The accounting challenges of scaling an event management company from $200,000 to $9 million in gross revenue in 3 years.
After only a few short years, JJ-LA has transformed into one of the fastest growing event production companies in Southern California, throwing events such as LA Pride, Saint John’s Gala & Capital Royale. Punch has managed JJ-LA’s accounting from the very early days and has compiled a list of key takeaways we thought other business owners could find useful.
Never underestimate the power of digitizing and automating your accounts payable. We implemented a software called Bill.com that creates management approval flows for payables, stores digitized backups for all your vendor bills, manages vendor expectations via automated emails, and allows for electronic payments.
With hundreds of vendors to be paid monthly, Punch created a streamlined accounts payable process that made it easy to batch approve and pay invoices. By creating strong process in the early stages, JJ-LA was able to manage the explosion of vendor submissions. In this case of JJ-LA, we would enter bills every Wednesday, management would approve on Thursday, and we would issue payments on Friday. By controlling the process for JJ-LA, Punch was able to help them function in a more organized and professional manner.
The biggest challenge of most businesses we work with is managing gross margin (revenue minus cost of goods sold) and sticking to a budget. With JJ-LA, a big priority was making sure they put processes in place to track the costs of each job. We knew that if we could set a target margin for each job, we could back into the gross margin we needed to cover operating costs and profits. Often times, business owners are doing back of the envelope calculations of what they ‘think’ their gross margin is, when in reality they are underestimating their true costs.
Budgeting helped management to understand the areas that they needed to improve upon. Having each department head manage and track to a budget not only provides accountability but allows you to better project your cash burn.
Creating the costs for each job allowed management to identify key areas of improvement and the most profitable revenue channels.
Breaking out cost of goods sold into subtypes on the P&L allowed management to identify what revenue streams were most profitable.
Creating an annual budget allowed management to identify milestones to fund growth. The purchase of fixed assets was strategically planned to increase future profits.
Managing payments to hundreds of vendors and contractors required a digitized accounts payable system that synced directly to the accounting software.
Punch implemented processes that streamlined all of my accounting functions, I was freed up to do business development and grow the business