceived value should all be measured to make sure you don’t lose attendees by over-charging them.
- Exhibition/Vendor Fees: The fee paid by exhibitors to display or market their products at the trade show. Most shows have a tiered-pricing structure based on their booth’s position on the floor. The more prominent the position is, the higher the fee to rent that space. In addition to booth rental fees, vendors also pay for booth upgrades like additional tables, electric access, and audio/visual equipment. These upgrades are typically marked-up by show managers to provide more revenue.
- Sponsorships: Contracting sponsorships for your trade show can be the difference between realizing a profit or a loss at the end of the event. Most sponsor packages include signage placement around the show, premium booth positioning, and the option for sponsors to engage with attendees through the use of free samples or intercom messages. The key to landing lucrative sponsorship deals is to make sure the brand is offered exclusive exposure that cannot be found through other types of advertising.
- Revenue Shares: With a revenue share, merchants give a percentage of their sales back to the show managers in exchange for little or no contractual fees. You see this in the concert industry, where the t-shirt vendors get to set up in and around the arena in exchange for a 25% sales commission. You can work this into a trade show business model by partnering with concession operators or adding a celebrity autograph station.
Trade Show Expenses
- Venue Cost: Every venue is going to charge a rental fee, and each facility will include a limited amount of services with that cost. Comparing venue prices and policies will be crucial to the success of your show. Pay close attention to the contracts and find out exactly what is included in the rental price.
- Booth Setup and Accessories: While you might get to utilize a venue’s tables and chairs as part of your rental agreement, all of the other elements that create a booth (pipe, drape, and table skirting) will likely need to be contracted from an event rental company. The same goes for any audio/visual enhancements each booth might need. Most of these costs will be passed off through the exhibition fees, but any oversights in this category can be costly.
- Marketing: The reason vendors pay an exhibition fee is so they can have access to a large group of buyers. Recruiting attendees is perhaps the biggest responsibility of running a trade show. Even one bad year of attendance can ruin the reputation of a trade manager for life. Thus, marketing plays an essential role in the viability of the business plan. Between internet, radio and television ads, you could easily spend 50% of your budget on marketing alone.
- Administration: It takes a team effort to operate and market an exhibition event, and this requires hiring a staff. You will likely need at least one individual for each of the core management categories: Marketing, operations, and customer support. Keep in mind that you can hire on a part-time or temporary basis to avoid employee benefit costs.
- Insurance and Legal Fees: Risk management is particularly important in event planning since the risks increase with the size of the group. Expect to spend at least a few thousand dollars on legal counsel and liability insurance. It is best to target suppliers who have experience in the event industry, so it might make sense to call other event planners for referrals. Most professional agencies will be happy to give you an estimate at no cost. This will help you budget these costs in advance.
What is the rule of 78 and how does it apply to revenue streams?