Are your event tickets selling like hot cakes? It’s super exciting to be at the helm of a successful event, but handling fast growth can be challenging.

Should you push your resources to increase your capacity or do you turn paying punters away? It’s always a tough call, but expanding too quickly can put you at risk.

The key, says Philip Sax, EMEA Finance Director at leading international event agency First Protocol, is managing your cash flow.

First Protocol has offices in London, New York, Los Angeles and Singapore, employs more than 150 people and has an annual event spend of $35 million.

Here, Philip explains how to balance money out vs. money in as you scale up your event.

Why is cash flow so important to a successful event?

“In the short term you can operate at a loss. Businesses don’t fail in the short term for making losses; they fail by running out of cash.

“It’s cash that’s actually king, so in all decision making and planning to be successful you need to think about your cash position and your cash flow.

“That’s why it’s vitally important in small to medium size businesses that generally don’t have big backers or shareholders or access to bank funding to manage their cash flow for short term, medium term and long term.”

Related: How much is your event worth?

So you should be thinking about cash flow from the outset?

“Yes. It is as important as planning the overall budget for the event, so that should be the overriding consideration. You have to plan for the ins and outs of cash quite early on to think through the whole process.”

Related: How to get your event budget planning right

A major problem is having to make considerable outlay prior to securing ticket money. How do you handle this?

“Our business is slightly different in that we don’t tend to sell events that are ticketed. However, the principals are the same. You need to figure out how you’re going to get your clients to pay early or as early as possible.

“We ask clients for a deposit or payment in advance, which is at least 25% up front upon booking of the venue, and then maybe two or three subsequent stage payments and then a final invoice once we know the final cost of building the event.

“The key message is that we need cash up front because we can’t pay out to our suppliers with the risk of not being paid by the clients. That will be the same for a small event or a mega event, although obviously the risk is far greater if it’s a huge event. It’s even more imperative that we are able to secure an advance payment.”

In the case of a paid event, then, should organisers encourage early payment by offering early bird deals, to get cash coming in?

“That’s the way I’ve seen a lot of organisations do it. They’ll aim to get a minimum number to cover their outgoings by offering discounted tickets up front.

“There are other concessions that can be bundled in to encourage people to book early. The thought process is finding ways to encourage positive cash flow at the beginning.”

Related: 7 Ways to create special offers with wow factor

So, if you have exhibitors, for example, you can get them to pay their deposits down to confirm their place?

“Yes, that can be another technique. Again, that confirms their commitment because they’ve used their resources to book their slot. If you’ve got people presenting services or offering to sell their services at a particular event then yes, you can get them to make a deposit that way. Again, that’s toward your cash flow.”

What about when organisers are buying services, can they negotiate the terms to be more favourable?

“Yes, you’d look to do that, but you don’t want to get into a situation where you’re paying them late, which causes them problems and then they may not want to work with you in the future.

“You want to pay them within their terms, but perhaps you don’t want to pay them early, so you pay them towards the end of their credit period, not at the beginning.

“It’s important the company does not get a reputation for not paying promptly. It might help in the short term, but long term it probably doesn’t do the reputation much good.”

Related: How to negotiate with anyone

Is shopping around important when booking suppliers to make sure you are getting the best prices?

“We have a preferred suppliers list – people that we’ve worked with over a number of years that we trust and they trust us. However, if we were required to work in a new location, we would shop around, probably tender with a few suppliers in an area.

“Of course, the cheapest may not be the best. It’s more than just looking at a price, it’s looking at service and reputation and ability to deliver a whole lot of criteria.”

Related: How EventProfs can build and benefit from strong supplier relationships

Would it be a risky strategy to hold off soliciting some of the key services until later in order to preserve cash flow?

“It depends how many suppliers you have to choose from to deliver the services. If it is only one person you can go to and you know they’re going to get booked up if you leave it too late, you risk not getting the right support.

“This is not a problem if there is a hundred to choose from, then you can wait till later because you know that you are going to actually find somebody. I think it just depends on your bargaining power and how many suppliers can offer the level of service that you think you need.”

What about growing your team – how do you manage staffing?

“What you don’t want to be doing is having people on your payroll that aren’t able to earn you income because there is no work. Although you are only committed to them for their notice period, the hiring and firing approach probably isn’t very good because it damages your reputation and a good reputation is essential in this industry

“There are some advantages in having a permanent full time headcount, because they have loyalty to the company and they understand the company culture, values and operating processes but there is obviously a risk of having too many people.

“Another approach is cultivating a pool of freelancers that you like. If you do reach a peak you know you can tap into that pool and know you’re going to get a good level of support. That also gives you some flexibility with your workforce.”

Related: How to manage a fast growing events team

What are the other biggest overheads that must be managed?

“After staff, it’s probably going to be your office space. You generally can’t upscale or downscale your office space pretty quickly. You tend to be tied into leases for a period of time, so you don’t want to commit yourself to anything too expensive. Flexible working or working from home can help mitigate the expensive costs of office space.”

Are there any other tactics event organisers can use to manage their cash flow?

“Some people may be able to negotiate an overdraft facility with a bank. That can be expensive, so you’d probably prefer not to do that. But if you are able to negotiate a reasonable facility, that does give you a bit of a contingency.”

Related: 8 Ways to finance your event idea

Conclusion

Never forget cash is king! Consider your cash flow before making any big commitments and focus on ways to get money coming in as soon as possible.

Encourage early bookings with discounts and incentives, and release that income with Eventbrite’s Early Payments to fund your growth plans.

But don’t forget, when managing your own cash flow also be respectful of your clients’ and suppliers’ positions. They have cash flow to protect too and a maintaining a good market reputation is essential for a sustainable business.