Determining Your Fee From Production Costs
Now let’s say that your marketing campaign brought in a total of ten speaking engagements. You can easily see that you need to charge $4,700 per speech, just to cover your development and marketing costs. But that isn’t the end of the story…..
It takes time for you to present each speech, and that needs to be assigned a cost as well. (Let’s assume that your travel costs are being paid for by the client.) If you estimate that it takes you 7 hours of travel time (each way) plus another 6 hours on-site, that’s 20 hours (or $1,000) that needs to be added to the production cost of each presentation.
If you give 10 speaking engagements, that brings your production cost to $5,700 per keynote. Now, suppose you had arbitrarily decided to charge $5,000 per speech, without running the numbers first. Surprise! You’re losing money! You’re losing roughly $700 per speaking engagement.
That bears repeating. In this example, you are getting paid a speaking fee of $5,000 (which many speakers would think is good money) and you're giving ten of these speeches because of your marketing campaign. It seems "obvious" that you're doing well... but actually, you're losing money!
Of course, these costs only apply if you land ten speaking engagements as a result of your marketing campaign. If you get more than 10 engagements, your production costs will decrease and you may actually make money by charging $5,000 per speech.
But this example illustrates the importance of knowing what your production costs are. There have been a number of apparently successful speakers who were shocked when their businesses failed — all because they had no idea whether their different activities were profitable or were costing them money.
Just as the pastry shop owner I described earlier needed to learn how much her pastries were costing her, you need to begin to determine how much your various activities are costing you. Only then can you begin to establish your business’s profitability... and set your fees and prices appropriately.