I spent £1m… and we didn't grow.
Originally sent exclusively to The Letter subscribers on August 26th. Want to be the first to get my personal newsletter in your inbox every Monday at 7am? Subscribe for free here.
Morning gang,
It's clear that we are entering a period where people are tightening their purse strings.
Believe you me I have rang around chums of mine that all feel it from my industry.
At Marsh Farm, our visitor attraction, we have maintained visitor numbers this year compared to last, which is somewhat disappointing given our investments.
Over the last 18 months, we've invested significantly in capital improvements, including a new dinosaur park, additional rides, new shops, and various events, alongside a substantial increase in marketing spend.
Historically, a capital expenditure of £1 million would typically attract 100,000 new customers to an attraction.
However, this figure now seems closer to £3 million. Similarly, marketing used to cost around £1 to spend to acquire a customer.
With current costs per click on social media and rising personnel expenses, I estimate this figure has doubled or even tripled, now standing at approximately £2.50 per customer.
I hope this provides some clarity on the current situation of running a visitor attraction, I think you could also add many more sectors to a similar set of spend.
These shifts in inflated costs are largely due to inflation and the passage of time and a word I hate - “stagflation”.
A critical point to consider is that when I acquired Marsh Farm 12 years ago, our ticket prices were similar to what they are today, but with significantly lower business rates, wage costs, and utility expenses.
We cannot continue to pass these increasing costs directly onto customers, as people are already feeling the financial squeeze.
Balancing pricing effectively has become a delicate art. Looking after a new born is easier!
It's becoming evident that prices will have to increase. We are on the verge of seeing a cappuccino cost a fiver and even that will be considered average before you can say, yes I will have a sprinkle of chocolate dust on my little treat, coffee shops will have no alternative, the costs are unbearable.
I anticipate a period of higher unemployment, business closures, discontent among entrepreneurs, and persistent stagflation for the next couple of years.
I must admit, I miss the ease of trading during COVID-19; this period is much tougher.
Despite investing over £1 million in capital improvements at Marsh Farm in the last 18 months, we've only maintained our customer numbers, not increased them by the expected 100,000.
Build it and they will come isn’t true in 2025.
For me, build it and you’ll maintain is the order of the day.
Sometimes, in economic downturns, the focus has to be on investing in marketing, improvements, and people to simply stay afloat.
While many businesses are struggling, those who continue to refine and advance will ultimately outperform their competitors when the next boom comes… and it will!
The economy has presented us with lemons, and now it's time to turn them into lemonade.
I’m going to add some of my favourite quotes, which I receive from time to time, at the end of each letter to set the tone. With the current economic downturn, we often return to hope: we hope things will get better, we hope the economy will improve.
My good friend Philip has a fantastic quote he repeats constantly:
“In life and in business, you’ll do well to remember that hope is not a plan.”
Action is the antidote for any disappointing numbers you’re facing.
Go make the changes.
To your continued success,
James
PS. Have you listened to our podcast — The Business Broadcast: Real business owners, real challenges, real solutions? Why not apply to come on the show and get honest advice from JB and me! Here’s the link if you’d like us to help your business.