How to use your corporate events and hospitality to effectively impact the lower half of your organization’s income statement
So far in this series, we have discussed a lot of strategies around rallying the troops to accomplish revenue-focused goals. Part one maintained that you need to proactively strategize and define these goals by involving the important stakeholders from the get-go; Part two revealed some of our favorite tricks to drive incremental revenue from existing customers; and Part three provided some proven road maps to use hospitality touch points to drive new business from prospects.
Part four is all about the bottom half of the income statement.
Specifically, this post is designed to get the wheels turning on how different organizations can use their corporate events to cut costs with vendors or further integrate with strategic partners.
The end result remains the same: enhance profits to the bottom line.
Here are some of our favorite trade practices that look to optimize the return from the outflow of cash through sports and entertainment events.
1 – Start with the Finance Team
As we have mentioned throughout the course of this series (and blog history) it is imperative that hospitality and event managers meet with the various department leaders in their organization to understand their individual goals. But first, we recommend starting with the finance team to get an in-depth look at what expenses are really having the most impact.
Some expenses will be variable, such as Costs of Goods Sold (COGS) and therefore will be directly tied to the amount of revenue produced.
Other expenses are fixed, such as a standard office lease, where the cost will be the same regardless of how often or little you use it.
An event manager that understands the cost basis for their company will be much more adept in their role. To effectively navigate this part side of an income statement is to have a macro understanding of an organization’s priorities – a useful thing when looking to drive those priorities forward through hospitality.
2 – Group Expenses into Groups
Through your discussions with various departments you will be able to identify which suppliers provide various items in your supply chain. Those suppliers can then be categorized based on relevant criteria:
- Are they a fixed or variable cost?
- How much does your organization typically order from them in dollars? How much in quantity?
- How is the relationship structured? Is there a contract in place, or are separate purchase orders and invoices set up?
- How long have they been a partner or vendor to your organization?
Compiling this data into a pivot table helps organize your expense sheet into insights, which in turn helps prioritize requests on event tickets across the organization.
It is also extremely useful in tracking progress and impact of your events for this sector. Make sure you spend the time asking questions that directly relate to the output of cash and cash equivalents in your company.
3 – Give Vendors and Strategic Partners a Place in the Pecking Order
Maybe not as high as customers and low-funnel prospects, but the case could be made that vendors and partners should be considered near the top of the priority totem pole. However, when hosting a counter-party that your organization spends money with, it is important that they all stakeholders understand the attempt to strengthen the relationship beyond the transaction.
For example, when your organization hosts a customer, it is implied that the relationship will continue past the initial transaction to a renewal or an upsell. You certainly do not expect the business relationship to end after spending corporate hospitality dollars towards it. Why would this be any different for the other half of the profit statement, especially when a discounted purchase or long-term settlement can have the same impact on the bottom-line as incremental business?
After completing Tips 1 and 2, you’ll have a better understanding of which levers to pull within your organization to ensure this part of the business is optimized moving forward – and with that ability this segment will take its natural place in the priority pecking order.
4 – Like Always, Track Religiously
All organizations vary. It is imperative that they change with the times or else go the way of Blockbuster. As mentioned in previous posts, this last tip is to track the impact that your corporate hospitality events deliver against your goals. This will define their performance and help to shape the decisions made not only on future hospitality execution but on when, where, and if hospitality is right for your company.
Start with the spend, then measure the KPI’s that were defined from the onset. For more information, please resort back to our first post of this series.
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Remembering that an income statement comes with two halves and that hospitality can directly affect either side is an important practice for hospitality managers. Utilize the steps above to ensure your organization is properly prioritizing and optimizing hospitality against expense items and the bottom line will surely yield a greater result.