Justifying Project Management Fees
by Dan Cantor
Pricing models continue to evolve for full-service exhibit houses like ours, which have been diligently facilitating small and large trade show programs for decades. It makes sense on many levels that our historical reliance on mark-ups for project management compensation should evolve into more of a fee-based model. This transition continues with each new client contract, and can have negative financial ramifications if we don’t fully appreciate exactly which organizational activities these fees should cover.
It is easy to assume that the various margins generated in disparate areas of our businesses are adequate to cover the indirect costs that we incur every day. Here are some questions that might be relevant during the process of determining and justifying project management fees:
- Are we charging separate fees for the strategic counsel provided by account leaders, or is that time considered to be included in project management or account management?
- Are transportation arrangements handled by project management, or a separate logistics function that should be covered by the project management fee?
- Are we capturing the time that designers, engineers and detailers spend on individual events (separate from discrete design/build projects)?
- Are we capturing the time that logistics or warehouse personnel spend in meetings (separate from the physical handling of properties)?
- Are administrative, accounting and coordination activities assumed to be covered by the project management fee?
- How are we covering department managers’ time, spent in meetings regarding event execution?
It’s not practical to behave like a law firm and track every minute of exertion in our business – but it is imperative that we maximize our awareness of indirect costs to maintain margins, as we are more compelled to rely less on mark-ups. We should also take a lesson from our agency friends, and recognize the true market value of individual roles.
If we are diligent about this effort, it is easy to justify reasonable project management fees, since we can be transparent about the extraordinary work that we do and who does it.