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Surviving The Off Season Business Models for Profitability & Sustainability

Carol Patterson ŠKalahari Management Inc. www.kalahari-online.com


Why Should I Care? Adventure tourism operators have average gross revenues of $246,821 × 46% of operators have annual sales <$50K × average gross margin is 18.3% ×

Source: Adventure Travel in Canada: An Overview, Tourism Canada, 1995


The Challenges × Short

operating seasons × Small group sizes × Reduced economies of scale × Higher input prices × New technologies, limited warranties × Limited financing options


The Goals × × × ×

To create a viable business To expand or create a succession plan Manage risk Maximize returns for owners and stakeholders

It is better to have horrible endings than endless horrors…..


Strategies Product diversification × New products × New markets × New capabilities


Optimize Returns Understand your cost structures × Look for opportunity to generate more returns on ‘fixed’ costs × Where possible, benchmark your performance against your competitors ×



Break Even Example Estimated Sales = $100,000 Variable Costs* = $60,000 Fixed Costs** = $32,000 1.

Variable cost per sales $ = $60,000/100,000 = $ .60

2.

Contribution per sales $ = $1.00 - $.60 = $ .40

3.

Break even in sales $ = $32,000/$.40 = $80,000

* Costs that vary with business activity e.g. wages, food, equipment rentals **Costs that do not vary directly with business activity e.g. marketing, insurance, taxes


Break Even Exercise If you had this cost structure what amount of additional sales would you need to invest an extra $12,000 into website design?


Break Even Example $30,000 of sales are required to invest $12,000 in website design True or False? TRUE! Variable cost per sales $ = $60,000/$100,000 =.6 Contribution = $1.00 -.60 = $.40 Break even = $32,000/.4 = $80,000 Sales needed for website = $12,000/.4=$30,000 Total sales to break even and improve website = $80,000 + 30,000 = $ 110,000


Cooperative Marketing Ă— Share

marketing costs Ă— Look for organizations with complimentary products, similar markets Ă— Focus on potential benefits


Business Metrics

Metrics are a quantifiable measurement of performance data that is critical to your organization’s success


Valuable Metrics for Ecotourism Businesses × × × × ×

×

Variable cost per customer/tour/service Percentage of return customers Percentage of marketing$ to sales$ Percentage of wage$ to sales$ Tons of carbon emission created (or reduced) from operating activities Pounds/kilograms of waste generated (saved)


Questions?


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