One of my hobbies for a long time has been learning about investing and studying the thinking of great investors like Warren Buffett (no my significant other doesn’t think it’s cool either). One thing I recently discovered is that the principles of investing can be applied to owning a wedding venue business. In fact, the most powerful principle in the investing world, compound interest, can be applied to almost any wedding venue through what I call compound marketing return.
Compound Interest 101
Now, before you get all “I hate math” on me, hold tight, I promise this is going to be worth reading. Compound interest is the theory that if you make a little money on an investment, then reinvest your profits, over time it will have a compounding effect.
In the example below, you can see how $100,000 turns into $2,662,333 dollars with 20% interest being reinvested over time. This is exactly how guys and girls like Warren Buffett got so rich. But what does this have to do with running a wedding venue?
Compound Marketing Return
I’ve heard that Albert Einstein called compound interest the “eighth wonder of the world” because it has such an amazing power to turn a little bit of cash into a lot over time. Well, I had an interesting realization when I used the theory of compound interest on my wedding marketing budget. What I found was that compound interest can exist in any business. Now that’s a pretty incredible realization because it means you can create a lot of wealth.
How I killed my wedding venue (in theory only of course!)
In the example here, you can see what happens if I sell a wedding for $1100, make $242 profit on it and reinvest 5% of that profit back into my marketing to get more new leads for my business. Over time, my business declines and to my dismay, I went out of business on paper by doing this. I am not reinvesting enough to grow my business, so the leads aren’t coming in, I’m not booking as many weddings, profit goes down and I have less to reinvest. By not continually reinvesting in my marketing, I am shooting myself in the foot and essentially killing my wedding business.
How I built a growth machine!
In this example, instead of reinvesting 5% back into marketing, I reinvested 20%. This had the opposite effect to reinvesting 5%. It created a compound marketing return. Every time I reinvested. I generated more new leads. This created more new bookings, which enabled me to exponentially invest even more in marketing. It created a cycle of growth that was scalable to as many weddings as I could handle.
This is why you see the emergence of large wedding companies. They don’t have infinite money for marketing and they certainly didn’t start off that way. Instead, they wisely reinvest their profit into additional marketing to create new leads and sales. When they have a marketing method that works, they consistently go back to it, making it more and more efficient over time.
You can’t just spend the money
Of course, you can’t just spend the money on marketing and hope it works. You need to carefully watch it. But what do you watch?
Well, you need to keep an eye on your business metrics, basically your critical sales numbers. For every marketing source you invest in, you need to know:
-How many leads does it get me per month?
-How many leads do I need to get a booking?
-What is the cost of the lead?
-What is the ROI on the marketing
Once you get a solid sense of your numbers, you can reinvest in what’s working and fine-tune your marketing and sales to produce even better results. Over time you want to be spending less per lead, generating more leads per dollar of spend and generating more sales from the leads you do have.
Actually, getting more sales from the leads you ALREADY HAVE is the very best way to grow your wedding venue. It involves no risk, is very low cost and can double your wedding venue business in a year if you use a tool like Event Temple to do it effectively.
So, next time you hear that someone must have a lot of money for marketing…
You can laugh, because you know the power of compound marketing return and that it functions just like compound interest. You know they might have only had $300 of marketing money, but they found a way to create a systemized, scalable marketing system with predictable results, which is the goal of every good business. Once they had it, they just decided how much money to re-funnel into the business. Since most wedding venues get 50% of their deposits before they do the work, that means you have an infinite amount of money to scale your wedding business if you reinvest it wisely. Think about that. There is immense power in reinvesting. Most wedding venue owners take the money and use it to survive. If you can however, find a way to reinvest just 20%, and you measure the return of that marketing carefully along with your critical numbers, you will have a growth machine on your hands, I can guarantee it.