5 Important Questions: Is owning an event venue right for you?
Answer these five important questions all venue owners wish they’d asked themselves before you jump into a new venue operation.
Congrats! What a party! Look at the blushing bride!
No matter what vision you have in mind for your new potential foray into the events and hospitality industry, you’re toying with the idea of owning an event venue and wondering just how hard it can possibly be. After all, you enjoy a celebration now and again, right? You know how to manage your schedule and what makes an event great. You have an impeccable sense of customer service. What else does one really need to know to do it well and make an old tired space their shiny new money tree?
As it turns out, there’s quite a bit to know about this industry before you dive in.
Today’s post helps walk you through five (5) of the most important aspects as you begin thinking about starting your own venue:
- Industry Knowledge
- Sales & Marketing
And, just in case you don’t have time to read the entire article today, I encourage you to save the link, print it out and take a look at this free resource we built to help you with venue marketing ideas.
#1 Risk Factor: Capital — Do you really have the money?
Determining the costs of any startup business is a tricky process. Even if you consider purchasing an existing business with an owner that’s ready to exit, both options require some know-how and insight to make your own budget and capital estimations.
Remember, the more sophisticated, polished and detailed your project plan for the venue, the more likely that the process will quickly exceed seven figures. It’s important to be prepared for what it costs to hit the mark and leave the impression you want when you open your doors to potential customers and a host of other industry professionals.
Generally, expenses can be broken down into three (3) simple categories:
- Regular Expenses
However, for event venues, expenses will be easier to consider in these five (5) expanded categories and can serve as the basis of your first estimated budget:
- Physical Assets
- Operational Assets
- Operating Expenses
- Estimated Budget
◈ Category 1: The Building.
First, do you already have access to a commercial property, or do you need to find one? Will you attempt to own your own building, or lease a building from an existing property owner? Both come with their own challenges and opportunities. Consider engaging a commercial real estate broker in your area to ask important questions about what price per square foot they see selling for both commercial leases and purchases. This will give you a reference point about what to expect based on the square footage you require.
Remember, if you plan on doing your own catering, you will need significantly more square footage that isn’t rentable in the building to house the kitchen, walk-in coolers and freezers, ovens and ranges. Catering kitchens also require a significant amount of prep space for large, working teams to plate food and get it out quickly.
If your commercial property requires significant build-out, don’t forget the costs of architects, structural engineers (especially if the property is historic), general contractors, plumbers, electricians, and other specialized contractors for sound, lights, projectors, screens and high-speed Wi-Fi that’s suitable for lots of simultaneous connections. If you’ll have your own parking, don’t overlook the cost of the parking lot and any finishing it will require.
Other spaces to consider adding to your new venue are a bridal party suite, meeting room breakouts and other small rooms for offices, coat check, etc. Also, don’t forget to leave some space for vendor load-in areas.
◈ Category 2: Operational Assets.
While the building and its components are one category of expense, other large-ticket purchases will include things like furniture (tables, chairs, cocktail rounds, etc.), staging, dance floors, audio-visual equipment, building signage and potentially other specific rental items such as podiums, microphones, etc.
Your team will also need a host of supplies such as computers, desks, printers, and similar operational items. If you’re planning on serving your own food, you may also need plates, glasses and silverware.
Think through exactly what your venue operation will look and feel like and jot down every possible item you’d prefer in place as you open your doors. It’s much easier to trim your budget than to realize you’ve forgotten thousands of dollars of items you need to be successful.
◈ Category 3: Operating Expenses.
This category covers the regular operating expenses of the business. Things that fall within this area include utilities, commercial internet and Wi-Fi services, security system monitoring services, linen services, cleaning fees and other business services such as legal, accounting, finance and taxes and advertising. You may also have several other industry-specific tools and venue software purchases.
These are the types of expenses that will regularly occur for the business and should be considered as part of the monthly budget.
◈ Category 4: The Team.
Technically speaking your team’s expense will roll up into your operating budget, but breaking it out in your mind will help you separate fixed aspects of your budget vs. other pieces that have more flexibility.
The team may only consist of you at the start, and you may opt to forgo a salary as you begin to keep expenses minimal for the new venue. Or, you may plan on hiring a slew of sophisticated and experienced venue personnel immediately.
Do some research about what estimated venue manager salaries are appropriate in your area and include what you feel is most likely the approach you will take in your budget. Don’t forget that employees will also require several additional expenses for taxes, healthcare and other benefits.
Independent contractors (1099) may also be an option for you as you start your new event venue, and could be engaged on a per-event basis. Verify your state’s employment laws with your attorney to pursue the option that’s best for your situation.
◈ Category 5: Estimated Monthly Budget.
After you have a strong idea about what the expense side of the new venue will require, it’s time to craft an estimated monthly income projection so you can determine how many months it will take before you hit your break-even point with the new venue.
More research should be completed to determine what rental rates are most appropriate for your new venue operation. You also need to be realistic about how long it will take to start generating any rental revenue as you’re completing your renovation or built-out process. There will likely be a 6–12-month gap in full operational income from a flourishing rental business that is quantifiable and predictable and your capital projections should account for as much.
It’s a good idea to have anywhere from 6 to 12 months’ worth of operating expense surplus on hand in addition to the entire build-out budget with an additional 30–50% margin for unexpected expenses.
So, for example, let’s say you estimate your build-out expenses are $1M and your monthly expenses will be $15K.
You may want to set aside $1.3 — $1.5M for build-out budget, and another $117K — $270K (6 x $15K + 30% margin up to 12 x $15K + 50% margin) for the operating budget.
You can see how having as much as $1.8M available to you versus merely the $1M starting figure might give you significantly more breathing room should anything not go as planned along your venue ownership journey that first year.
Adding an investment partner to own the event venue with you may help minimize your risk and help share the expense of the startup costs associated with this area of the business. It’s certainly an option worth considering if this will be your first attempt at owning and operating an event venue.
#2 Risk Factor: Time— Do you really have the time?
It’s one thing if you’re a seasoned entrepreneur and you’re not clocking in for another employer for a traditional 40-hour work week, but what if you are and your dream involves doing the venue legwork on the side while you keep your day job? No matter your situation, starting your own business requires a significant time commitment, and owning an event venue can drastically alter your work schedule.
Figuring out the time it will take to get started generally falls into three (3) categories:
- General Pre-Venue Research
- Location-Specific Licensing Research
- Event Venue Selling Timeline & Season Research
We spoke quite a bit about the capital requirements of the new event venue in the last section, but in addition to finding the perfect space, there’s the matter of figuring out if the space will work in your area based on a variety of market factors.
General research might involve doing a little digging with some event planning trade organizations and focusing on venue ownership statistics and findings. A number of these organizations are highly respected within the event industry and can give you critical insight into a variety of topics affecting venue owners.
After you’ve learned a little more about the national trends affecting the event industry, you may want to spend significant time researching the licensing requirements for owning event venues in your area. These may include understandable steps such as setting up a new business license with your state, to more nuanced needs like alcohol permitting, space use regulations and building permits, fire code policies, noise ordinances and other matters such as parking and right of use areas around your building.
You need to give yourself enough time to make sure you don’t have any surprises. Alison Faulkner, owner of new event venue The Wilds Wedding and Event Venue in Bloomington, Ind. had this to say about the planning process:
“It took us 18 months to get through county zoning and state mandates before the first shovel could even break ground. After a year of construction, a few inspirational trips…and countless hours of dotting our i’s and crossing our t’s, (the venue) will finally be open for business…”
If you’re lucky, you might also be able to find a venue mentor in your area. If you don’t plan on doing your catering in-house, many area caterers may take you under their wing to help you build a venue that works and doesn’t have any holes in the operations plan from the start. Just be advised that significant income is derived from the catering aspect of the business and you should have a firm catering profit-sharing model in place with any partners to help shore up your revenue model for maximum potential.
It’s also a smart idea to research the 5–10 existing event venues in your area that are most like what you will offer. If there are no venues around you immediately like your own, then find venues across the nation or in your geographic region that are similar and look for ideas and models that inspire you and may work in your own operation. Just be mindful of not outright stealing ideas because the event industry is very networked and a move like that will land you in hot water before you’ve even opened your doors. Your peers will notice.
In addition to all your pre-opening research, there’s also the matter of knowing the seasonality and cycle of booking an event venue. Knowing whether or not you’re focusing on one specific type of event (say weddings) or any number of events (social, corporate, trade, conventions, etc.) will help you determine where to focus your time and energy. Both on setting your official opening date and what month you’ll start accepting events on the calendar.
It’s a smart idea to learn a lot about the most recent stats in the wedding industry as well as key conventions and major events that will happen in your city during the next year.
#3 Risk Factor: Smarts— Do you really have the industry knowledge?
You’ll have a significant leg up on others if you already have extensive experience in the event industry and are bringing that to the table when you start your own venue.
If you can narrow down the style of venue you want to operate, and then focus on the venues in your market that are your most likely competitors, you can better determine how much of a genuine opportunity exists to capture a piece of the pie. What already seems to work well in your city? What gaps exist? Taking time to really think about this will help you focus your attention and have the right vision in mind when you pursue your new venue.
If all that sounds foreign and intimidating to you, don’t worry. It’s just a matter of allowing yourself more time to dig in, learn about the industry and catch up to those who might already have that knowledge readily available. You could also consider engaging an event industry consultant to help you with some of these pieces. You can consult your convention and visitors’ bureau (CVB) or Chamber of Commerce to see if such individuals exist in your area, and you can also ask both organizations about any “wish list” items they have for new venues in the area. Those two groups may be great referral partners in the future if they are engaged early in your planning process.
A quick and easy way to expand your knowledge while you’re still in your research phase is to start by talking to the contacts you know in the event industry and attending the networking events they recommend. People will appreciate it when you take their advice and know you’re serious about doing your homework. There are also countless event industry-related blogs that you can tap to supplement your in-person information gathering process.
#4 Risk Factor: Sales & Marketing— Do you really have the marketing know how?
“The venue sells itself.”
How many times have you ever heard a statement like this and wondered how true it might be…fantasized about it perhaps? In a perfect world, you’d sit back and have (wonderfully charming) prospective clients enter the building. You’d watch them tour the space, be wowed by the work you’ve done (jaws dropping) and sign on the spot to make sure they held their event date immediately.
And, that very well may happen.
But can you bank on it? I’d advise not.
Instead, I’d recommend you spend a significant amount of time learning exactly how to market an event venue. There’s having a loose construct on paper; then there’s having a systematic sales and marketing machine in place that makes sense, works for your team and matches your venue’s vision, mission, style and price point.
Great success in venue marketing isn’t accidental. It’s planned. As you build your pre-launch timeline, leave yourself plenty of room to get to know exactly what you intend to do before you open, as well as your first year of operation to ensure you have a solid foundation in place for venue marketing success.
Proper venue promotion can be time-consuming, and knowing where to focus your attention can be invaluable. If you are short on capital (#1) or time (#2), you’ll be trying to get a lot of work done quickly. Knowing where to focus your attention can make you more efficient and productive, and help you avoid costly mistakes.
Do you know all the free media avenues available to you? How about the tools at your disposal from lead generation to customer relationship management software? And are you up to date on how you’ll need to use social media for your venue and which social media channels will give you the most return for your time and effort?
Understanding exactly what’s involved with the venue business planning process, which leads to a winning sales and marketing approach, can help you leap miles ahead of your competitors. Remember, having the best sales team in town won’t matter if the venue is not adequately marketed to the public and industry pros alike.
People must know about the venue first, and it needs to be easy to find online before the sales team can apply their fancy sales techniques to those curious would-be customers who show up at the space.
#5 Risk Factor: Partnerships — Do you have help?
No one is going to step in and do the legwork to open an event venue for you, but having people you can count early in the process does make things much easier.
Who do you already know in your market that may make a good vendor partner? With more than 20 vendor categories to choose from in today’s large event setups, you’re sure to find a “starting squad” that can help you out with some basic questions and tips about how to navigate the process in your area.
When you think about your starting lineup, the next most natural consideration is your own team — the venue’s opening staff. While it may seem premature to think about staff this early in the venue planning process, it may be helpful to think about the roles you would want to be filled either on a part or full-time basis, and those you suspect may be a limited-duration contract role. (We mentioned this above in Risk Factor #2 about budgeting.)
You’ll also want to think about the type of environment and culture you establish for your team. How strict will policies be for team members? What sort of schedule will you keep for the venue in those opening months? Having a handle on this before you start recruiting may make finding the right people easier and faster, and help you find the best fit sooner.
Wrapping It Up. Lots of Risk. Lots of Rewards.
After you’ve considered all these risk factors and you feel comfortable finding ways to lessen them, it’s time to take the next logical step to owning your event venue.
It’s time to move from your pre-planning phase to your “doing” phase. Call the real estate broker. Get your lawyer, banker and accountant on the line. You’ve got a new venue to open and a vision to share with your city. You’ve got a venue business plan to write and a new budget to build, and there’s no time like the present.
You’ve got a new title to add to your new business card — venue owner. And the only thing standing in your way is how soon you start working toward your goal of venue ownership.