I was just speaking with someone who told me he booked 100% of his meetings and was fully booked every year. That sounds great in theory, but I guess my question is this. Why would you want to book 100%, if you’re fully booked all of the time? For that matter, I’m not even convinced that you want to book 100% if you’re not fully booked. But if you are, that means it’s probably fair to assume you’d be fully booked at a 80% or 90%. Quite probably lower.
Let’s assume 80% for the time being. If you can still be fully booked at 80%, that means you’d only need to compensated for the meeting times, since you’d take no loss on total revenue. At that ratio, if you do 40 weddings, you’d need 50 meetings. So, assuming meetings take 2 hours, you’d need to be compensated for 20 hours of additional work. If you’re worth $150/hr, that would be $3,000 of time. That means you’d need to increase the profit from each wedding by a whopping $75 to compensate. I’m skeptical that $75 would even cause a drop in bookings at all for someone who hits 100% at full capacity. If that’s true, then there’s no question that a 100% booking rate is costing you.
Now, let’s get a little more specific. Suppose your average contract is $4,000. Now, suppose you try increasing your price to $4,400. In my experience, that’s a fairly marginal increase. It seems quite likely that if you can hit 100% at $4,000, you can hit 80% or more at $4,400. Assuming all this to be true, you’ve now lost $325 per wedding, or $13,000 per year. Not a trivial amount.
But it gets worse. Because there’s no way to know whether your average could be $4,000 or $8,000. So if you ignore what’s a strong indicator that you’re in good demand, then you could be losing far more than $13,000. And it gets worse still. Because the pattern is quite likely to be compounded. If you’re undercharging by 10% (as an example) one year, you’re likely to repeat that pattern the next and the next. So, let’s pretend you raise prices 10% per year, when you could do 20% and achieve the same amount of bookings. That means if you start out at $4,000, in five years at a 10% increase per year, you’ll be averaging $6,442 per wedding. If you could have sustained a 20% increase, you’d be at $9,953 by the end of that same period. Now you’re losing $140,000 per year, but, over the years, you’d have lost over a quarter of a million dollars when you add it all up.
Here’s the thing. You’ll never know how much range you actually have to play with unless you test it. You might be able to double your cost and still book at 50%, which would cause you to lose no money, but only have to shoot half as much. You might not. But the risk to give it a try is marginal, while the long term cost isn’t. The real cost in booking 100% of the time is that you never get context for your pricing. Business is discovery. It’s learning what works and how to make it work as well as possible, but hitting 100% does just the opposite. It keeps you in your security zone, preventing you from getting an accurate gauge about where you are. And without that information, how do you know if you’re moving forward?
preach it. good stuff spencer!
Thanks! I’m liking the sound of that. I think I want to officially be called “The Preacher Man,” from now on.
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Essays like this are so important to broadening people’s horizons.
Wow 100% booking and booked to capacity? Who is this super hero?
Hehe! They both clearly have great taste in women, so maybe they are I know you’re a nut-lover (er…you know what I mean) like me, so I’m sure you’d enjoy this shake!
Great points, and with the numbers you are really backing up the lost potential. However, the cost of failure can seem so high – like what if you can’t get that 80% at 4400? How do you adjust at that point?
Thank! It does, definitely. Failure just feels miserable. That’s really the problem. It feels so miserable that we avoid it even in the face of huge gain.
There are a few different things to think about. First, uncertainty is everywhere, which means failure is always a possibility. But every great company has great failures. Without the failures, they’d never have become great. More to the point is simply this. You have a choice to incur more risk and get greater reward or to take less risk and get lesser reward. I think most people skew the balance too far towards the side of caution, giving up the potential for large gains in exchange for modest security. That’s too much to lose in my mind. After a year or two, it’s no big deal. But after a decade or two, it can be huge. It’s not just business. It’s being the person you want to be. The risk of money and business matters, of course, but it’s not life and limb. Almost anyone can recover from a rough year. No one can recover from a rough life. Failure enables success. If you’re not experiencing enough failure, you won’t get what you can.
Also, remember that you can always try something out for awhile, then change it back. Nothing has to be permanent. That’s the whole point of business, right? Try something, see what happens, then use that to improve. And $400 doesn’t have to be $400 added to the base. You can easily sneak it in in small parts. Suppose you price a la carte (with packages, you’d have to do it differently, but you could still do something similar). You could add $150 to the base rate, $65 to the engagement session, and you could cut the album down by 6 images and charge $30/image, which would get you another $180 on the backend. That’s $395.
Finally, if you’re 100% booked with a 100% booking rate, and you’re running your business reasonably, you should have a good amount of buffer zone to take some risk. If you’re at 100/100 and there’s no buffer, something is wrong, and I’d say to look at that, because being fully booked to just barely squeak by is not where you want to be. Also, if there were, say, a 40% drop after a 10% price increase, that’s too steep a falloff. I know all markets are different, but there are all sorts of little factors that affect pricing, and a 10% bump shouldn’t have that type of effect. There must be something else going on. If that’s the case, better to know now. It could be the connections, referral programs, networking, pricing, even the picture taking, but there’s likely something going on in that scenario.
Wow, that is a great response, thanks for taking the time to write that. You have articulated very clearly what I have struggled to clarify in my own pricing strategy.
I think my new mantra will have to be “failure enables success” 🙂
That’s what I tell myself. It makes me feel better when I fail. 😉
I am so totally in agreement with what you are saying… Why be a busy fool if you can do less weddings for more income 🙂 you have to continually try/ reinvent new things or go stale, if it doesn’t work what have you lost NOTHING!
Great post xxx
So true!