After four years of fairly flat sales and decreasing profits, this adventure-based tourism company was looking for ways to improve their profitability as well as understand the cash flow of their business. They saw a lot of opportunity in the marketplace to grow within their existing offerings; as with most adventure-based tourism companies though, they were burdened by the seasonality of the business and the cash implications this created.
They needed a strategy for business growth.
To understand what opportunities existed for the company and develop a plan to capture these. Through the process there needed to be assurance that the weaknesses could be identified and overcome, particularly as it pertained to cash availability.
Through this process we identified that there were plenty of opportunities. This included building awareness and increasing the customer base with the existing operations. It also involved looking to new markets that were similar but would decrease the seasonality of the business. The key here was to utilize the existing infrastructure and not increase costs so that profit could be maximized. We identified the biggest risk to the business was not having enough cash during the slower periods. Knowing this, we were aware we could take steps to minimize the risk during these timeframes.
The company was able to start growing sales significantly. In fact, sales growth became 15% over industry averages. First, we worked with the marketing company to help capture more clients to the existing business. We then started to expand the business in areas that drove sales and opportunities during the off-season. We determined that an operating line of credit would provide the required cash during the off-season. Our clear financial plan showed lenders that we had a strong understanding of the drivers and challenges of the business. Within two years all debt had been eliminated and the use of the line of credit became unnecessary due to the increase in cash and predictability of the business we created.