Weathering economic downturns and travel slowdowns requires planning, analysis, and a willingness to step back and think carefully about your business. That was the key takeaway from a presentation by Travefy founder and CEO David Chait at Travel Market Report’s Travel Market Place West conference in Vancouver earlier this month.
“The pandemic has been a case study in the value of travel advisors,” he said, addressing the audience of Canadian travel advisors. “But one thing we’ve all learned is that things can go wrong quickly and revenue can dry up in a second.”
Future-proofing your business is about reflecting on the lessons of the past, creating new processes, and implementing new plans to ensure you can survive — and thrive — no matter what.
“Knowledge and having a plan are key,” he said.
Fundamentals of financial viability
Future-proofing your business starts with understanding the financial fundamentals of your business.
“How do you make sure that you put yourself, financially, in a position that you hope for the best, but [no matter] what might happen, you are in a strong position,” Chait said.
Positioning yourself this way, he explained, takes a three-pronged approach.
Understand your financial statements
Before you do anything else, you need to understand where your business is at and what is required on a daily, weekly, and monthly basis.
First and foremost, this means understanding your expenses.
“Understand where your money is going, what you are spending it on, what your assets are and what is essential to running your business.
The answer to this will be different for everyone. For one advisor, after-hours phone service may be a luxury, while for another it’s a necessity. For everyone else, high-speed internet is probably non-negotiable.
Understanding what your expenses are, as well as which ones are most critical, will help you make decisions if you need to tighten your belts in the future. Without that understanding, you could end up cutting something that could be disastrous, Chait told attendees.
Maintain cash reserves
Maintain a cash reserve of ideally three to six months, Chait advised. By doing so, you have enough money to cover your basic expenses should your business (or the industry as a whole) take a hit. Even if you end up needing to reduce your expenses, having a reserve will allow you to “understand the situation before making decisions”.
The key is to avoid having to make rash decisions in the moment, he added.
Chait acknowledged that building up a six-month cash reserve is easier said than done, but encouraged councilors in attendance to formulate a plan now, even if it’s just a small amount each month.
Adapt processes to new realities
Finally, advisors must always adapt processes to meet new realities, particularly in terms of accountability. This could mean introducing COVID-19 waivers or requiring signed authorizations for credit card charges or insurance denials.
These liability procedures are meant to “really protect your business,” Chait said.
Once you understand where your business stands from an expense and liability perspective, it’s time to understand the other side of the “revenue minus expense equals profit” equation.
You need to understand “what are your income brackets, where are they coming from, and what are the things you can do to get more predictable income.”
If the COVID-19 pandemic has taught the travel advisor community anything, it’s that being married to one type of trip or one travel destination can be dangerous. Advisors who only sold cruises before the pandemic suddenly found themselves with nothing to sell, for example. Anyone who specializes in the Baltic region is most likely in trouble now.
To avoid this situation, Chait recommended diversifying and said there have been many great examples of advisors over the past two years.
Some advisors have started selling national products. Others have expanded their all-inclusive Mexican offerings.
How you branch out (or if you need to) is entirely up to each adviser, he said, adding that there’s no right or wrong way to do it.
“The question for you is, do you have at least two things you sell that aren’t exactly the same so you can change if necessary.”
And, he added, it’s okay if one of those things is your main product. The point is simple to have something in your back pocket that you can fall back on if you need it.
A hot topic for sure, but fees are an option for generating consistent revenue, Chait said. But he added, again, that there is no one-size-fits-all approach.
“There is no right or wrong, but make sure that whatever your answer to [fees] that is thoughtful. Whether you charge a fee because you recognize your value or not because you have identified a competitive advantage by doing so.
In other words, don’t let emotion determine whether you charge a fee or not. Approach it from an analytical and business perspective. And then make an informed decision.
ROI for customer acquisition
The third part of future-proofing your business is to become more analytical and optimize how you spend your time and money on customer acquisition.
“It’s about taking what works, tweaking it and improving it,” Chait said, urging audience members to “be a bit more analytical to help with the decision-making process about where to go.” we spend our time and our dollars growing our business.”
There are two ways to look at your customer acquisition: sources and ROI.
Start by asking yourself, “What is your primary source of business?” or in other words “Where does most of your stuff come from?”
Make sure you’re not just guessing, but have a solid way to verify this, whether it’s an automated CRM program or a manual spreadsheet.
As an example, Chait gave this example:
An advisor booked three clients last month. One was a referral and two were from Facebook ads. In other words, 66% of this advisor’s clients last month came from Facebook ads.
Knowing this, the advisor might decide to stimulate more social media posts, buy more Facebook ads, or try other social media ads to see if they attract customers as well.
Return on investment
But that’s not the only way to look at customer acquisition.
“How do we measure the impact? Now we are talking about dollars. Not only where they come from, but what is the cost of this acquisition. What are we spending to have these people?
Same example, explained in a different way. We know the advisor had three clients in the last month, one from a referral and two from Facebook ads.
All three spent $1,000, for a total income of $3,000. The advisor spent $100 to get the referral (say a bottle of wine as a thank you to the referrer) and $500 on Facebook ads.
So what was the return on investment? (The equation to calculate the ROI is: Return on investment = [Revenue – Cost] / Cost)
From the single referral, the advisor spent $100 and earned $1,000. Subtract the first from the second to get a profit of $900. Put that at 100 and you have a 900% ROI.
As for the two Facebook clients, the advisor spent $500 and brought in $2,000. Subtract the first from the second to get a profit of $1,500. Put that at 500 and you have a 300% ROI.
Looking at it this way, you see that yes, the advisor is getting more customers from Facebook, but the unique referral has had more of an impact on the bottom line.
What does the counselor do now? What would you do, Chait asked.
The catch, again, there is no right or wrong answer. A person might decide to go all out to get referrals. Another might decide quantity is the way to go and double down on social media advertising. A third could figure out how to split the time between the two.
“There is no right answer. The thing is, with the data at your fingertips, you can be more thoughtful. It’s about understanding so you can be as smart as possible with your money to help you grow and evolve.