Facing an economic downturn and slowing travel requires planning, analytics, a willingness to take a step back, and think carefully about your business. This was the main outcome of a presentation given by Travefy founder and CEO David Chet at Travel Market Report’s Travel Market Place 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 income dries up in a second.”
Proving your future work is all about reflecting on the lessons of the past, building new processes, and implementing new plans to ensure that you can survive — and thrive — no matter what happens.
“Knowing and having a plan is essential,” he said.
Fundamentals of Financial Sustainability
Proving your future business starts with understanding the financial fundamentals of your business.
“How do you make sure that, financially, you put yourself in a position where you wish the best but [no matter] What might happen, said Chet, you are in a position of strength.
He explained that to put yourself in this way, it takes a three-pronged approach.
Understand your financial data
Before you do anything else, you need to understand your business situation now, 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’re spending it on, what nice things you have and what are the essential things to run your business.”
The answer to that will be different for everyone. For one counselor, after-hours telephone service may be a luxury, while for another it is a necessity. For everyone, high speed internet probably can’t be negotiated.
Understanding what your expenses are, along with the most important ones, will help you make decisions if you need to tighten your belt in the future. Without that understanding, you could end up cutting into something that could be disastrous, Chet told those present.
Maintain cash reserves
Schitt advised keeping an ideal cash reserve of three to six months. By doing this, you have enough money to cover your basic expenses in case your business (or the industry in general) takes a hit. Even if you end up needing to constantly cut expenses, having a reserve will allow you to “understand the situation before making any decisions.”
The main point, he added, is to avoid having to make rash decisions right now.
Chet acknowledged that piling up a six-month cash reserve is easier said than done, but encouraged the advisors present to craft a plan now, even if only a small amount is set aside each month.
Adaptation of operations to new realities
Finally, consultants must always adapt processes to respond to new realities, particularly when it comes to responsibilities. This could mean making waivers for COVID-19, requesting signed authorizations for credit card fees, or denying insurance.
These liability actions are about “really protecting your business,” Chit said.
Once you understand where your business stands from an expense and liability standpoint, it’s time to understand the other side of the “revenue minus expenses equal profit” equation.
You need to understand “what are your income ranges, where they come from and what are the things you can do to get more predictable earnings.”
If the COVID-19 pandemic teaches the travel advisor community anything, marrying just one type of travel or one travel destination can be dangerous. Consultants who sold cruises only before the pandemic suddenly found themselves with nothing to sell, for example. Anyone who specializes in the Baltic region is likely to have a problem now.
To avoid this situation, Schitt recommended diversification and said there have been a lot of great examples from advisors over the past two years.
Some consultants have started selling local products. Others have expanded their all-around Mexican offerings.
How to diversify (or whether you need to) is entirely up to each advisor, he said, adding that there is 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 primary product. The point is simple to have something in your back pocket that you can refer to if you need to.
It’s definitely a hot topic, Chet said, but fees are one option to generate consistent revenue. But, he added, again, there is no one-size-fits-all approach.
“There is no right or wrong but make sure that whatever your response is [fees] It is thoughtful. Either you charge because you recognize your value or you don’t because you have identified a competitive advantage in doing so.”
In other words, don’t let sentiment determine whether or not you’re charging. Treat it from an analytical, action-first perspective. Then make an informed decision.
ROI for customer acquisition
The third prong to prove your business in the future is to have more analysis and improvement of how you spend your time and money when it comes to acquiring clients.
“It’s about taking what works and tweaking and improving it,” Chit said, challenging audience members “to be a little more analytical to help with the decision-making process of where we spend our time and money to grow our business.”
There are two ways to look at customer acquisition: sourcing and return on investment.
Start by asking yourself, “What is your main source of work?” Or in other words “Where does most of your work come from?”
Make sure you’re not just guessing, but have a solid way to check, whether it’s an automated CRM program or a spreadsheet manually.
As an example, Chait gave this example:
A consultant booked three clients last month. One is a referral and the other two came through Facebook ads. In other words, 66% of this advisor’s clients last month came from Facebook ads.
Knowing this, the consultant may decide to promote more social media posts, buy more Facebook ads, or try other social media ads to see if they bring in customers as well.
But this is not the only way to look at customer acquisition.
“How do we measure impact? Now we’re talking about dollars. Not just where did they come from but what is the cost of this acquisition. What are we spending to get these people?”
Explain the same example in a different way. We know the advisor had three clients last month, one from a referral and two from Facebook ads.
All three spent $1,000, totaling $3,000 in revenue. The advisor spent $100 to get the referral (say a bottle of wine as a thank you to the referrer) and $500 in Facebook ads.
So what is the return on investment? (The formula for calculating ROI is: ROI = [Revenue – Cost] / cost)
Starting with a single referral, the advisor spent $100 and brought in $1,000. Subtract the first from the second to get a profit of $900. Put that over 100 and you have a 900% ROI.
As for Facebook clients, the consultant spent $500 and brought in $2,000. Subtract the first from the second to get a profit of 1500 dollars. Put that over 500 and you have a 300% ROI.
Looking at it this way, you see that yes, the advisor gets more clients from Facebook, but the single referral has more impact on the bottom line.
What does the counselor do now? Chet asked what you will do.
The problem again is that there is no right or wrong answer. One person may decide to go ahead with getting referrals. Another might decide that quantity is the way to go and double up on social media advertising. A third might figure out how to divide the time between the two.
“There is no right answer. The point is, with the data at your fingertips, you can be more thoughtful. It’s about understanding so you are as smart with your money as possible to help you grow and expand.”