How to Write a Race Budget
Knowing how to write a good race budget is critical if you want to avoid costly mistakes and big headaches down the line.
In this detailed article we'll help you understand how to best approach your race budgeting and how to maintain good budgeting discipline throughout the event planning process.
At the end of the article, you'll also be able to download our free race budgeting template to help you quickly and safely build a budget for your race.
Before you begin
There are some important rules to keep in mind as you prepare to write your race budget:
- Understand how your legal structure will affect your accounting. In some cases, how you account for things like in-kind sponsorship, some expenses and your overall profit will depend on whether you organize your event under a nonprofit, charity or private company. Make sure you are clear about the correct way to account for all budget items before you begin, if you want to avoid unpleasant surprises. If in doubt, consult your accountant.
- Be honest with yourself. You want to make your race work, so you might be tempted to make some optimistic assumptions about your budget! It's understandable. But do try to be honest with yourself when estimating costs and revenues. Make a point of updating both as you collect more quotes and get a better handle on registrations, even if they don't always turn out the way you expected.
- Aim for transparency. Obscuring or missing items in your plan is a slippery slope that ends in disaster. Make sure what's in your head goes in your plan and put down even the most obvious budget item, however small in value.
- Understand how you will make money. Your participants will want their money's worth, which means you'll end up spending a big chunk of their entry fee on swag, event safety, staff and the overall race experience. Perhaps you plan to subsidize some of these costs through sponsorship. Whatever your plan, make sure you know how you will make money from your race and how many participants you will need at a minimum to make money or break even.
With all that in mind, let's take a look at some important challenges you'll face during the budgeting process.
Working with uncertainty
Learning how to handle the intrinsic uncertainties in building a race budget is key to avoiding disasters down the line.
If you are planning a new race - or even if you're not - you should be particularly careful about estimating things like participation, which feed into just about every line item of your race budget. Get this wrong and you're in for a bumpy ride.
Because participation is such a key variable to building any race budget, many people like to recommend using a conservative number (i.e. erring on the side of caution) to avoid downward adjustments as actual participant numbers come in.
That is definitely preferable to being too aggressive with your participation estimates, but it does risk putting you off the whole thing, if your conservative participation numbers end up being too low. Instead, we would recommend aiming for realistic estimates.
To get a handle on participation in the absence of any data from previous events, try benchmarking your event against similar events in their first year. Look for events with the same distance, location and size, and prefer data from recent events over data from older ones, as the industry keeps evolving and data from a race ten years ago may not provide the right indicators for your race.
Lastly, if you have to - or want to - be conservative, try to be reasonably so. Take your benchmark data and haircut it by 10%-20%. Fight the urge of making worst case your base case scenario.
Estimated vs actual numbers
One of the best habits you can pick up when writing your race budget is to distinguish between estimated and actual cost/revenue numbers in your plan.
An estimated number is your best guess at what an item will cost or make for your race. An estimated number becomes an actual number when the cost or revenue for an item is confirmed, for example, by obtaining a binding quote from a supplier.
There are many ways to manage estimated vs actual numbers in your plan. Our preferred method is color-coding. Use one color to highlight numbers that represent cost/revenue estimates and another to highlight numbers that represent actual cost/revenue numbers. That way, you can also easily inspect your budget for remaining estimates that will need pinning down as you approach race day.
We touched on participation estimates a bit when we discussed working with uncertainty in your budget. Now let's go back to this very crucial aspect of race budgeting and look at things in a bit more detail.
Estimating participant numbers is tricky. It's particularly tricky for first-year events with no data and no track record (though there too there's things you can do, like benchmarking, as we discussed above), but it's tricky nonetheless for any event, whatever it's history and past performance.
In other industries where forecasts are made on the back of uncertain information, people sometimes choose to conduct so-called scenario analysis on the situation. This simply means tweaking the number of participants and seeing what the impact is to your budget at different participation levels. (That's exactly what our race budget template helps you do.)
There's two specific types of analysis you should do in your budget:
- Min/max analysis What do your race economics look like at your most optimistic and most pessimistic predictions for participation? This doesn't mean 0 and infinity, by the way! Use reasonable lower and upper bounds for the number of participants you realistically expect to achieve. Is the worst-case scenario close to something you can leave with? Is the best-case scenario barely OK? These are questions you want to be able to answer.
- Breakeven analysis How many participants do you need for your event to break even? This is a key figure and you should recalculate this throughout the budgeting process as actual figures come in. Keep your eye on that magic break-even participant number - reaching it can mean you can no longer lose money.
Remember when we said you need to be transparent in your budget? Well, sponsorship is a good example of where good practice goes out the window.
Many inexperienced organizers will tend to overestimate the amount of value (either through cash or in-kind contributions) they can generate through sponsorship. There are many reasons for this: poor transparency on sponsorship deals, difficulty of benchmarking against other events and, in some cases, a bit of naivety on the part of the organizer.
Because sponsorship amounts can dramatically shift the overall picture of your budget, you should be very very careful about the assumptions you make on sponsorship. And there are some good practices you can adopt to keep yourself honest:
- Add all your cash sponsorships into your budget at a probability adjusted level. If you expect the sponsor to pay $1,000, don't go ahead and put $1,000 into your budget revenue. If discussions have just begun, put only $100 into your budget, if that (the full $1,000 adjusted for a probability of success of 10%). That way you won't be left with a big hole if the sponsorship collapses. As your sponsorship discussions progress, adjust your probability of success (and your sponsorship revenue estimate) accordingly.
- Add in-kind sponsorships as an adjustment on items you expect the sponsorship to cover. This is also something our race budget template allows you to do. If you have agreed with a sponsor to pay the cost of - or contribute directly - the medals for your event, say, $2,000, don't simply delete your medals line item from your budget. That way, you lose transparency into your costs and confuse a cost item with a (dubious) revenue item. Instead, keep your medal costs as they are and add a negative adjustment to it that reflects the probability-adjusted in-kind sponsorship you expect to receive for that item.
If you're struggling with securing sponsorship for your event, try our Sponsor Finder tool for a list of suitable sponsor matches you can apply to online.
Taxes & other indirect charges
Many budgets, business plans and dreams have come undone on the point of taxes. Don't let that be you.
You should always be on the lookout for hidden taxes and other charges that you may not know you should charge your customers or you may not know might be added on your quote by your vendors.
Ask yourself (and your accountant and your vendors) this:
- Is the price in my quote from a vendor the actual final number that I will have to pay? Will VAT or other taxes have to be added to that price? How does my legal entity status affect all this?
- Am I either buying supplies from overseas or sell entries to overseas participants that might be subject to duties and other fees?
- Do I need to pay sales tax or any other tax on my registration fees and other revenues? Sales tax in particular is a very hot topic in the industry right now and, unfortunately, there are going to be some unpleasant adjustments coming for some.
- Have I deducted my registration platforms fees from my projected registration fee revenue? Will I pay a commission or fee to the bank to make a deposit or pay money in by check?
Be paranoid about this stuff. It pays.
Lastly, a brief comment on volunteers....
Volunteers cost money. They cost money to recruit (advertising and manpower), to train (venue hire and travel expenses), to deploy (ditto) and, very importantly, to keep happy (swag and a glass of wine don't hurt). So don't forget about these costs when setting up your race budget!
If you are early enough in your plans and do not know whether support from volunteers will materialize, play it safe. Start off by using in your budget the cost of hiring staff to do the jobs you expect your volunteers to cover. Then when you get the volunteers you need, decrease or adjust these costs accordingly.
Download our race budget template
Are you ready to build your race budget plan? We have put together a great template you can use to build a flexible race budget from the bottom up.
Our race budget template comes in both Excel and Google Sheets formats and can help you quickly and easily build your event budget up from scratch.
The template is also accompanied by a quick reference doc in both Word and Google Doc formats to help you get up to speed in using the tool.
To download your copy of the race budget template, click here.