How to Grow an Escape Room Business

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 going to be learning about escape rooms. So over to you, Lizzie. Give us a quick potted history of Labyrinthos. You've 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 at the moment, but the next 12 months or so.

Yeah. So we started last year, last November, and we've got 2 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, really quite flourishing, yeah, and lots of potential for growth for delivering Delivering the rooms and then lockdown.

Yeah, so in terms of like, so from November to sort of pre-lockdown, you hit £8.5K turnover, which is absolutely phenomenal for a small local business. And especially as a bricks-and-mortar business, I think, you know, 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?

Um, well, just getting that support really, getting people coming back because we, we, um, change the rooms, um, periodically. Just getting people coming back who are, you know, wanting to come back to the new room, and then, and then organically growing and recommending, um, people. And we have people from all over the country coming, um, coming to, 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 7 days a week, and for the time period— obviously people aren't going to be playing at 2 o'clock in the morning, But physically, but, you know, running as much as they can be 7 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 7 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 into 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.

Yeah.

And that's what we found, yeah.

So 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 up front 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.

Great.

Yeah, so the more rooms that we can run in a location, then Then, you know, it's split between variable and fixed. We've got the, the rent, and then we've got the variable cost, the games master controlling and facilitating the game. Yeah.

Cool. I'm gonna flip over just to my share 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 I'm 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 slot's being filled.

Yeah.

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%.

Okay.

And the reason, the science, if you're interested behind it, and this is a very quick potted history of how somebody much cleverer than 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 because obviously if we, if you were to like, you know, so what we're saying here is actually at 22% capacity, you know, as you see it physically, you are actually already operating at 94% of capacity. So the extra 22% times by 2, 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 going to degrade, become less efficient. You're going to have problems. There's going to 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, that's my non-scientific explanation for it. So 72% is actually critical. Great that you're pushing that profit. There's just some— that's more something to be wary of. Also, another thing is at the moment 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 center of your business. Mm-hmm. Now I have something called a product architecture model which involves several different sort of components. We have something called a breakthrough session. I'll come back to— I'll explain each of these in a second. You have something called a— this is less appropriate for you, this is more so for service-based businesses, but you have a sort of a qualification process to work out 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.

Mm-hmm.

That then feeds people into either 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 rug gets pulled under your feet right now and you can't deliver that core product, okay, we've got nothing there to— So what's got to happen immediately is you've got to come up with a new idea. It's potentially going to 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, 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 it might— we might not answer all the questions now, by the way— but it'd be great if either we had more core products, and I normally recommend having 3 to 5, which I'll be honest, it's simple for you because we add in location number 1 and location number 3 to your current location number 2, 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 Center Parcs. Now imagine Center Parcs may have an escape room, but they may also have cycle paths, paintballing, swimming, and all these different kind of complementary, you know, entertainment-type activities. So really you want your core products to be like complementary but not the same, if that makes sense.

Yeah, that's really interesting because each of our locations are are dependent on us being able to deliver them. And at the moment we can't deliver, so none of it works.

That's it. So we're gonna 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, isn't it? And then you've got the online version, which you can still take groups of 6. You're gonna have one person in the room and then they guide them around, which is really great adaptation of a product. But I wanted to— the reason why we're obviously talking at length beforehand, so would it be fair to say that— I mean, this is great because you end up with, you know, what, let's say 300 visits times by, you know, whatever the price is, which I think you said £60 to £70.

Yeah.

Okay, so That gives you your sort of roughly $18K to $20K turnover. That's how I came to that sort of conclusion. But you're relying on people to— 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. I think it would also be quite nice if you can come up with what I call a follow-on product.

Yeah.

And these happen in— there's 3 different types of follow-on products, which I'll explain. Now, the follow-on products, you can potentially kind of take people straight through, you know, ignoring the core products and straight down to the follow-on products. In effect, it becomes like a complementary product. Does that make sense?

Yeah, because we were— we do change the rooms, so we don't 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.

Potentially, yeah, absolutely.

Yeah, what do you think about that?

So there's a couple of things I'm— so with the follow-on products, and this is where you kind of, you're on the right track with how you've pivoted, so, or how you've adapted your product so far. But you have— they kind of break down into 3 different models. So you have your DIY follow-on product, so do-it-yourself, your home kit.

Yeah.

You have your what we call done with you, DWY, which is kind of— your business is kind of a DWY because you need somebody to facilitate the session with people. There is also a 3rd one which is less appropriate to you, and which is done for you. Like, people come for the experience. You can't really do that, like, give them that experience passively.

No, 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.

Yeah. However, imagine, imagine actually that there's probably a group of people out there who maybe don't always want to be participating.

Yeah.

They don't mind watching.

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. Yeah. Yeah.

So 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 that, or what we discussed beforehand, so your 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, when you've got to make difficult decisions for a business. Yeah, it makes you think creatively about different products you can introduce into your business. So, you know, this— the Home Kit might not have happened had the current situation not happened. So, but I'm kind of most interested in what this done-with-you type product could look like for you. So, and I hope you don't mind me bringing this up now, but obviously one of the challenges which we faced whilst we're doing the pre-interview was your It's what I call— it's just a situational bias. It's a bias towards your own product where you've— 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 4 directors.

Yeah.

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 beforehand to kind of like, what opportunities are there that sit outside this?

Yeah, and you had to— it was a real struggle to get me to think outside the box.

Yeah.

To think that the product could work in any other way.

Yeah, so what we came up with— so, and this is where probably for those— maybe give people a very quick introduction about like the escape room model and how that works.

So our model is a team of 6 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 a 1, 2, 3, 4, 5, however many. There'll be maybe a bit of a clue over there and a bit of a puzzle, and 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 2 different rooms and we change the theme of that room regularly. And that's our model at the moment.

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-prem, so on-premises. So What I was looking at was when I, when I try and create follow-on products or complementary products, you've got to almost extract the— remove the physical limitations.

Yeah.

The room, the fact that you have to have 6 people and somebody directing it.

Yeah.

And you've got to start asking slightly different questions, which is why do people go and use escape rooms?

Yes.

So the obvious ones are the puzzle, the problem-solving, puzzle-solving. There's the social aspect with friends. Yeah, there's the escapism, you know, the fun. And finding— and this is where we kind of led on to the, well, how, you know, how could 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? You know, 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. So one of my clients runs a medical aesthetics business.

Okay.

They're doing Botox injectables and things like that. Very typical high street. You have to— it's physical. You have to be in there. There isn't a DIY— well, there is a DIY option. Hopefully nobody ever injects themselves. But, you know, and This is, this is a whole sort of done with you, done for you model. And what they were doing is the whole, the whole revenue was based on people coming into the clinics and having injections and treatments and things like that. We did introduce a whole load of non-invasive products into that, into the mix as well. So we expanded their core products.

Yeah. Yeah.

One of the most, the best decisions that we made with their business, though, was to introduce some kind of a subscription model. Right. It sounds weird. Botox on subscription.

Yeah.

However, and 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 HydraFacial, 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.

So is that like going to the dentist when you, you might have a checkup, you go to see the hygienist and you get all that rolled in and paid monthly?

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 got them up to about 15%, and the goal is to ultimately get them to 25%. Because at 25%, some interesting stuff started to happen for their business. All the rent on the 3 clinics was paid for. A 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 license fee every time they do an injection or use a piece of machinery. So it's only really those variable costs, and if they had to ramp staff up or down depending on how busy they were. So at a time like now, their business is still collecting those monthlies because they've either delivered the treatment or they're going to deliver the treatment in the future. So the client's happy to pay them. So it's created that sustainable revenue. So 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, we talked about, well, imagine if we had double, treble, quadruple the audience to relaunch in September, January, whenever we kind of are allowed back out again and back into normal life. But straight away you jump from £8.5K to £20K because you've got double, treble, quadruple the 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 20— sorry, 10 and 15% of your monthly revenue was recurring.

Yeah, yeah.

That would be nice. And what we're talking about here is— so this is where we're going to kind of summarize 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 going to 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.

Competition against somebody else, the competitive factor of it.

So let's write that down. So competition. We had to remove— so what we could do without, basically. So we had to remove the physical element. Yeah, because that was— 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.

Yeah.

And actually what I suggested, and this is whether, you know, 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, 1 to 2 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.

Yeah. Yeah.

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 a month? And you've got to test the pricing to see what people are comfortable with. And all you need— I 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 at, you know, I mean, that's 100 would be £1K a month. let's say we get, you know, either 200 subscribers or put it up to £20, you know, we're gonna kind of— you're starting to get somewhere close to your 10 to 15% of regular incoming money. And the nice thing about this is this postdates the crisis. You can keep on doing this. You've told me that you've got a— your brand is starting to be recognized further afield and people will travel.

Yeah.

Well, this will appeal to them too.

Yeah. And this is a global thing, isn't it? And this is a one night a week.

And they can pay the £10 a month, they can come to as many events as you're putting on. You know, you kind of make it unlimited almost. I mean, if you're only doing 1 or 2 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 and things like that. Mm-hmm.

Yeah, one of the limiting factors then is the amount of games, the amount of puzzles that we can come up with to be able to keep it new, keep it fresh.

Yeah, so I mean, I don't know. One of the things which I looked at was, and I mean, that's one of the things which you and your expert team of puzzle creators will have to come up with, answer to, but let's say it's, it's an hour, you know, and maybe, I don't know how long, like the puzzle's like 5 or 10 minutes or something like that, but let's, let's say for example like 10 minutes.

Yeah.

On average, by the time you've done the front matter, the introduction and the outroduction, that's 5 puzzles per week, you know, so maybe actually let's, let's scrub the 2, and we'll just do 1 a week. It's 5 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.

Yeah.

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 a month. Well, let's say, for example, Ah, now this could be interesting. Can't do it on this page. Let's go on to a new page. We could have the— do it in red, stick with the red. So you could have the live version, and then you could also have the library version.

Yeah.

So for, let's say for example, obviously 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 a month each. Or if you want them both, it's £20 a month.

Yeah.

Makes sense?

Yeah.

So now you've got 2 following products. 3 following products. So we've got live or library or both. What a great range of choice.

It is, it is.

And that, like I said, can be sold in addition to your core products.

I mean, even if— we were changing the room every 2 months and then kind of went, oh well, let's put more money into props. So that, um, we— they were better quality props, would last longer, um, and we would go to every 4 months, every 6 months. But if we're not putting the money into the props, and it's very much, um, that, you know, this is really tweaking the puzzle, isn't it, that it's all digital, um, and you're not building physical, um, physical props.

There's no overheads, or very little overheads.

Yeah, it's a very different sort of puzzle, isn't it?

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 2 things that you could do— you could have an annual conference. Yeah, you know, get people in a room for a day solving problems.

Yeah.

which is paid for, and that could be— people will pay any— they'll pay hundreds for events if they're good. Or you could potentially do competitions.

Yeah.

Who did I saw? 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 organizing a one-on-one breakdancing competition, like knockout competition. Throughout the UK. And so you upload your video of your battle, they place— they put your dance, they put you up against another person, the judges decide which was their favorite, and then you go through to the next round. And they're just doing this until, you know, they end up with a winner.

Yeah, but what about as well getting— because these are enthusiasts who play this, and part of our team is made up of volunteers of escape room enthusiasts.

Yeah.

Who come up with these puzzles. What about pitching our contestants, if you like, against each other? Can you come up with a puzzle that nobody else can solve?

Great idea. There you go. So you didn't even need my help to come up with that. That's a great idea. So, you know, puzzle creation.

Yeah.

You know, so there's— you're already starting to now do the work yourself, which means that I've 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 want, 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 3-page notes as well, so that you've got a copy of those. But how does that feel, having gone through that process?

No, 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, and there's— I mean, I could go on for hours. You know, you notice I'm wearing a branded t-shirt, for example. You know, there could be, you know, Labyrinthos t-shirts and merchandise that you can sell just as another passive income. You could have— 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 just said, your target market is so tight. Like, people who do this are enthusiasts. It's like, you know, 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.

Yeah.

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 their window when I wrapped up my day at 5 o'clock and they were kind of just starting one of their workshops. And these kids who are just absolutely enthralled, 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, you know, what they did down there. And it used to— like, I used to get enjoyment out of just like 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, you know, that level of enthusiasm, this could be like opening Pandora's box for you if you got it right.

Part of it for those games, for the Games Workshop, is actually painting and building your models, isn't it?

Mindfulness at its best. You get into flow.

You bring your puzzles to the workshop.

Yeah, which is amazing. So I think there's a ton of opportunity for you there. Lizzie, I appreciate, you know, 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. Thank you very much for being here on Fix Your Business.

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 organized 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@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.