Knowing Your Critical Sales Numbers

Knowing Your Critical Sales Numbers

 

Have you ever heard the phrase “what gets measured, gets managed”? It’s one of my favourite and it basically just means that the numbers you keep an eye on are the numbers that are most likely to change and improve. So today, I wanted to talk a little bit about the key numbers that every wedding venue owner/manager needs to know about their business. These are the numbers that will make or break your business and will cause you to thrive or struggle (and maybe even fail unfortunately). It’s a bit of math, but not much, I promise. The best part is, once you learn these, you can use them for the rest of your life, in any business situation and they will always be relevant. I didn’t know them for the longest time so I want to share them with you today!

Critical Numbers

Every wedding venue needs to know:

• How much revenue do I make, per year?

• How much profit do I make, per year?

 

• How much revenue do I make, per month?

• How much profit do I make, per month?

 

• How much revenue do I make, per wedding?

• How much profit do I make, per wedding?

 

• How many leads do I need per year?

• How many leads do I need per month?

• How many leads do I need per wedding?

• What is my conversion rate on leads to sales?

• How much can I spend on a lead?

 

Revenue is the total amount you make. So if someone pays you $2000 for a wedding, your revenue is $2000 for that wedding. If you book 10 weddings in a year, your total revenue is $20,000 (10X$2000).

But what if you spend $1000 on a website and $10,000 on a advertising over the year? Well your true profit will be ($20,000-$11,000) or $9000. So where it felt like you were making a lot of money, at the end of the day you weren’t making that much after all.

The goal of any good business is to keep profit margins high, and costs low. You also want debt to be low if possible.

 

Using The Critical Numbers

The best way for me to explain the critical numbers is to give you an example of how to use them in real life. In my own business, I like to start by picturing where I want to be at the end of the year and work backwards from there.

So, let’s say in this example, I really want to make $100,000 this year. So I have my goal, now it’s time to work backwards.

I think I can sell a gig for $2000 each. So to make $100K, I need to do 50 weddings (100,000/2000).

Okay, wow. I only expected to do about 30, so I’ll need to raise my prices to $3,333 to get $100,000 with 30 weddings (1000,000/30).

Perfect, so now I know how many weddings I need and how much to charge, but how do I know what to spend on advertising?

Well, I need to decide what I want my profit to be. This is called “profit-first” thinking.

I want my profit to be at least $70,000, so I can afford to spend $30,000 on advertising.

Since, Im not sure that I’ll actually get all 30 bookings though, I don’t want to risk $30,000 up front. Instead, I’ll figure out what $30,000 as a portion of each wedding. Since I need to book 30 weddings, the math is easy (30,000/30). I can spend $1000 on marketing for every wedding.

Wedding venues are awesome because you can request the deposit at the time of booking. That means you can get money to re-invest into your businesses’ growth before you do the work, which is pretty cool. So, I can charge a 50% deposit to my first client and they’ll owe me $1666.50. Of that, I’ll take $1000 and immediately put it into advertising to get the next wedding. You can also think of it that $1000 of each wedding will be marketing money, so if you book a wedding at $3333, 30% of it will go to marketing.

The Cost of a Lead

So now I know how many weddings I need, how much revenue I need to make, and how much profit I need to make. That helped me decide how much to charge for a wedding and how many weddings I want to do. It also helped me figure out how much to spend on advertising. Notice that the whole thing so far has been very intentional. We started out by deciding what you WANT and being unapologetic about creating a plan to get there.

Now, let’s figure out how to spend money on advertising.

 

You could go and spend that $1000 to get 1 lead, but that would be very risky. Instead, you want to get as many good leads as possible for that $1000. The reason is, is that if you are charging $3333 for a wedding and your competitors are charging say, $1000, you are going to have a tough time selling and will need to talk to a lot more potential brides and grooms before you get a single booking.

How many leads you need before you get a sale varies from business to business, but as a rule, if you need to talk to a high number of leads to get a sale, that is a bad sign. A good number is 25%. If 1 in every 4 brides you talk to books with you, then you are closing 25% of the leads you get. You can track this by using a system like www.eventtemple.com, which has lead tracking and sales tracking built in, or you can create a spreadsheet and remind yourself to update it manually every time you get a lead and a sale. (I highly recommend automating this with a system like Event Temple to ensure it’s accurate).

You need to experiment and do some tracking before you know this number for sure, but over time you will know it. So let’s say you know you can close 1 in 4 leads you meet with. That’s great, because now you know your critical numbers and can use them to make business decisions.

Our Example

Let’s fill in the questions now, from our previous example:

• How much revenue do I make, per year?

$100,000

 

• How much profit do I make, per year?

$70,000

 

• How much revenue do I make, per month?

$8333 ($100,000/12)

 

• How much profit do I make, per month?

70% profit or $70,000, monthly is $5833

 

• How much revenue do I make, per wedding?

$3333

 

• How much profit do I make, per wedding?

$2333 ($3333-1000)

 

• How many leads do I need per year?

I close 1 in 4 leads, and I need 30 bookings a year

(30X4 = 120)

 

• How many leads do I need per month?

10 (120/120)

 

• How many leads do I need per wedding?

4 ( I need 4 leads to close 1 wedding)

 

• What is my conversion rate on leads to sales?

25%

 

• How much can I spend on a lead?

I can spend $1000 to land a wedding, but I need 4 leads to do that

(1000/4)

$250 is the most I can spend on a lead

 

Congratulations!

Congrats, you now know your critical numbers. Since you have them written down, you can now focus on getting more leads per month, lowering your cost of leads, increasing the price you sell weddings for, increasing the number of leads you convert to a sale and more. Once you have these numbers you can focus on improving them and they also help you to create a predictable, healthy business!

 

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