Your marketing numbers: leads, conversion, booking value and lifetime value

What you will be able to do

• Calculate leads, conversion rate, average booking value and cost per booking from your own records
• Estimate client lifetime value using gross profit, repeat rate and referrals
• Use lifetime value to set a sensible maximum cost to acquire a client

You cannot manage what you do not count, and most event businesses count only one thing: revenue. Revenue tells you what happened. It does not tell you why, or what to change. Five simple numbers do, and you can calculate all of them from your inbox, your calendar and your invoices in one afternoon.

Read the transcript

Your marketing numbers: leads, conversion, booking value and lifetime value.

You cannot manage what you do not count, and most event businesses count only one thing: revenue.

Revenue tells you what happened.

The five numbers.

Each number points to a different fix.

Too few leads is an attract problem.

Leads and conversion: the funnel in numbers.

Break conversion into stages so you can see where clients drop.

For an event business, three stages are usually enough: inquiry to conversation (a call, meeting or tasting), conversation to proposal, and proposal to booking.

Average booking value and the HST trap.

Calculate booking value before HST.

The tax you collect belongs to the government, so it is not revenue.

Cost per booking.

Every channel costs something, even if it costs only time.

To compare channels fairly, give your time a value.

Lifetime value: what a client is really worth.

Lifetime value, often shortened to LTV, is the total gross profit a client brings over the whole relationship.

Use gross profit, not revenue, because you cannot spend revenue that went to staff, food or rentals.

That is the lesson. The worksheet and the quiz are just below this video.

The five numbers

Each number points to a different fix. Too few leads is an attract problem. A low conversion rate is a convince or convert problem. A low booking value is a product or pricing problem. A high cost per booking is a channel problem. A low lifetime value is a keep problem. Revenue alone hides all of this.

Leads and conversion: the funnel in numbers

Break conversion into stages so you can see where clients drop. For an event business, three stages are usually enough: inquiry to conversation (a call, meeting or tasting), conversation to proposal, and proposal to booking.

Here is Lantern & Lane’s wedding funnel for one season, using illustrative figures.

• Leads: 80
• Consultations: 36, so 36 / 80 = 45 percent of leads reached a conversation
• Proposals sent: 32, so 32 / 36 = 89 percent of consultations
• Bookings: 22, so 22 / 32 = 69 percent of proposals
• Overall conversion: 22 / 80 = 27.5 percent

The weakest step is the first. More than half of their leads never reached a conversation. That points straight at response time and the first reply, not at the proposal or the price.

Be careful with comparisons. A 27.5 percent conversion rate means nothing on its own. A photographer whose leads all come from venue referrals might convert 40 percent. A rental company handling many quick quote requests might convert 20 percent at a much lower booking value. Compare yourself with yourself, season to season.

Define a lead before you count. A message that says only “price?” with no date is a lead. A vendor asking to join your preferred list is not. A past client asking about next year’s party is a lead, but tag it as repeat business so it does not inflate the performance of whichever channel you were testing that month. Write the definition down and apply it the same way every time, or your conversion rate will drift for reasons that have nothing to do with marketing.

Average booking value and the HST trap

Calculate booking value before HST. The tax you collect belongs to the government, so it is not revenue. If Lantern & Lane invoiced $261,708 including 13 percent HST for 40 bookings last year, the revenue is $261,708 / 1.13 = $231,600, and the average booking value is $231,600 / 40, about $5,800.

Watch the spread as well as the average. If most bookings are $3,000 and a few are $15,000, an average of $5,800 flatters you. Look at the median too, the middle value when bookings are sorted by size.

Cost per booking

Every channel costs something, even if it costs only time. To compare channels fairly, give your time a value. Say Marco values his time at $50 an hour.

Instagram looked free. It was the most expensive channel per booking. Venue referrals were the cheapest by far. That does not mean drop Instagram, because it may be creating demand that shows up later in other channels. It does mean the next hour of work should probably go into venue relationships.

Lifetime value: what a client is really worth

Lifetime value, often shortened to LTV, is the total gross profit a client brings over the whole relationship. Use gross profit, not revenue, because you cannot spend revenue that went to staff, food or rentals.

A simple formula works for most event businesses:

LTV = gross profit per booking x average number of bookings per client + gross profit from the referrals they send

Worked example: a caterer serving corporate offices.

1. Average booking: $3,000 before HST. Food, staff and rentals cost $1,800. Gross profit per booking: $1,200.
2. Corporate clients book an average of 4 times: a holiday party, a summer event and two lunches, over the relationship.
3. Gross profit from bookings: 4 x $1,200 = $4,800.
4. Each client refers, on average, half a new client worth one booking: 0.5 x $1,200 = $600.
5. LTV: $4,800 + $600 = $5,400.

Compare a wedding client for Lantern & Lane. Planning fees are mostly gross profit, say $6,600 on an average wedding booking of $7,600. Couples rarely rebook, but a good wedding produces referrals. If each couple sends 0.5 bookings on average: $6,600 + (0.5 x $6,600) = $9,900. Referrals add half again to the value of a wedding client. That is why the keep job matters.

How much can you spend to win a client?

LTV sets the ceiling on what you can sensibly spend to acquire a client. A common rule of thumb is to keep the cost of acquiring a client to around a third of LTV or less, leaving room for overheads and profit. For the corporate caterer, a third of $5,400 is $1,800. Spending $700 to win a corporate client is comfortable. Spending $2,500 is not, unless you have evidence they stay longer than average.

Use this checklist each quarter:

• Count leads, consultations, proposals and bookings.
• Calculate conversion at each step and overall.
• Calculate average and median booking value, before HST.
• Calculate cost per booking for each channel, including your time.
• Update LTV for each main client type.
• Pick the one number you most want to move next quarter.

In Canada and the GTA

Keep HST out of your marketing numbers. Once you are registered for GST/HST, the tax you collect is not your money. In Ontario the HST rate is 13 percent, so the revenue on a taxable invoice is the total divided by 1.13. Build that into your spreadsheet so your booking values, conversion values and LTV are always pre-tax. If you are still a small supplier, track your revenue against the threshold. The Canada Revenue Agency says you remain a small supplier only while your worldwide taxable supplies, including those of associates, are $30,000 or less in any single calendar quarter and over the last four consecutive calendar quarters. Your marketing numbers tell you when you are approaching it.

Invoices are data. The CRA’s guide for GST/HST registrants sets out what an invoice must show. For sales of $100 to $499.99, include an indication of the GST/HST charged and your GST/HST registration number. For $500 or more, also include the buyer’s name, a brief description of the services and the payment terms. Those same fields are what you need for marketing analysis: who bought, what they bought and how much. A clean invoice template gives you a clean client list. The details are in the CRA’s RC4022 guide.

Your numbers contain personal information

A spreadsheet of inquiries, with names, phone numbers, event dates and budgets, is personal information under the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA applies to private-sector organizations that collect, use or disclose personal information in the course of commercial activity, and it generally applies to businesses in Ontario. Its fair information principles include limiting collection, limiting use, disclosure and retention, and safeguards. In practice:

• Collect what you need to quote and to measure, not everything you can.
• Keep the spreadsheet or CRM behind a password, and do not share it with partners.
• For analysis, you rarely need names at all. A lead number, date, source, event type and value are enough.
• Decide how long you keep lost inquiries, and delete them when that time passes.

If a breach of that data creates a real risk of significant harm to individuals, you must report it to the Office of the Privacy Commissioner and notify the people affected as soon as feasible, and you must keep records of all breaches for 24 months. The OPC’s PIPEDA overview is a good starting point.

What GTA numbers tend to look like

Because published industry benchmarks for small Ontario event businesses are scarce and inconsistent, your own history is the only reliable benchmark. A few local patterns are still worth expecting. Corporate clients in the GTA often rebook annually for holiday parties and summer events, which can make their lifetime value much higher than a single booking suggests, even at a lower average booking value. Wedding clients rarely rebook, but they sit in dense family and community networks, so their referral value can be large. Cultural wedding sequences with several events may show up as one booking with a high value, or as three bookings with the same family; decide how you will count them and stay consistent.

Seasonality distorts quarterly numbers. A caterer’s conversion rate in the fall holiday party rush will look nothing like February. Compare each quarter with the same quarter last year, not with the one before it. In your first year, when there is no history, record everything carefully and resist drawing conclusions from a single busy month. One year of honest numbers is worth more than any published average.

This is general information, not tax or legal advice. Check the official sources named here, or ask an accountant or lawyer, for your own situation.

Worksheet

Download the worksheet and complete it for your own business, using Lantern & Lane as the model where it helps. Keep it with your marketing plan. It takes about 10 minutes.

Download the worksheet (PDF)