Imagine your general service contractor handing you a standard industry contract that includes numerous preprinted clauses and blanks for your show's name, dates and amount of rented space.
Luckily, such a standard contract isn't feasible. Because general contractors have to contend with so many variables, show contracts must be customized and tailored.
"There's no standard industry contract for shows," says Ed Simmons, Associate Director of the Exposition Service Contractors Association. Contracts may have standard elements in them specific to the business, but each show is unique, and each show manager has his or her own priorities.
These priorities lead to industry contracts that build on a relationship of trust and understanding between both parties. In all likelihood, most contracts you have signed with general service contractors have evolved over periods of time, the results of negotiation processes that began -- and ended -- on a very personal level.
Many show managers learn negotiating skills on the job by observing or practicing. Others bring skills with them from sales and marketing jobs in other industries. Some, such as Nancy King, were fortunate to have mentors adept at negotiating.
King, who has been in the business 27 years and is now Partner in EMC2, a show management firm in McLean, VA, defines a good negotiator as one who "creates a win-win situation for both parties." Further, she says, good negotiators don't put general contractors at a financial disadvantage.
What is a win-win situation? When the show manager walks away from the table with the services needed at a reasonable price, and the general contractor has the opportunity to provide the level of service required at a fair profit.
Barbara Silverman, Vice President/Show Manager at Professional Exposition Management Company, or PEMCO, in Carol Stream, IL, believes mutual respect is essential when negotiating an equitable contract. "And," she adds, "we can't lose sight of the fact that results of negotiating will be felt by our exhibitors." Regardless of what you're negotiating for, the bottom line ultimately is price. And costs have got to come out of someone's pocket.
What is negotiable?
Does tailoring service contracts leave the door wide open for negotiating? Yes and no. "Everything is negotiable, depending on potential for revenue," says Michael Cox, General Manager, George E. Fern Company, a general service contractor based in Cincinnati, OH.
Basically, Cox explains, general contractors have two sources of income -- show management and exhibitors -- and they look at the total scope of potential income from both. The majority of revenue, though, is derived from exhibitor services. When evaluating a show for bid purposes, contractors have to consider what it will cost them to produce the event compared to the potential for revenue -- just as show managers must do before launching a new show.
According to Cox, most contractors have in mind a job cost percentage relative to total gross revenue potential that determines profitability.
"Our philosophy of pricing," says Ellen Beckert, Director, Corporate Development, The Freeman Companies, "is based on the dollar value of the show vs. the cost to produce. We don't look at unit pricing."
Julie Smith, Director of Marketing and Special Projects at GES Exposition Services, looks at the size of the show and its profile in determining the level of negotiation:
- Consumer or trade show -- The revenue potential for consumer shows is not as high, as they generally have fewer drayage and decorating needs.
- Type of exhibitor -- What are their needs?
- Location -- Is it a difficult or easy facility/city to work in?
- Show management needs
- Special equipment required -- Are rigging, cranes, etc. needed?
- Local labor rates
- Move-in, move-out pattern. -- Straight-time or overtime?
Your value as a customer
Put a twist on the bit of wisdom, 'Physician heal thyself,' change it to, 'Show manager know thy show,' and you'll have the key to negotiating wisely. "You have to know what your business is worth and not want more than that," says King.
One way to know your value as a customer, suggests Penny Kent, President, Show Management Inc., Dallas, is to ask your general service and specialty contractors, for a revenue recap of last year's show -- a summary of income generated from custom booth work, furniture rental, drayage and so forth. This item will have to be negotiated as part of your contract, as many general contractors balk at the idea.
Butch Bartlett, GES's Senior Executive Vice President, Sales & Marketing, questions whether revenue recaps give a true picture. "It's more important to understand the show's physical elements. The dollars don't always equate, especially for a traveling show, because what we're able to charge is based on the price ranges in different cities, especially labor rates. And, our single biggest cost is labor. We negotiate based on show size and potential for revenue."
The RFP revisited
Going to the negotiating table knowing only your value as a customer puts you at a disadvantage. You also should have a clear picture of your show needs and priorities, as these are the elements that eventually will tailor the contract. The platform for initiating the contract process, the Request for Proposal is an excellent way to pull the pieces of the puzzle together, especially on complicated shows. "And, it makes negotiating cleaner," says Smith.
King agrees, pointing out that the RFP helps show managers compare apples to apples when general contractors respond with proposals. And RFPs are a fair way to do business. King is concerned, however, about what she calls "real or ritual" -- the practice of sending out RFPs to fulfill a multiple-proposal requirement with no intention of giving the contractor serious consideration, or the routine of using RFPs to play one contractor against another. "It's a question of ethics," she says, adding that the costs involved have to be recovered.
"A detailed proposal, including renderings and a team traveling to make a presentation to show management, can cost as much as $5,000," says Ray Pekowski, President, The Expo Group.
Cutting costs
Keep in mind that finding ways to lower costs gives you more negotiating leverage. "Even labor rates can be negotiable," says Bartlett, "if we can sit down together and reduce the overall cost of the show." It's to show management's advantage to keep the RFP process simple and "real," and to let the general contractor know what is expected of them.
"An uncomplicated show can be complicated by a long, detailed RFP," says Freeman's Beckert. She would like to see the industry develop a standardized RFP for show managers.
Be flexible
The more flexible you can be with the timing and location of your show, the more bargaining chips you can accrue. Schedule during a slow time of year or move to a city with favorable labor rates.
If it's not essential that your show be in a major city, ask your contractor to recommend exhibitor-friendly venues. Sometimes, just changing facilities can provide greater revenue potential to contractors, if the new center has fewer exclusive labor agreements.
Competition
What effect has the narrowed playing field of general service contractors had on the competition? "The opportunity may be greater than before," says Beckert. "The show manager is now getting bids from two large companies and one small local contractor."
Cox at George E. Fern Company agrees, saying, "It's not a windfall, but an opportunity for a medium-sized company with national capabilities, such as we are."
Show managers should realize more negotiating opportunities, too, as these smaller-sized contractors vie for their business. Competition dictates lower markup on costs and increases the pressure to deliver high-quality service.
"The competition now is very stiff," says Smith. "We have to become better, more creative."
Enhanced service and fair prices create a win-win situation for everyone concerned.
