When people tell me they are opening a venue, I ask what their budget is for the months before the first event. Most have a solid number for the build-out and furniture. Fewer have budgeted for permits that take longer than planned, payroll during training or the cash needed to carry the business while bookings ramp up.
Startup costs vary enormously with the building, the city and how much work the space needs. What does not vary is the list of categories. If every one of them is on your budget, you are far less likely to run short in the final month before opening.
What Are the Startup Costs of an Event Venue?
The startup costs of an event venue are everything you spend before the first event pays, usually lease deposits or a property down payment, build-out and renovation, permits and professional fees, furniture, AV, bar or kitchen equipment, software, insurance, opening marketing, pre-opening payroll and a cash reserve. The total depends on whether you lease or buy, the size and condition of the building and local construction costs. The only reliable figure is one built from quotes for your own space.
The Startup Cost Categories
Use these categories as the skeleton of your budget. Each one needs at least one real quote before you commit.
Space and build-out
- Lease security deposit and first month's rent, or a down payment if buying
- Construction and renovation, including restrooms, HVAC, electrical and finishes
- Fire and life safety work, such as sprinklers, alarms and exit lighting
- Accessibility upgrades for entrances, restrooms and routes
Build-out is usually the largest and least predictable line. An older building that needs a change of use for assembly occupancy can require far more work than a space that already hosted events.
Permits and professional fees
- Architect or designer and any engineering drawings
- Building permits, inspections and the certificate of occupancy
- Business license, liquor license and health permits where needed
- Attorney and accountant fees for leases, contracts and setup
Furniture, equipment and technology
- Tables, chairs, linens, lounge furniture and decor
- Sound, lighting, projection and staging
- Bar equipment and a warming or catering kitchen if you have one
- Software, a website and professional photography
Opening and operating cash
- Insurance premiums and deposits
- Opening marketing and a grand opening event
- Payroll for hiring and training before opening
- A working capital reserve for the first months
An Illustrative Budget
Here is a sample budget for an imaginary leased venue of about 5,000 square feet that needs moderate renovation. The figures are made up to show proportions, so your own will differ.
Space and setup, $227,500
- Lease deposit and first month, $30,000
- Build-out and renovation, $150,000
- Build-out contingency at 15 percent, $22,500
- Design, permits, licenses and professional fees, $25,000
Equipment, opening and cash, $200,000
- Furniture, linens and decor, $40,000
- AV, lighting, bar and warming kitchen equipment, $55,000
- Software, website and photography, $10,000
- Insurance, opening marketing and pre-opening payroll, $35,000
- Working capital reserve, $60,000
That totals $427,500. Notice that nearly a fifth of it is cash held back for the contingency and reserve. Those two lines are what keep a delayed inspection or a slow first quarter from becoming a crisis.
The proportions shift a great deal from one project to another. A space that already hosted events might spend a fraction of this on build-out and more on furniture and AV. A raw industrial building might spend double.
A Method to Price Your Own
You can build a credible estimate before you sign a lease. Work through these steps in this order.
- Have a contractor walk the space and give a rough build-out estimate
- Ask the local building department which permits and inspections apply to assembly use
- Price furniture and AV for your target capacity and layouts
- Add a build-out contingency, often 10 to 20 percent as a rule of thumb
- Add a reserve covering several months of fixed costs
Then pressure-test the total. Ask what happens if construction runs two months late or if your first six months bring half the bookings you planned. If the budget does not survive those cases, raise more capital or reduce the scope of the first phase.
Where Owners Commonly Underbudget
Some costs catch first-time owners off guard more than others. Fire and life safety upgrades are near the top, especially when a building changes use. Restrooms come next, since assembly occupancy often requires more fixtures than the previous tenant had.
The time between signing a lease and opening is another. You pay rent while waiting for permits and contractors, so negotiate a rent-free or reduced-rent period for the build-out if you can. Finally, budget for the marketing that fills the first season, including the months after the launch party, when the excitement fades and the calendar still has gaps.
Build the Budget Before You Sign
Put every category above into a spreadsheet, fill in quotes for the space you are considering and add the contingency and reserve. Take that budget to your lender, landlord and accountant before signing a lease. A lease signed before the budget is built tends to set the budget instead.
Frequently Asked Questions
How much does it cost to open an event venue?
It depends on whether you lease or buy, the building's condition, its size and local construction costs. A venue in a space that already meets assembly codes can cost far less than one needing major renovation. Build your estimate from contractor and supplier quotes for your specific space.
What is the biggest startup cost for an event venue?
For most venues, it is the build-out or renovation, including fire safety, restrooms, HVAC and accessibility work. For owners buying a building, the down payment on the property is usually larger. Furniture, AV and equipment come next.
How much working capital does a new venue need?
Many advisers suggest holding enough cash to cover several months of fixed costs, since bookings take time to build. The right amount depends on your pre-bookings, your fixed costs and how quickly your market books new venues. An accountant can help you size it.
Can you reduce event venue startup costs?
Yes. Choosing a space that already meets assembly codes, leasing some furniture and AV, negotiating a build-out allowance and opening in phases all help. Avoid cutting the contingency or reserve, since those protect you from delays.
