Get The Most Bang For Your Buck—Exploring Your ROI

Understanding and measuring the Return On your Investment will help you understand your business and take it to the next level.

If you’re like many wedding and event pros, it was your creativity that  brought you into the industry, not your business acumen. To be successful,you need both. Once you decide to sell products or services, you need to develop your business skills and an understanding of the many ways to measure your success.HOW DO YOU MEASURE SUCCESS?Any good financial advisor or consultant will tell you that it’s not what you make, it’s what you keep that matters. In the early years of your business, you should plow back much of your profits (if you have any) into growing your business. A growing business should invest 10%-15% of its anticipated sales into marketing and advertising—not 10%-15% of their actual sales; the higher sales number that they’re trying to achieve. Then, once you’ve gotten there, you can lower that percentage to maintain your sales.DON’T SHUT OFF THE ENGINESIt’s like the analogy of how a pilot needs to have the throttle on full to get the plane off the ground and get to cruising altitude. Once at cruising altitude, a pilot doesn’t turn off the engines, they back off enough to keep them up there. If they need to climb—they increase the throttle. Similarly, if you want to increase your sales or you expand into a different market or a new  service/product, you need to increase your marketing/advertising budget, again.WHAT’S A GOOD ROI?How do know if you’re getting a good ROI (Return On your Investment)? Measure it. That’s sometimes easier said than done. While it’s easy to see online metrics, much of what happens either isn’t tracked or you can’t connect the dots easily. For instance, when someone gets to your website, and sendsyou an inquiry, that’s great, but from where did that lead really come? I’ve often said, in my presentations, that we don’t get business “from” our websites., we get it “through” our websites. They had to come “from” somewhere to get to our sites. And, what if they were at three or four other sites before they got to yours? How did they get to yours?WHAT ARE YOU TRACKING?Too many wedding and event pros are asking the wrong tracking questions—at the wrong time. For instance, if you’re waiting for a phone, or face-to-face meeting, to ask, “How did you hear about us?”, that’s both the wrong question and the wrong time. You’re too far removed from those online clicks. A better question, right on your website contact form, is, “How did you find our website today?” It’s the closest you’ll be to that last click. If you have analytics for your website, it’s not likely to be sophisticated enough to show youthe path for that specific customer, before they got to your site.THE BASICS OF ROIThe difference between an investment and an expense is that an investment may return you more than you invested. While an expense gets you only what you paid for (gas, your vehicle, your computer, etc.). To calculate your ROI,you need two numbers: the amount you spent on that investment and the amount you got in return. You can never say whether something is expensive or inexpensive based solely on the price. While one professional camera may cost twice as much as another, it may have features that will help a particular photographer make more sales. If those additional sales justify the extra investment, then it’s not expensive; however, the same camera to a differentphotographer—with no way to monetize that feature—may be considered expensive.ALL ROI ARE NOT CREATED EQUALOf course, not all investments return the same ROI, nor should they. There’s usually no connection between different investments, so comparing their ROI is an imperfect exercise. What we need to do is measure each investment’s ROI, on its own merit. From a business and financial perspective, does thisinvestment make sense? The opportunity cost of choosing one over another is the potential profit of the investment you didn’t make—if it could be higher than one you’re making now.But, that too, is an imperfect analytic. In the real world, it gets more complicated. For instance, let’s say you were thinking of doing a particular wedding show, so you decide to move some of your advertising dollars from something else to that show. While that seems like a sound decision, in the real world, any couples who would have found you on the ad you dropped, won’t find you at the show, or even on a different website. The couples who choose to attend a particular wedding show, or frequent a particular website, won’t go looking for you elsewhere if they don’t see you. They’ll choose from the vendors they see where they are (on that site, or at the show, etc.). If you have a positive ROI from the ad you’re thinking of dropping (you’re making more in profit, than you’re spending), then you’re going backwards by dropping it. The new investment needs to bring you at least the same profit, or you’re going backwards; but you won’t know—until you try it.DON’T BET THE RENT MONEYWhat I suggest is to find additional money to try with the new opportunity. Once you prove that it works, and brings you better profit, you can decide if you should drop something else. However, if they’re both bringing in a goodprofit, even if those profit margins are very different, don’t shoot yourself in the foot (or rather, the bottom line). The only time I’d drop the lower-performing investment, is when the new one is filling your calendar.NO ONE LIKES A RATE INCREASEI often present on getting you to raise your rates, charge what you’re worth, and account for your increasing costs. So, it’s kind of hypocritical to raise our rates and complain when another business does it to us. Take the emotion out, and look at it rationally. Don’t look at what the rate was, look at what thenew rate is, and does the ROI make sense at the new rate.FINAL THOUGHTSOne of the most important metrics is profitability. I don’t care how many weddings or events you do. I’m not impressed if you double the number of events, but your bottom line doesn’t increase. Feed your family, not your ego. If your ROI from two different ads, or opportunities, is the same, it’s a coincidence. Before you jump from one opportunity to another, look at your ROI for each, not in comparison to the others, but on its own merits. WPM__Alan Berg, CSP™, www.AlanBerg.com, Kendall Park,N.J.