Should You Go For Volume or Profits?
As I work with businesses like yours, growing your businesses is a frequent topic. When growing your business, is the focus on top-line sales, or bottom-line profits? Too many wedding and event pros pay too much attention to sales, and not profits.
Listen to this new 7-minute episode and get a clearer view of where you should be focusing.
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– Should you go for volume or for profit? Listen to this episode and find out. Volume or profits? This is a dilemma that a lot of businesses have when they’re looking to grow, because what does grow mean? It means something different for every client. I think if there’s anything that 2021 and 2022 have shown us, is that your volume, which obviously can vary greatly from where it should have been to zero for a lot of you, and then to all of a sudden 150% of what normal volume is, showing you that just growing your volume and growing it quickly may not be a good answer for you because there’s other things that go along with that: Staffing and equipment and just burning yourself out. So when you think about trying to grow your business, what is the way to grow your business the right way? Should you be going for higher volume or should you be focusing on profits? I was just listening to an audio book and they were talking about this same thing, how companies that are going for, let’s sell more volume, sell more volume, sell more volume, often do that at the expense of profits, where at a higher price and a lower volume, they could actually profit more than they could at a higher volume at the pricing that they’re charging now. But they can’t charge more because they’re also trying to do the more volume and that works against it.
So for me, I like to go for profits. I think profits, it’s easier to do less of the events and profit more per event, than it would be to say, let’s just do bigger volume and we might have to lower our pricing to get to the bigger volume. Because if you think about it, let’s just do it in terms of easy numbers here. Let’s say your average sale is a thousand dollars. I know for many of you is way more than that, but let’s just work with me on this. It could be $10,000, it doesn’t matter, but let’s say a thousand dollars. And let’s say that your profit margin is a third, right? So you make $333 on that. If, instead of doing more volume, because for every one you’re going to make $333, what if instead of that, you cut back on your volume, but raise your price, because your inventory has lowered. And if you could make more money by raising your price, if you’re able to raise your price by the $300 instead, every event you do makes you $300 more without having to do more events. Even if it was a hundred dollars, that you could raise your price. That means for every three events you do, you’re profiting the same as if you had done four events because you’re making the profit of four events on three events at the higher price. So, I’m not going to get into the crazy math here. But the idea is that higher volume is not always the benefit. I have a friend of mine where his business had crossed a million dollars in sales, which was great, except he said, when his business was doing $500,000 in sales, he was actually profiting more than he was at $1 million, because of higher staff costs and higher marketing costs and other costs that that increased. So he said, yeah, it looks great on paper, but he was actually making more money when he was doing half the sales that he’s doing now.
So is your business in that same position? Are you going for the more volume, the more volume, the more volume at the sacrifice of profit? So let’s take a look at this from your particular standpoint. What’s your inventory like? And if you were to increase your volume, where are you going to get that? So for instance, if you are a solo operator, you’re a makeup artist, or you’re a DJ, or you’re a photographer, an officiant, or a videographer, or a planner, or whatever, and you have an inventory of one per day, right? So on that Saturday, you could only do one event. Well, you can’t increase your volume without increasing the staffing, right? You need another team now to be able to be the second photographers out on a different wedding, or the second planners on different wedding, and so forth. So your inventory is going to be limited. When you go to volume, if you’re not already filling the most popular Saturdays in season, then you have places to go on volume. Once you’re filling those most popular dates, now where are you going to go to get the volume? Now you’re going to go to less popular dates. So you’re going to move to your Fridays and Sundays. I have clients that are filled up, venues that are filled up on Friday, Saturday, and Sunday. Okay, well now where are you going to get your volume from?
If we want to profit more, doing more volume is one way to profit more, but what happens when your inventory gets tight or you have inventory that people don’t want. If we fast forward to 2023 or 2024, are you going to be doing as many Monday and Thursday weddings as you were doing in 2021 and 2022? I don’t think so. because I don’t think the demand’s going to be there the same way. Do you want to be doing that many weddings in 2023 and 2024? Or do you want to cut back on your inventory and profit more by being able to raise your rates because your inventory is limited, going for the dates that you know you can book, and if you raised your rates even a little bit, you’re going to profit more. Every dollar you raise your price is profit. Every dollar you take away without getting anything back in value is profit you’re giving away. When you go for higher volume, it’s very often less profitable business. Now, yes, your fixed costs might be covered already, your rent and your vehicle payments and things like that. But you’re not profiting as much on a Thursday as you would be on a Saturday. If your Saturdays are booked, you don’t have any more Saturdays. We just can’t add anymore.
Depending on where you are around the country or around the world, there are dates that are more popular than others, and you can say, hey, that’s great, I have Saturdays open, but if there are months that people aren’t getting married as much, it’s going to be much harder to sell that, and certainly may not be able to sell that at the same dollars. So you’re sacrificing profitability to get more volume. The other side of this is some of you have staff you need to keep busy. I understand that. At a certain point though, if you’re just moving money from your clients to pay your staff and you’re not getting anything out of that, that’s not a good business model for the long-term. What are you going to focus on? You’re going to focus on profitability? You’re going to focus on volume? Your business, everybody listening here, your business is in a different place. I have a lot of people who’ve realized in 2021 and getting into 2022, that more volume, more volume, more volume looks good on paper, but it doesn’t feel so good when you have to actually do those events. So think about what might be best for your business. Is it volume? Is it profits? What’s the right balance between those? Where you can raise your rates up to be more profitable per event, but you’re still able to fill the calendar with the dates that you want to do, right? Not 365, what’s the right number for your business in terms of the dates, based upon the staffing you have, how many events you can do at a time, and so forth. I like focusing on profits because profits is what you keep. Profits pays your mortgage, profits is your retirement, profits is your college education or your kid’s college education, profits is your vacations. That’s where it’s going to come from. Volume at the sake of profits is not a good long-term business model. My phrase that I like to say is, “I would rather feed your family than your ego.” I hope this gave you something to think about.
I’m Alan Berg. Thanks for listening. If you have any questions about this or if you’d like to suggest other topics for “The Wedding Business Solutions Podcast” please let me know. My email is [email protected]. Look forward to seeing you on the next episode. Thanks.
Listen to this and all episodes on Apple Podcast, YouTube or your favorite app/site:
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- YouTube: www.WeddingBusinessSolutionsPodcast.tv
- Spotify: https://spoti.fi/3sGsuB8
- Stitcher:
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