We have a rule at our house when it comes to birthday parties. We have family only celebrations unless you are turning 5, 10, or 16. If the child is turning one of those ages, they may have a "friends" party. This really works well for us since we have a large family. Our family celebrations are lots of fun anyway, so the kids don't mind at all.
Honestly, we would be partying year round if we did not put this limitation on birthdays.
Whenever we do have a "friends" party, I try to make it as low key as possible. When we recently had a sweet girl turning 5, I planned out stations to have around the living area with games that were self explanatory. I had a bean bag toss, pin the tail on the donkey, and a fishing game (the kind with a magnet on the end of a string tied to a stick.)
I put a big bowl of candy and prizes on the table and the children were able to go from game to game as they wished and pick out the prizes they wanted when they were through with each game. We had plenty of children who were willing to explain the games or police the prizes if needed.
This was the most relaxing birthday party I have ever planned. I really enjoyed doing it this way, (carnival style?) because I didn't have to be the game coordinator or the activity director. I could spend time taking pictures or talking to guests.
This definitely "Works For Me" when it comes to birthdays. Click on the link for more birthday tips.