Cost-plus, market and value pricing

What you will be able to do

• Calculate a full-cost floor price that includes overhead, owner pay and a profit margin
• Map competitors' published prices to place your offer within the local market
• Estimate the value of an event service to a client and use it to set a price ceiling

Most event businesses set prices the same way: they look at what a few competitors charge, shave a little off, and hope it works. It rarely does. Good pricing uses three lenses at once. Your costs tell you the lowest price you can survive on. The client’s value tells you the highest price you could justify. The market tells you where, between those two lines, you can actually sell.

Read the transcript

Cost-plus, market and value pricing.

Most event businesses set prices the same way: they look at what a few competitors charge, shave a little off, and hope it works.

Good pricing uses three lenses at once.

Three methods, three questions.

Each method answers a different question.

None of them is enough on its own.

Cost-plus: find your floor.

The floor is the price below which every booking loses money once you count everything.

Most small vendors underestimate it because they count only the obvious direct costs and forget overhead and their own pay.

Market pricing: see where others sit.

Market research tells you how clients will compare you.

Collect prices only from sources that are public or freely given: competitors' websites, listing platforms, published packages, and quotes your own past clients chose to share with you.

Value pricing: find your ceiling.

Value pricing asks what the outcome is worth to the client, in money, time, risk or feeling, and prices a share of it.

Corporate clients make this easier because they can put numbers on outcomes.

Putting the three together.

Calculate your floor with full costs. Never price a standard package below it.

Estimate the value to your target client. That is the ceiling you can argue for with good proof.

That is the lesson. The worksheet and the quiz are just below this video.

Three methods, three questions

Each method answers a different question. None of them is enough on its own.

Cost-plus: find your floor

The floor is the price below which every booking loses money once you count everything. Most small vendors underestimate it because they count only the obvious direct costs and forget overhead and their own pay.

Build it in four steps.

1. Annual overhead. Everything you pay whether or not you book an event: insurance, software, phone, website, accounting, vehicle, storage, marketing, professional fees.
2. Owner pay. What you need to earn from the business. This is a cost, not a reward for whatever is left over.
3. Capacity. How many events, or event-equivalents, you can realistically deliver in a year at the quality you promise.
4. Direct costs per event. Staff, subcontractors, travel, materials, food, rentals: anything that exists only because this event happens.

Worked example. Lantern & Lane wants a floor price for full wedding planning. Priya and Marco budget $36,000 a year in overhead and $120,000 in combined owner pay. That is $156,000 to recover. They can deliver about 30 full-planning events a year, or the equivalent mix of smaller packages, so each one must carry $156,000 divided by 30, which is $5,200. Direct costs for one full-planning event, mostly an assistant’s hours and travel, come to $700. The break-even price is $5,900.

They also want a 15 percent profit margin, to build savings and fund growth. Here many people make a mistake. Adding 15 percent to $5,900 gives $6,785, but that is a 15 percent markup, and the margin on it is only about 13 percent. To get a true 15 percent margin, divide the cost by 0.85. The result is $6,941, which they round to $6,950.

• Markup = profit divided by cost.
• Margin = profit divided by price.
• Price for a target margin = cost divided by (1 minus the margin).

A caterer works the same way at the per-person level. If food for a plated dinner costs $28 a head and the caterer has decided food should be no more than a third of the menu price, the menu price is at least $84 before staffing, rentals and service charges.

Market pricing: see where others sit

Market research tells you how clients will compare you. Collect prices only from sources that are public or freely given: competitors’ websites, listing platforms, published packages, and quotes your own past clients chose to share with you. Note what each price includes, because a $3,000 package with no assistant is not comparable to a $3,000 package with two.

Plot what you find as a simple ladder from lowest to highest, with a note on what each tier includes. Then decide deliberately where you belong. Sitting in the middle of the ladder with nothing to distinguish you is the most crowded spot in the market.

Two cautions. First, many of the prices you find will be too low, set by people who have not done the cost-plus exercise. Matching them imports their losses. Second, gathering public prices is research. Agreeing prices with a competitor is not, and the Competition Act treats an agreement between competitors to fix prices as a criminal offence. Compare, never coordinate.

Value pricing: find your ceiling

Value pricing asks what the outcome is worth to the client, in money, time, risk or feeling, and prices a share of it.

Corporate clients make this easier because they can put numbers on outcomes. Suppose a company spends $40,000 on a three-day trade show booth and wants 300 qualified leads. A strolling magician who draws crowds to the booth and lets sales staff scan badges during every set is not a $500 entertainment line. If the act plausibly adds 100 extra conversations, and the client already pays $133 per lead through the booth, the act is linked to more than $13,000 of value. A day rate of $3,500 suddenly looks modest, and the performer can say why.

For weddings and social events the value is mostly risk and emotion. A couple paying $70,000 for a wedding is not buying a timeline from a planner. They are buying the certainty that their parents are not running the day and that a vendor problem at 4 p.m. will never reach them. Price that certainty against the size of what it protects.

Value pricing works only with evidence: photos of comparable events, testimonials that name outcomes, and a clear account of what goes wrong without you.

Putting the three together

1. Calculate your floor with full costs. Never price a standard package below it.
2. Estimate the value to your target client. That is the ceiling you can argue for with good proof.
3. Map the market. Choose a spot between floor and ceiling that matches your position and proof.
4. Test it on the next ten inquiries. If nearly everyone books without hesitation, you are probably too low.

Sometimes the floor sits above everything the market seems to pay. That is information, not a reason to price below cost. Either you are selling to the wrong segment, your costs are out of line, or the package includes more than clients value. Fix one of those three: move toward clients who can pay, trim the costs that clients do not notice, or strip the package back to what matters and sell the rest as add-ons.

Lantern & Lane’s floor is $6,950. Comparable full-planning packages in their area run across a wide band, and their best clients spend heavily on the day itself. They launch at $7,500 and review after one season.

In Canada and the GTA

Costs are higher here, so the floor is higher. Rent, insurance, vehicle costs, parking and wages in the GTA run above the Ontario average. A storage unit for décor or rentals, a commercial kitchen for a caterer, or a studio in the west end can each move your overhead line by thousands of dollars a year. Do not copy a price from a business in a smaller market. Build your own floor from your own receipts.

If you employ staff rather than hiring contractors, remember that wages are not the whole cost. Employer payroll contributions such as Canada Pension Plan and Employment Insurance premiums, vacation pay and any workplace insurance all belong in your direct or overhead costs. Ask your accountant to give you a fully loaded hourly cost for each staff role, and use that figure, not the hourly wage, in your cost-plus sheet.

HST and your cost sheet. Ontario’s HST rate is 13 percent. HST you collect from clients is not revenue: it belongs to the government, so build your prices before tax and add HST on top where it applies. If you are registered, you can generally recover HST paid on business purchases through input tax credits, so calculate those costs before tax. If you are a small supplier and not registered, the HST you pay on supplies is a real cost and should be included. The CRA treats you as a small supplier while your worldwide taxable sales are $30,000 or less in any single calendar quarter and over the last four consecutive quarters. Check your own position with an accountant, and read the CRA’s guide for GST/HST registrants before you build next year’s sheet.

Competitor research and the law. Researching published prices is normal and legal. Discussing future prices with competitors and agreeing to hold them, or to divide up clients, is a different matter under the Competition Act. Industry associations and vendor groups in the GTA often share general information about costs and trends; keep those conversations away from what each of you will charge.

GTA practice notes

Market prices in the GTA vary sharply by segment and by area. A planner serving downtown corporate clients, a caterer working large cultural weddings in Brampton, Mississauga and Markham, and a photographer shooting small weddings at city hall and in local parks may all call their service “full” or “premium” and mean very different things. When you build your market ladder, compare like with like: same guest count, same hours, same deliverables.

Listing platforms are a convenient place to gather public prices. The Knot, WeddingWire and Zola often show a starting price or a price band for vendors, and many GTA vendors publish packages on their own sites. Record the date you collected each figure, because prices change at the start of each season.

Corporate value pricing works best when you learn the client’s numbers. Procurement teams and marketing managers in Toronto will often tell you the budget for a booth, a sales kick-off or a client appreciation night, and what success looks like. Ask: “What would make this event a clear win for you, and how will you measure it?” Their answer gives you the value side of your price.

Wedding value conversations are more delicate. Couples in the GTA often fund weddings with help from both families, and the person paying may not be the person you are speaking with. Talk about outcomes and risk, not about their total budget, unless they bring it up.

Finally, review your floor every year. Insurance renewals, software subscriptions and fuel costs drift upward, and a price that cleared your floor comfortably two seasons ago may not clear it now. Put a date in your calendar after your busiest season to rebuild the sheet from the year’s actual numbers.

Worksheet

Download the worksheet and complete it for your own business, using Lantern & Lane as the model where it helps. Keep it with your marketing plan. It takes about 10 minutes.

Download the worksheet (PDF)