Question 1

What's the difference between direct and indirect costs for a rental?

Accepted Answer

Direct costs are expenses incurred specifically for that single event, like paying for event-specific staff, security, or post-event cleaning. Indirect costs are a portion of your regular operating expenses, such as utilities, insurance, and general maintenance, allocated to that rental.

Question 2

How do I calculate the indirect cost for a single rental?

Accepted Answer

A common method is to calculate your total monthly operating costs (utilities, insurance, etc.) and divide by the total hours your facility is available for rent in that month. This gives you an hourly indirect cost. Then, multiply that hourly rate by the number of hours the facility was rented for the event.

Question 3

What is a good profit margin for facility rentals?

Accepted Answer

This varies widely based on the type of facility, location, and demand. However, a healthy profit margin to aim for is often in the 40-60% range after all costs are accounted for. High-demand, premium facilities can achieve even higher margins.

Question 4

My profit margin is low. How can I increase it?

Accepted Answer

You can either increase revenue or decrease costs. Consider implementing tiered pricing for peak vs. off-peak hours, offering high-margin add-on services (e.g., equipment rental, A/V packages), or reviewing your direct costs to find savings (e.g., more efficient cleaning crews).

Question 5

Should I ever accept an unprofitable booking?

Accepted Answer

Sometimes, it can be strategic. An unprofitable event might be a marketing opportunity to expose your facility to new, high-value clients. It could also be a way to build a relationship with a major community organization for future, profitable bookings. However, these should be conscious, strategic decisions, not accidental losses.

Facility Rental Profitability Tool

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Understanding Facility Rental Profitability

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