October 3, 2022
How to Grow an Escape Room Business - This week's guest on Fix Your Business is Lizzie George who is the Financial Controller at Escape Rooms Cheltenham.
The business was only founded in November last year and is already going great guns with 150 bookings per month on average already.
During the episode we talk about How to Grow an Escape Room Business.
00:00 - How to Start an Escape Room Business
04:21 - Working Out the Capacity for Your Business
06:48 - Marketing a Small Business
18:52 - Building an Online Subscription Business
23:23 - How to Choose Online Products
For those who don't know escape rooms are based around a 60 minute adventure designed to test your mind and your team working skills. Find clues, solve puzzles and work together to escape!
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- Welcome back, everybody. It's another episode of Fix Your Business with your host, me Robin Waite, The Fearless Business coach. And today I've got an amazing guest on, we're gonna be learning about escape rooms so, over to you Lizzie, give us a quick potted history of Labyrinthos, you started very recently, so tell us about that and also where the business is at now and where you hope to get it to throughout the next, I know it's a tricky time, but maybe the next 12 months or so.
- So we started last year, last November and we've got two rooms at Create on the Square, our venue. And we grew really rapidly, up to about 150 sessions a month, and our turnover was really quite flourishing, yeah. And lots of potential for growth, for delivering the rooms, and then, lockdown. [laughing softly]
- Yeah, so in terms of like, so from November to sort of pre-lockdown you hit eight and a half K turnover which is absolutely phenomenal for a small local business. And especially as a bricks and mortar business, I think to hit that from a standing start is phenomenal. What would you say was kind of the, I guess, one of the biggest success factors in that?
- Well, just getting that support, really. Getting people coming back, because we change the rooms periodically. Just getting people coming back, who are wanting to come back to the new room and then organically growing and recommending people. And we have people from all over the country coming to play.
- And in terms of forgetting about the crisis now, where does the business need to get to? So we'll focus on the one location for the time being. Where does that business need to get to in order to kind of start to achieve the financial goals that you and the directors have laid out for the business?
- I think, that both rooms need to be running as much as they can. So they need to be running seven days a week and for the time period. Obviously people aren't going to be playing at two o'clock in the morning, but physically, running as much as they can be, seven days a week. And then in the other locations as well, building them up to be as, each of the other locations has got one room, and they need to be running seven days a week as much as they can. And that has a knock-on effect then, because we'll be able to be employing more people and really seeing that benefit to the local community. Because that's what we're about as well, is going in to locations that aren't premium town centre and doing up a unit that's not loved and breathing life back into a community. Because people will travel to come to an escape room. And that's what we've found.
- In terms of your role in the business, you obviously deal with the numbers side of it, the accounting side of things, so if it's not too upfront of me to ask, imagine if both the rooms in the current location were full and let's say for argument's sake it was pushing out somewhere close to 20K turnover, what sort of net profit would you expect that to sort of produce on the bottom line?
- Yeah, it's really, really good net profit. It's about half, half the--
- Great.
- So the more rooms that we can run in a location, then it's split between variable and fixed. We've got the rent, and then we've got the variable costs, the games master controlling and facilitating the game.
- Cool, I'm gonna flip over just to my shared screen for a second just so we can start to kind of build up a picture of things as I'm making my notes. So I did make lots of notes earlier on, as you can see on the other page, but we're not gonna share those, that's just for me to see. So one of the challenges with physical, bricks and mortar spaces tends to be that once you hit capacity, now most people make a really big mistake at this point, they assume that the capacity is actually 100% of the time, the slots being filled, but actually that's complete bunkum. The optimal capacity, and this came out of things like Toyota manufacturing plants and kind of just in time thinking and all that sort of production line side of things. The optimal amount of capacity that you should be aiming for is actually 72%. And the reason, the science if you're interested, behind it, and this is a very quick potted history of how somebody much cleverer that me came to that number. For every 1% you go over 50% of your capacity, it's actually worth 2%. Now the reason why it's not 75%, is 'cause obviously if you were to, what we're saying here, it's actually 72% capacity as you see it physically, you are actually already operating at 94% of capacity. The extra 22%, times it by two, 94%. And that gives you 6% wiggle room. And the reason for that is obviously because, imagine you've got a machine, stamping metal products in a manufacturing plant, and as you send the pieces into it that machine over a period of time, is gonna degrade, become less efficient, you're gonna have problems, there's gonna be bits and pieces that come out of it that aren't perfect, sort of wastage and things like that. Now I know that's obviously production line methodologies and thinking, but actually, I've applied this to many service-based businesses and if you try and make a service-based business run at 100% capacity it breaks, basically. So that's my non-scientific explanation for it. So 72% is actually critical, great that you're pushing that profit. That's more something to be wary of. Also, another thing is at the moment you've got, you've got kind of, and we're gonna start to build up a picture in a second. So you've kind of got, effectively one core product sat at the centre of your business. Now I have something called a product architecture model, which involves several different sort of different components. We have something called a breakthrough session, I'll explain each of these in a second. This is less appropriate for you, this is more so for service-based businesses but, you have a qualification process to workout whether prospective clients are a good fit or not. You have your marketing assets that you've built up. So your marketing assets feed people into your kind of qualification process, your dating process with your business, if you like. That then feeds people either into a breakthrough product or straight down through into your core products. I've missed off a step there, but it's fine, it doesn't matter for this case. And then you've got one core product. So it's kind of like, if the rope gets pulled under your feet, like now and you can't deliver that core product, phew, okay we've got nothing there to, so what's gotta happen immediately is you've got to come up with a new idea, it's potentially gonna be sold into a new market. That takes time, energy and effort. It takes time, energy and effort to then market and sell it, and then next thing you know, your crisis disappears, we go back to how we were and we've expended all this energy and actually we're back to the same place. So where I would like to get you to, hopefully, and we might not answer all the questions now, by the way, but it would be great if either we had more core products, and I normally recommend having three to five, which I'll be honest is simple for you because we add in location number one and location number three to your current location, number two, and now you've got multiple core products if you want to call it that. This is a dumb example I'm about to give you, but for argument's sake if you were to look at, let's take Centre Parcs. Now imagine Centre Parcs may have an escape room, but they may also have cycle paths, paintballing, swimming and all these different kind of complimentary entertainment-type activities. So really you want your core products to be complimentary but not the same if that makes sense.
- [Lizzie] Yeah, that's really interesting because each of our locations are all dependent on us being able to deliver them and at the moment we can't deliver, so none of it works.
- [Robin] That's it. So we're going to fix that, that's the plan. That's why it's called Fix Your Business. So we're gonna come up, now I know that obviously with the crisis in mind, you've created a couple of different products. So there's an at home kit, which you're in the process of rolling out, which I think is 10 pounds, isn't it? And then you've got the online version which you can still take groups of six. You're gonna have one person in the room and then they guide them around which is a really great adaptation of a product. But I wanted to, the reason why, we were obviously talking at length beforehand, so, will it be fair to say that, I mean, this is great because you end up with, let's say 300 visits times by whatever the price is, which I think you said 60 to 70 pounds, okay. So that gives you your sort of roughly 18, 20K turnover. That's how I came to that sort of conclusion. But you're relying on people, you're kind of having to like, sell, deliver, sell, deliver, sell, deliver, sell, deliver, sell deliver, sell, deliver. Something goes wrong, somebody gets ill, we can't sell, we can't deliver. Now we've got no revenue, now things are fixed, right? Sell, deliver, sell deliver, sell deliver. I think it would also be quite nice if you can come up with what I call a follow-on product. And these happen in, there's three different types of follow-on products, which I'll explain. Now the follow-on products, you can potentially kind of take people straight through, ignoring the core products and straight down to the follow-on product, in effect becomes like a complimentary product. Does that make sense?
- [Lizzie] Yeah, because we were, we do change the rooms. Some escape rooms just have however many rooms they've got and they don't change the theme. So we were changing the theme, but we wondered whether, if we did a different model that we would have to change the rooms quite so often.
- [Robin] Potentially, yeah, absolutely.
- [Lizzie] Yeah, what do you think about that?
- [Robin] So there's a couple of things, so with the follow-on products, and this is where you're kind of, you're on the right track with how you've pivoted, or how you've adapted your product so far. But you have, they kind of breakdown into three different models. You have your DIY follow-up products, so do-it-yourself home kit. You have what you call done-with-you DWY, which is kind of your business is kind of a DWY 'cause you need somebody to facilitate the session with people. There is also a third one which is less appropriate to you, which is done-for-you, people come for the experience you can't really give them that experience passively.
- [Lizzie] No because part of it is finding the clues, bringing them together, bringing a bit from over there, a bit from over there and bringing it together to make the answer.
- [Robin] Yeah, however, imagine, imagine actually that's there's probably a group of people out there who maybe don't always want to be participating. They don't mind watching.
- [Lizzie] Yes, now a friend of mine said, I'll watch, you know, my friends in the room, but I'm not being in that room.
- [Robin] There's your done-for-you, so they can passively just watch it, but you can still potentially generate some income from it, okay? So what I'm thinking is, what we discussed beforehand, so you're DIY is kind of your home kit, you've got that going which is great. You've created this, and this is one of the great things about when a crisis happens, is when you've got to make difficult decisions for a business, it makes you think creatively about different products you can introduce into your business, so the home kit might not have happened had the current situation not happened. But I'm kind of most interested in what those done-with-you could look like, for you. And I hope you don't mind me bringing this up now, but obviously one of the challenges which we faced whilst we were doing the pre-interview is what I call, it's just a situational bias. It's a bias towards your own product, where you, and naturally so, your product is great. I'm not suggesting it's not great, but you, because you're so focused on your own product, the model which you've created and invested all this time, energy and effort into, you and the four directors, it's hard to see, you sort of start to lose situational awareness of what's going on around that. So we did a bit of work before hand, to kind of, what opportunities are there that sit outside this?
- [Lizzie] And you had to, it was a real struggle to get me to think outside the box, to think that the product could work in any other way.
- [Robin] Yeah, so what we came up with, so, and this is where probably for those, maybe give people a very quick introduction about the escape room model and how that works.
- [Lizzie] So our model is, a team of six people would go into a room, the door is locked, and they've got an hour to solve puzzles in the room. They don't know what the puzzles are because we don't have one, two, three, four, five, however many. They'll be maybe a bit of a clue over there and a bit of a puzzle, and you've got to, you've got to resource investigate the room and bring different things together to be able to see that it is a puzzle to be able to get the answer to go on to the next puzzle. And that's our model at the moment, and we have two different rooms and we change the theme of that room regularly. And that's our model at the moment.
- [Robin] And it's a brilliant model, incredibly popular model, but obviously it's difficult to roll out if something happens, if you can't deliver it on premises. So what I was looking at was, when I try and create follow-on products or complimentary products, you've got to almost extract, remove the physical limitations of the room, the fact that you have to have six people, and somebody directing it, and you've got to start asking slightly different questions, which is, why do people go and use escape rooms? So the obvious ones are, the problem solving, puzzle solving. There's the social aspect with friends, there's the escapism, you know, the fun. And finding, and this is where, we kind of lead on to, well how can we take those aspects, the reasons why people go and do it, and create a follow-on product from it. That potentially could be subscriber-based. Now more than ever, businesses are looking to create sustainable, recurring revenue. It doesn't have to be all of the revenue, so I'll give you an example of this. One of my clients runs a medical aesthetics business. They're doing Botox, injectables and things like that. Very typical, High Street, you have to, it's physical, we have to be in there, there isn't, well there is a DIY option, hopefully nobody ever injects themselves. This is a whole sort of done-with-you, done-for-you model. And what they were doing is, the whole revenue was based on people coming into the clinics and having injections, treatments and things like that. We did introduce a whole load of non-invasive products into the mix as well, so we expanded their core products. One of the most, the best decisions that we made with that business though was to introduce some kind of a subscription model. It sounds weird, Botox on subscription, right?
- [Lizzie] Yeah.
- [Robin] However, it's not for everybody, I get that. But one of the things we did, is we created this package which was, and there are medical reasons why people need Botox, by the way, it's not just for cosmetic reasons, there's also medical reasons. So we created the package where they would have the injectables plus they would also have something called a hydrofacial, which is a non-invasive treatment, a mix of them, over the course of 12 months to create a specific outcome. And that would be paid on a monthly rolling basis.
- [Lizzie] So is that like, going to the dentist when you might have a check-up, you go to see the hygienist and you get all that rolled in and paid monthly.
- [Robin] Essentially, yeah, it's like that. It's kind of just getting those monthly payment plans. Now, their subscriptions probably only make up about 15% of their overall turnover, it was obviously zero, but in the last year we've gotten them up to about 15%. The goal is to ultimately get them to 25%, 'cause at 25% some interesting stuff starts happening to their business. All the rent on three clinics is paid for, the majority of the salaries were paid for, and a majority of the operating expenses were paid for. It was only the variable costs, as you said. So they have to pay a licence fee every time they do an injection or use a piece of machinery. So it's only really those variable costs, and if they have to ramp staff up or down depending on how busy they were. So, at a time like now, that business is still collecting those monthlies, because they've either delivered the treatment or they're going to deliver the treatment in future. So the client's happy to pay them, so it creates that sustainable revenue. This is why, you have your core products here, which do bring in a big chunk of change, and they will do. And when the crisis is over, and we talked about, well imagine if we had double, triple, quadruple the audience to relaunch in September, January, whenever we kind of are allowed back out again and back into normal life. But straightaway you jump from 8.5K to 20K because you've got double, triple, quadruple size of the audience to launch your product into. So that'll take care of itself. But what about if actually we could create something down here that was, I don't know, imagine if it was producing somewhere between 10 and 15% of your monthly revenue was recurring.
- [Lizzie] Yeah, yeah.
- [Robin] That would be nice. And what we're talking about here is, this is where we're gonna kinda summarise it and bring it back now, is we take all of the elements of the why, so why do people use escape rooms? The where, is obviously gonna be, well, online. Let's create an online version of it, somehow. So here we're talking about, you know, we talked about fun, we talked about problem solving.
- [Lizzie] A competition, against somebody else, the competitive factor of it.
- [Robin] Yep, so let's write that down, say competition. We had to remove, the what we could do without basically. So we have to remove the physical element, cause that was, you kept on coming back to that, we can't do it because we can't do it because, so we had to remove the physical element of it. And actually what I suggested, and this is whether, this is something to put to the directors and test and trial and things like that. Well actually, what if you just had a, let's say one to two weekly games, so delivered via Zoom, any number of people could join. Zoom, you can have hundreds of people on there. It'd be a bit crazy, but you get community managers to help you manage that, some of your existing staff potentially. Any number of people. And what you do, you treat it, it's almost like you gamify it, so it's like a pub quiz, but with problem solving, yeah? Now I've been to free pub quizzes, I've been to paid pub quizzes, I'm quite happy to chuck a fiver in the pot if there's a chance if we win we might get the whole pot and give some money to charity and things like that. So what I was thinking is, could you have a package which is I don't know, somewhere between 10 and 20 pounds a month, and you've gotta test the pricing to see what people are comfortable with. And all you need, well I wouldn't say all you need, But all you need is 100 subscribers, oops I can't even write at the moment. So 100 subscribers, and there you go, you're up. I mean, that's 100, would be 1K a month, let's say we get either 200 subscribers or put it up to 20 pounds, you know. You're starting to get somewhere close to your 10 to 15% of regular incoming money. And the nice thing about this is, this post-dates the crisis. You could keep on doing this. You've told me that you've got, your brand is starting to be recognised further afield and people will travel. Well this will appeal to them too.
- [Lizzie] Yeah, and this is a global thing isn't it? And this is a one night a week.
- [Robin] And they can pay the 10 pound a month. They can come to as many events as you're putting on, you know, you kinda make it unlimited almost. I mean, if you're only doing one or two a week, there's kind of limitations on that anyway, it might be to start, I mean this is where you get into the real nitty gritty of kind of the business model, if you've got different time zones, people coming in from all over the world, you're gonna have to start having games starting at different times, things like that.
- [Lizzie] Yeah, one of the limiting factors then, is the amount of games and the amount of puzzles that we can come up with to be able to keep it new, keep it fresh.
- [Robin] Yep, so, I mean, I don't know. One of the things which I looked at, I mean, that's one of the things which you and your expert team of puzzle creators will have to come up with an answer to. But let's say it's an hour, you know. And maybe, I don't know, how long, the puzzle's like five or 10 minutes or something like that. But let's say for example then, 10 minutes, on average. By the time you've done the front mats, the introduction and the outro-ductions, that's five puzzles per week. So maybe actually, let's scrub the two, and we'll just do one a week. That's five puzzles a week that you've got to come up with. In a year's time, you'll get some attrition anyway but in a year's time you can start to either recycle some of those puzzles or come up with new versions of the same puzzles. You know, that's where your IP is going to be. What you could also do, is give people a library, you could create a bank of puzzles, and people could just pay 10 quid a month. Well, let's say for example, ah, now this could be interesting. Ah, can't do it on this page, let's go on to a new page. We could have the, I'm gonna do it in red. Stick with the red. So you could have the live version, and then you could also have the library version. So for let's say for example, as obvious as it sounds, you can take part in as many live games as you want, or you can just dip into the library whenever you want, each of these are 10 pound a month, each. Or, if you want them both, it's 20 pounds a month. Make sense? So now you've got two follow-on products. Three follow-on products. [chuckles] Live, or library, or both. What a great range of choice.
- [Lizzie] It is, it is.
- [Robin] And that, like I said, can be sold in addition to your core products.
- [Lizzie] I mean, even if we were changing the room every two months and then kind of went, oh well, let's put more money into props so that they were better quality props, would last longer, and we would go to every four months, every six months, but if we're not putting the money into the props, and it's very much, you know, this is really tweaking the puzzle, isn't it? 'Cause it's all digital, and you're not building physical props.
- [Robin] There's no overhead. Or very little overhead.
- [Lizzie] It's a very different sort of puzzle, isn't it?
- [Robin] The other thing as well, is this would create an amazing community of people who eventually as a little bonus, you could start to throw in, and I mentioned two things that you could do, you could have an annual conference, you know, get people in a room for a day solving problems. Which is paid for, and that could be people, they'll pay hundreds for events if they're good. Or you could potentially do competitions. So one of my existing clients is a breakdancer. And obviously breakdancing, you have these things called battles where you dance, have a dance off against somebody else. Well somebody is organising a one on one breakdancing competition, like knockout competition, throughout the UK. And so you upload the video of your battle, they place your dance, they put you up against another person, the judges decide which was their favourite and then you go through to the next round. And they're just doing this until they end up with a winner.
- [Lizzie] Yeah, but what about as well, because these are enthusiasts who play this, and part of our team is made up of volunteers of escape room enthusiasts, who come up with these puzzles. What about pitching our, the contestants if you like, against each other, can you come up with a puzzle that nobody else can solve?
- [Robin] Great idea, there you go. See you didn't even need my help to come up with that. That's a great idea. So, you know, puzzle creation.
- [Lizzie] Yeah.
- So, you're already starting to do the work yourself which means that I've successfully completed my part of the job. What I will do, Lizzie, is I've got my notes here, obviously this has been recorded, so I'll get the recording to you and if you're happy to share it with your colleagues and see what they think.
- Yeah.
- I will also send you a screenshot of each of my three pages of notes as well. So that you've got a copy of those. How does that feel, having gone through that process?
- It's really good, and I would love the product owner to go through this process as well, for her. Because that's been an amazing journey for her in growing this project, yeah.
- Yeah, I could go on for hours. You notice I'm wearing a branded t-shirt for example, there could be Labyrinthos t-shirts and merchandise that you can sell just as another passive income. You've got the online kit, there's just one kit at the moment but you could have 20 kits that you could start to go into the Amazon marketplace and start selling those. That could be particularly profitable for you, potentially. Because, like you've just said, your target market is so tight, like people who do this are enthusiasts, it's like, they will invest in products if there's a good brand and it's entertaining. I was saying when we were offline, you know, I used to have an office above a games workshop in the local town, and I don't fully understand it, you know, I'm into my things, and I didn't fully understand what was going on, but what I used to love seeing as a business owner, was actually looking in through that window when I'd wrapped up my day a five o'clock and they were kinda just starting one of their workshops. And these kids who are just absolutely, they're engaged, they're chatting to one another, they've got these most amazing models which they've created and painted and they've got these games all set out, like strategy games. And I was blown away by what they did down there. I used to get enjoyment out of just looking in and seeing what they were getting up to, so I can only imagine what it's like to participate. So when you've got that level of enthusiasm, this could be like opening Pandora's box for you, if you play it right.
- Well part of it for the games workshop is actually painting and building your models, isn't it?
- It's mindfulness at it's best, you get into flow.
- You bring your puzzles, to the workshop.
- Yeah, which is amazing. So I think there's a tonne of opportunity for you there. Lizzie, I appreciate, I've talked a lot as we've been going through that, but obviously we did a lot of prep work beforehand. Hopefully people can start to see how we go about sort of productizing a service like yours, and how you start to build up those various different revenue streams from it. So, thank you very much for being here on Fix Your Business.
- No, thank you. Yeah, no it's been a really good experience, thank you.
- My pleasure. And if anybody else wants to take part in Fix Your Business and have me go through the inner workings of how you've organised your products, how you price it, and what opportunities might be available for you, please do, you can drop me a comment either below the video with your details or email me, Robin at, so that's R-O-B-I-N @fearless.biz and you can be just like Lizzie and her amazing team of escape room artists, is that a thing? You know, and the great business which she's created there, and actually despite the current circumstances what a great business it has the potential to even grow into further, so thank you once again Lizzie.
- Thank you.
