This excerpt is part of Entrepreneur. Comes Second-Quarter Startup Kit, which explores the fundamentals of starting up in a wide range of industries.

The Entrepreneur Media Inc. staff and Cheryl Kimball, the writer, explain how to get started in event planning, whether you are looking to plan a wedding, birthday party, bar mitzvah, or work part-time. They also discuss product launches and political fundraisers. The authors provide an edited excerpt that explains how to decide what event planning clients should be charged.

Your business’s success depends on your ability to charge enough for event planning services but not too much. First-time business owners should be cautious when estimating the event’s cost. Pricing a service should be done to allow you to charge overhead costs and still make a profit.

According to Dr. Joe Goldblatt, fees are usually determined by three factors.

Market segment served. Corporate events have a different pricing structure. Planners in the social events sector typically charge a fee and a portion of any vendor fees. According to Patty Sachs, an industry expert, social planners would make between $12 and $75 per hour if you broke down the event planning fee into an hourly rate. Vendor commissions are also included.

Planners in the corporate events sector typically charge a fee and a handling fee for each item. Before charging the client that amount, a planner might buy flowers from a florist and mark them up (15 percent usually). A flat fee or “project fee” is another option. This is often used for large events where the company wants a “not-to-exceed” amount. Sachs estimates that a corporate planner’s hourly rate is $16 to $150 plus vendor commissions.

Geographic location. Prices are generally higher in the Northeast than in the Southeast. This is due to the variations in living costs. Additionally, prices in areas with clearly defined on- and offseasons (e.g., the Hamptons in New York, Martha’s Vineyard in Massachusetts) are based partly on the season.

Reputation and experience of event planners. It’s okay to charge less if you are just getting started. However, it is important to not charge too much just for the job. Clients may shop around to find the best price. However, a planner that offers too low a quote could be just as annoying as one that charges too much. Based on what you’ve quoted, your client might question your ability or willingness to host a high-quality event.

How are the fees-for-service mentioned above calculated? Event planners use a cost-plus method to price their service fees (the total cost to clients). Event planners contract out labor, supplies, and materials and charge their clients between 10 and 20 percent of the total event cost. A rough estimate is 15 percent.

Before you plan an event, it is important to understand what your clients want and their budget. Next, estimate the cost of labor and supplies. Add your commission to this and then present an estimate to the client. Here are some examples of per-event costs:

• Site rental. Prices for site rentals can vary depending on the event. They may be high, low, or in between. This is a great way to save money for clients on a tight budget. Maybe a client is looking for a beautiful summer barbecue. While a site on a public beach is often available for virtually nothing, well-respected beachside clubs can command high prices.
• Vendors. This could include a bartender or decorator, florist, photographer and videographer, and a caterer.
• Supplies. Your company will have to purchase any supplies not provided by the vendor or client. This could include everything from food to potted trees and table candles.
• Equipment Rental. It is possible to rent audiovisual and lighting equipment.
• Permits and licenses. Certain events require licenses or permits that are not available to the general public, such as a permit for a fire marshal or a license to perform a musical score.
• Transportation and parking There may be significant transportation expenses if the event involves you or your staff traveling or requiring transport for speakers or attendees.
• Gratuities and service fees. Hiring temporary staff such as servers for an event can be expensive.
• Speakers’ fees. Conferences, and other commemorative or educational events, often include speakers.
• Invitations Publicity Large events may have a lot of Publicity, but smaller events might need to use flyers. Invitations are often required.
• Shipping and mailing Some event planners even ship flowers.
• Photocopying and preparation of registration materials are all examples of this category. Handouts to attendees and photocopying of flyers fall within this category.
• Signage All signs and banners for the event must be included in your per-event costs.

Once you have a list of all the expenses, you can calculate the event cost and fee-for-service. Begin by getting three vendors and suppliers to find out the current rate. Next, calculate the cost for each of these categories (and any other that may arise), add them up, and add a small amount to cover unforeseen costs.

You may wish to give an itemized list to your client when you present an estimate. Each vendor or supplier should be shown separately. Give a description of the services you’re offering and the price for each. This is a great way to remind clients that you will only receive a fraction of the service fee.