Discover how to conduct a cost-benefit analysis for your next corporate event to evaluate financial viability and return on investment. Prove your event’s worth and showcase its value as a wise investment to decision-makers.
Read time: 5 – 8 minutes
Return on Investment: Steps to Success
Learn how to determine the financial viability and return on investment of your next corporate event by conducting a cost-benefit analysis.
This article outlines the steps to conduct an effective cost-benefit analysis, including defining your event’s purpose, identifying, and measuring all costs and benefits, choosing an appropriate discount rate, conducting sensitivity analysis, and using key metrics to evaluate financial viability, such as net present value, benefit-cost ratio, and internal rate of return.
By following these steps, you can prove the worth of your event to CEOs and decision-makers and showcase its value as a wise investment.
Key takeaways:
- Metrics to evaluate financial viability and return on investment for your next corporate event
- How to identify, measure all costs and benefits to prove viability to CEOs or decision-makers
- Cost-benefit analysis for successful corporate events
Cost-benefit analysis: Start here
Hosting a successful corporate event can do wonders for your business, especially when it comes to connecting with clients, customers, and partners. It’s a powerful tool for showcasing your products, generating leads, and building valuable relationships.
However, the high cost associated with organising such events often raises concerns among CEOs and leaders, who may question the return on investment.
To win over these decision-makers, it’s crucial to conduct a cost-benefit analysis that will prove your event’s worth as a wise investment.
What is cost-benefit analysis?
Cost-benefit analysis is a powerful tool for decision-making because it helps people to make better, more informed choices by weighing the potential costs and benefits of different options.
In simple terms, it involves identifying all the costs and benefits associated with a project, measuring them in monetary terms, and comparing them to determine whether the benefits outweigh the costs.
Example event
Let’s say a company is considering hosting a product launch event for their new line of luxury watches.
The event would include:
- a presentation and aspirational video about the new products
- a cocktail reception
- and a fashion show featuring the watches
Cost-benefit analysis: A step-by-step guide
To conduct an effective cost-benefit analysis and determine the return on investment for such an event, you would need to follow these steps:
1. Clearly define your corporate event
Define the event’s purpose, target audience, and key objectives. This will help you identify the potential costs and benefits associated with the event. For example,
- Purpose: the event is a cocktail reception and fashion show to launch a new luxury watch
- Audience: high-end clients
- Objectives:
- to create brand awareness
- generate sales leads
2. Identify and measure all costs and benefits
Identify both direct and indirect costs and benefits as part of your process of determining the event’s return on investment.
Direct costs might include:
- Venue rental
- Catering
- Decorations
- Technology
- Content development
- Marketing and advertising costs
- Event management and production
Indirect costs might include:
- Staff time for planning and executing the event
- Travel expenses for staff and attendees
Benefits might include:
- Sales revenue generated from the event
- New customer leads
- Increased brand recognition
- Positive media coverage
- Networking opportunities with industry professionals
Once all the costs and benefits have been identified, they would need to be measured in monetary terms. For example:
a) The value of increased brand recognition could be estimated based on industry benchmarks for the cost of brand exposure.
b) The sales revenue generated from the event would be estimated based on the number of attendees and the expected sales volume per attendee.
After measuring all the costs and benefits, you would need to compare them to determine whether the benefits outweigh the costs and whether your organisation can justify the return on investment.
3. Choose an appropriate discount rate
To conduct this analysis, you would also need to choose an appropriate discount rate that reflects the time value of money and the risk associated with the event. The discount rate is the rate at which future costs and benefits are discounted to their present value.
Let’s say you decide on a discount rate of 10%. This means that any costs or benefits that occur in the future will be discounted by 10% to reflect their present value. For example, if the company expects to generate £100,000 in sales from the event one year from now, this would be discounted to £90,909 at a 10% discount rate (£100,000 / 1.1).
Choosing an appropriate discount rate is important because it reflects the time value of money and the risks associated with the project. A higher discount rate would reflect higher risks and lower future value, while a lower discount rate would reflect lower risks and higher future value.
4. Conduct sensitivity analysis
In conducting sensitivity analysis, you could vary assumptions to test the robustness of the results. For example:
- the number of attendees
- the conversion rate of leads to sales
- and the cost of catering and entertainment
This will help identify potential risks and uncertainties associated with the event and work to mitigate these risks.
5. Use key metrics
The company could use metrics such as net present value (NPV), benefit-cost ratio (BCR), and internal rate of return (IRR) to evaluate the financial viability and return on investment of the event. These metrics provide a clear picture of the project’s financial viability and can be used to compare different projects or policies.
- Net Present Value (NPV): This is a financial metric that takes into account the value of future costs and benefits of a project or investment, and discounts them to their present value. In simple terms, it helps you determine whether the costs of the event outweigh the benefits or vice versa. If the NPV is positive, it means that the benefits outweigh the costs, and the event is financially viable.
- Benefit-Cost Ratio (BCR): This is another financial metric that compares the total expected benefits of a project to its total expected costs. If the BCR is greater than 1, it means that the benefits outweigh the costs, and the event is financially viable.
- Internal Rate of Return (IRR): This is a financial metric that measures the profitability of an investment. It represents the rate at which the present value of future cash flows equals the initial investment. If the IRR exceeds the discount rate of 10%, it means that the event is expected to generate a higher return than the rate at which the future costs and benefits are discounted.
For example, if the NPV is positive, the BCR is greater than 1, and the IRR exceeds the discount rate of 10%, it could be determined that the event is financially viable and should be hosted.
A strategic, data driven approach to return on investment
When it comes to hosting a corporate event, the stakes are high, return on investment is crucial. Not only do you need to impress clients and partners, but you also need to convince your CEO or other decision-makers that the return on investment is worth it.
That’s where a cost-benefit analysis comes in. By taking a strategic and data-driven approach, you can determine whether the benefits of the event outweigh the costs and deliver a positive return on investment.
Ensure Return on Investment with MGN events
The bottom line is this: hosting a corporate event can be a powerful tool for building relationships, generating leads, and showcasing your products.
But it’s important to approach it strategically and with a clear understanding of the potential costs and benefits. By conducting a thorough cost-benefit analysis, you can make an informed decision and ensure that your event is a smart investment that delivers results.
MGN events can help you plan an event that will deliver the return on investment that you need. Check out our corporate case studies or for more tech inspiration for your next event, contact our team via the form below, via 01932 22 33 33 or by email hello@mgnevents.co.uk. Let’s empower your workforce to thrive!
Further reading:
Employee engagement and retention trends 2023
5 amazing and cost-effective employee engagement tactics
Planning a conference? Why not make it an unconference instead!
6 ways hybrid events keep companies on track
How events can help build a resilient workforce
6 Creative Event Ideas for Amazing Corporate Events
6 reasons companies should have a hybrid employee event strategy
7 great ways to improve employee well-being at internal events
References and sources:
The remarkable intellectual achievements of William Baumol | CEPR
Policy Analysis | Concepts and Practice | David Weimer, Aidan Vining | (taylorfrancis.com)
