A few years ago, my business partner and I had an inspiration to spend 2 hours on New Year’s Eve and do something not so celebratory – strategic financial planning for our next year. It was time for us to put our “big girl” panties on. We created a budget and revenue projections for the next 12 months. I know, sounds very boring doesn’t it?
In all honesty, I dreaded the process. But we sat down at a pub, ordered a few beers, rolled up our sleeves and got right down to it. As it turns out, it wasn’t nearly as painful as I thought it would be. In fact, it felt very good. It felt cleansing and empowering.
The best part was the result 12 months later. Not only did we meet our numbers (which were quite aggressive), we exceeded them and had the best financial year ever. What an amazing feeling it was to look at our projections 12 months later and see how they turned out.
Since then, I have always done some sort of financial planning. I’ve developed the process, elaborated on it, enhanced it and do it with an entire team. I would go as far to say that without it, my business would have failed.
Steering your business financially with a budget and revenue projections is a big blind spot for many travel entrepreneurs. No one is telling you to do it, let alone showing you how. In this article, I lay out a very simple, 3 step process for you. If you follow it, you will have your very own strategic plan for the year. Are you ready?
Step 1: Start with Expenses
The first step in the process is to start with your expenses. If you have been in business for more than 1 year, you have numbers to start with. Figure out what you spent on all business related items and put it in a spreadsheet. There are monthly fees, annual fees, professional fees, marketing expenses, travel expenses, etc. Look at what you have spent in the past. Get as detailed as possible. Then add to it what else you intend to spend this year. Maybe you want to pay yourself a salary (or increase it). Maybe you want to take a few more travel journeys for work. Maybe you want to attend a few more industry events. Maybe you want to spend more on marketing. Maybe you want to hire someone part time. Put it all in. Do your best at guessing the most accurate amounts.
Step 2: Project Your Revenues
Once you know the total amount of money your business needs to run this year, you have the total amount of revenue you need to generate. This is why I had you put in a salary. Your expense total will be your revenue goal. Take the aggregate number and divide it by 12 so you have a monthly revenue goal. Then look at your different revenue producing activities to figure out how you can get there. Some revenue producing sources include:
– Service Fees
– Travel Insurance Commissions
– Affiliate Fees
Make sure that you are projecting the actual amount that will hit your bank account, AFTER a host agency has taken their share, if that is relevant for you.
In essence, you want to establish an average booking size, an average commission on the booking (including travel insurance commission)and an average service fee you will collect. Take your monthly revenue goal and divide it by the total of these average revenue sources to establish how many bookings you need per month to meet your revenue goal.
Step 3: Map Out Your Marketing Systems
Now that you know how much revenue you need to generate each month and how many bookings you need to book, you have a decent idea of how much marketing you need to do. For example, if you need to make 10 bookings per month, then you should probably be in front of at least 1,000 prospects per month. How will you get there? It could be a combination of travel shows, Facebook, networking, sending a weekly ezine, direct mail, etc. Pick the marketing systems that seem to be the most relevant for your target market and set a goal of “touching” your targeted number of prospects each month. Figure out which systems you will do on a daily basis, weekly basis, monthly basis and quarterly basis and then put them all in your calendar. Map it out.
After going through all 3 steps, you might want to circle back to your expenses to make any adjustments to your marketing expenses now that you have your marketing plan mapped out.
If there is one thing you do for yourself this year – do this! You won’t believe how powerful it is. Collect the necessary stuff you need, give yourself a few hours, turn off everything and open a spreadsheet. Do this for yourself this year and then track your progress every single month. Give yourself this gift of clarity and empowerment.