Facing a slew of challenges ranging from Covid to climate change, the recreation industry is in a state of upheaval. As a result, business models are—or should be—continuously evolving to meet the market changes that are affecting us daily.
A business model isn’t a “set it and forget it” proposition. History is rife with examples of companies that did not adapt their business models and either shrank or disappeared entirely. The railroad companies that didn’t realize they were in the transportation business, or Sears—a catalog company that didn’t embrace e-commerce—are perfect examples of failure to update their business models.
At Strategic Adventures, we use a tool called the Business Model Canvas to create new business models and rework older ones. We recommend that you re-examine your business model at least annually to identify changes in your marketplace or the economy at large.
Here, we’ll explore the nine primary areas that make up a business model and how to adapt them to meet current conditions, whatever they may be.
The first area of a business model is your value proposition. A value proposition is your promise of what you will deliver to customers. Our businesses typically promise to deliver a fun, exciting time outdoors, a chance to push past personal limitations, or a way to get to know others in a new environment. What is your current value proposition?
Since we’re in the middle of a pandemic, a good value proposition right now will focus on two areas: How your product will help solve a problem that your customer has, and what you are doing to mitigate risk.
Problems to help solve. Are you able to offer time away from screens? An opportunity to change up the routine? A chance to get the kids out of the house?
Mitigating risk. Tell potential customers what you are doing to mitigate risk. For example, some operators have posted videos on their websites of how equipment is sanitized before use. Of course, be cautious about using the word “safety” in any messaging or in your value proposition. You cannot promise absolute safety in adventure recreation, even without a pandemic.
A customer segment is a defined category of your clientele. Local school groups, corporate teams, camps, homeschooled children, birthday parties, or even adrenaline seekers are all examples of a customer segment.
Your customer segments may change over time, either due to shifting recreational trends or more dramatic things like a pandemic. How have your customer segments changed since you started your business? What’s changed since the start of the pandemic?
Charles Park, with Louisville Mega Caverns, Ky., has noticed a dramatic shift in his customer segments. “Tourism throughout our area is way down this year, for obvious reasons,” says Park. He’s addressing this by creating themed events to bring back more of the local population for repeat visits.
Another example: group business, which has all but evaporated across our industry. This may be a short-term change. Even so, it could take a few years to regain pre-pandemic levels. You may want to adjust your business model if you rely on group business or events.
Marketing should be continuously tested and measured, not just during a pandemic. With the new digital marketing frontier (I’m 49, get off my lawn …), marketing tools, metrics, and algorithms all change rapidly. What may have worked for you a few years ago may not work today. If you haven’t updated your website in a decade, it may even get blacklisted by Google! Don’t let that happen.
Constant change. Marketing must adapt to your evolving value propositions and your changing customer segments. This may mean changing marketing platforms, updating Adwords and display ads, or even a whole rebranding effort. Keeping up with the multitude of changes in the marketing world isn’t easy, but it is necessary.
Changes may happen seasonally, or even month-by-month. Early on in the pandemic, for example, everyone was home, so billboards were essentially useless. Once people started to emerge and even unplug as summer progressed, billboards were once again effective. Being agile and pivoting from one marketing strategy to another can make your business more successful.
What do you do to keep your customers coming back again and again? Sending a monthly or weekly newsletter, holding a photo competition on social media, or hosting a themed event are all ways to build customer relationships.
Practice restraint. That said, exercise caution in how frequently you communicate with your clients, especially by email. Too many messages, and your unsubscribe rate for emails may increase, or interaction on social media may decrease. If you do want to share frequent information, a safe(r) place might be somewhere like Instagram stories. Customers have to work harder to get there, which may weed out some of your less avid followers.
Just remember, no matter what you post, use some discretion. You may be excited to share on an hourly basis, but your clientele won’t be excited to hear from you that often.
Any business model review must focus heavily on revenue. If you want to increase it (I haven’t encountered a business owner who didn’t), you may need to add more sources of revenue. Relying on a single source of income is an unsafe business practice.
Gloves. Revenue can come from a variety of sources. Outdoor Ventures, among many this past year, created a new source of revenue with glove sales. “We produce our own gloves and sell them at several price points,” says CEO Bahman Azarm. “As a result, we sell higher-end gloves to some of our guests, which has led to a 100 percent increase in per person retail sales.”
Dynamic pricing. Many operators are using dynamic pricing—higher prices on high demand days, and lower prices when the business is typically slower—to drive more weekday business and boost revenue. This also helps manage Covid-induced capacity restrictions.
Virtual gigs. Training Wheels team-building guru Michelle Cummings has adapted her revenue stream by providing keynote speeches to virtual events. “I was able to speak at four different conferences in one day, rather than having to pick and choose where I would present,” she says. She also adapted many of her in-person trainings to be delivered virtually.
Revenue is great, but you can’t get there without identifying and leveraging your key resources. These include employees, working capital, and your attraction (zip tour, aerial park, camp, etc.).
Working capital. Ideally, a seasonal business should have a minimum of three months of operating expenses in reserve, and six months in reserve if you operate all year long. This reserve can keep you going through unexpected shutdowns or capacity limitations that prevent you from being profitable, and can also help you retain your best staffers in a time of crisis.
Employee care. With enough working capital, you will have an easier time taking care of your most important resource—your employees.
John Hines, with the Adventure Park at Sandy Springs, Md., changed his employee structure due to Covid restrictions. “We’ve kept our salaried staff on board, and they take on more roles that our hourly staff used to handle,” says Hines. In addition, he notes, “While we are running with fewer hourly staff, they are getting more hours and being paid better than they were previously.”
There are several things you must do to keep your business operational: staff training, inspections and maintenance, and now, of course, cleaning and sanitization. There are many more key activities, but as you look to retool your business model, look first at those that are the most customer-facing.
Training during a pandemic can become a wasteland of Zoom meetings and lectures. Screen fatigue is a very real problem in the learning environment. Since safety is paramount in our industry, you must find a way to keep staff engaged in the training process so they can be at the top of their game when interacting with customers.
Gamification. Michelle Cummings has increased engagement for her camp staff trainings by creating online scavenger hunts using the camp’s employee manual. “The scavenger hunt process allows the staff to have fun during their training, and has led to much higher retention of the policies and procedures of their camp,” says Cummings.
Whether you gamify training or use other tools for engagement, be sure to include frequent tests for understanding. This may include written assessments, online demonstrations, or simply asking participants to type their ideas into the Zoom chat. These strategies will keep them on their toes, and show whether they are absorbing the content or not.
Inspections and maintenance. While training is obviously essential, inspections and maintenance can easily be overlooked during the pandemic. Even if a course is idle, it still needs maintenance. You still have to deal with weather-related issues, and keep a paper trail of proper maintenance schedules for insurance purposes.
This can also be a great time to do some course upgrades without impacting the client experience. Again, that working capital comes in handy.
Cleaning and sanitization have become top of mind for everyone. Follow your local jurisdiction’s Covid requirements and your manufacturers’ recommendations for cleaning and sanitizing equipment.
Make this process visible to your clientele so they feel comfortable about the level of precaution you are taking. It helps to communicate both what you are doing and why you are doing it, especially if you anticipate any kind of pushback.
You and your key partners are, in fact, “all in this together.” Your partners include builders and insurance providers plus suppliers, government agencies, and even your competitors.
Your builder can help you with maintenance schedules and cleaning protocols, and assist you in accommodating smaller group sizes, distancing requirements, and reducing bottlenecks that cause participants to bunch up.
Insurance providers can help you determine the right level of coverage for your new participant counts, staffing changes, and the suitability of any new coverages that become available. Any change in your business model should trigger a call to your insurance agent.
Partnerships. Lastly, you may have developed informal partnerships with other complementary businesses, such as rafting companies or climbing gyms. They are likely going through similar struggles, so talk to them. Whether you share strategies for getting people in the door, or simply wish them well, people appreciate connection now more than ever. Never underestimate the value of these partnerships.
If you’ve come this far through the pandemic without examining your expenses—DO IT NOW!
Over time, we tend to accumulate recurring expenses that once seemed valuable, but don’t add real value to your business now. John Hines calls this “nice to have” vs. “need to have.”
“We sat down and went through everything in our accounts, and made some immediate changes,” he says.
Take a close look at every expense category at least once a quarter to see if reductions can be made or if anything unexpected has cropped up. The places to look at first are: staffing, insurance, and subscriptions. All three have the potential for growth as time goes by.
When reworking your business model, it’s best to focus on one section at a time, and in the order presented here. If finances have you concerned at present, move expense control further up the list.
Will the industry look the same on the other side of all of this? I don’t think so. But that’s not necessarily bad. If we are intentional with our business models, perhaps it will be even better.