“Everyone has a plan until they get punched in the mouth.” — Mike Tyson
This quote is very indicative of where we are this year. I think we all feel like we’ve been punched in the mouth. But that doesn’t mean we have to—and by no means should—stop planning.
There are two different times during the course of a business’s life where planning for the unexpected happens. The first is during the initial planning stages of the business, and is often in response to some imaginary need that might befall the business in the future. This includes squirreling away cash or setting up lines of credit to use when needed. Insurance policies also put into place safeguards against damage to property, theft, employee injuries, and the like.
The other time for planning happens when a disaster or unexpected event actually occurs, and we start scrambling. We scramble to comprehend what’s happening, try to deal with it the best we can, pray that someone else has all the answers and will share them with us, and try to predict the future. This is where many of us find ourselves today.
While planning in this environment may feel like drinking from a fire hose, we’ve found that the best way to look at emergency contingencies is to break the challenges into small, manageable chunks. We’ll start by looking at some of the different ways that we can plan for uncertain times. Then, we’ll look at what we can do when those uncertain times arise. You know, hypothetically.
Planning for Uncertain Times
When you first started your business, chances are you were full of hope and wonder, with visions of sunny days, profitable seasons, and an image in your mind that everything is going to run smoothly in the future. By now, of course, you’ve realized that there will be potential problem areas ranging from employee conflicts and inclement weather events to natural disasters and the occasional global pandemic thrown in for good measure.
By now you know that we have to prepare for these types of events. But what kind of planning goes into being ready for unexpected interruptions?
We always recommend that operators have a certain amount of working capital set aside as a cushion for the unexpected. This is by far the most important tool in planning for uncertain times—and the easiest to dismiss. It’s so easy to allocate cash on hand to more immediate expenses, like extra tree work or an additional platform, especially in the early stages of the business.
At present, we probably don’t need to explain the importance and value of extra working capital. The trick is to figure out how much you’ll need, and then make a plan to get there.
Key factors. The amount of working capital needed depends on a few factors. The first, of course, is the seasonality of the business and how many months of the year you are operating. The more months of the year you are open, the more working capital you will need.
The second factor is the availability of employees in the area. If it is difficult to hire staff for your business, you will want a larger buffer, in case you cannot open to full capacity at any point during the season.
The third factor is the overall size of your facility. Larger facilities have higher cash demands and greater maintenance needs than smaller ones. Facility costs extend to any attractions that you operate, land that you operate on, and any buildings that you use for check-in, concessions, or other operations.
How much do you need? Working capital needs are based on the business’s monthly fixed expenses, wages of critical staff, and your pay (or at least a portion of it). You can’t help anybody else if you can’t keep yourself above water! Here’s how to figure it:
For this example, we assume that you have $40,000 a month in fixed expenses, $15,000 in critical wages, and $10,000 for you as the owner. That brings us to a total of $65,000 a month needed in working capital. At a minimum, you want a working capital fund of at least three months—or $195,000 in this case. (Of course, six months’ working capital would be better.)
Here is what the working capital fund for the three potential outcomes in our example would look like:
1. Closed for three months – $195,000
2. Closed for six months – $390,000
3. Closed for 12 months – $780,000
I know, I know. That is a lot of money! I don’t expect that most of you had all that on opening day. But the goal should be to develop that fund as time goes on and your business begins to grow.
It’s also worth including some working capital as a line item when you are writing a business plan and applying for financing. While you probably won’t get a full year’s worth, many lenders are understanding and willing to honor a small amount of working capital if it is justified in this way.
While there is no substitute for a large amount of working capital, there are other steps that you can take to plan for uncertainty. A good insurance policy will take you a long way. In addition to the standard umbrella policies, you should make sure to add business interruption insurance. While this specific type of insurance doesn’t cover pandemics, it can provide financial relief for things like property- or weather-related closures.
Line of Credit
Additionally, if you are far from achieving your working capital cushion, you may want to apply for an additional line of credit—and start pulling from it before you need it! Many lines of credit dried up just weeks after the closures from COVID-19 began. While you do have to pay back that money in due time, a quick financial infusion could mean the difference between weathering the storm and closing permanently, particularly for a small business.
While none of these tools is foolproof in and of itself, the right combination of working capital, easy access to a line of credit, and a solid insurance policy could be enough to keep you afloat even during the worst of crises. Most crises, anyway.
Planning in Uncertain Times
Everything so far is speculative, based on worst-case planning during better times. Now let’s look at where we are today in the age of COVID-19.
Out of the blue, we are suddenly faced with shutdowns, phased-in reopenings, concerns about a second wave of shutdowns, and a very uncertain future for the adventure industry. And none of that even factors in the additional costs of personal protective equipment (PPE) for staff, additional sanitation practices, and potential loss of revenue due to operating at a lower capacity in order to adhere to social distancing guidelines.
So what can we do to be as prepared as possible for what comes next, whatever that may be?
1. Stay informed. The number one action that we can all take is to stay informed. Stay connected with your state and local governments, the Association for Challenge Course Technology, your vendors and distributors, and of course, Adventure Park Insider. All of these sources are striving to figure out what’s next and provide useful information.
Stay in touch with your bank, too. This is an important partner during uncertain times, especially if you are applying for disaster loans, renegotiating leases, or researching deferred payment options through the SBA. In times like this, relationships matter.
2. Analyze your cash flow. Secondly, if you haven’t done so already, you’ll want to take a good hard look at your cash flow. Right now, you probably have a little bit of extra time on your hands. What better time to go through and really hone your financial skills and knowledge and apply them to your business?
Go through your bank and credit card statements, and make note of any monthly or yearly subscriptions or software that you no longer use. If you are closed, make sure that your AdWords and other advertising accounts are turned off. You can always “unpause” ad campaigns at a click of a button when you reopen.
If you’re really feeling up to the task, dig deeper into any subscription-based accounts that you use and see if there are any ancillary services that you can cut—or try negotiating a lower rate. Even small things like extra domain names that you bought when you were starting the business can add up.
Above all, protect your cash! Even a handful of little items can add up to several hundred dollars per month.
3. Communicate with stakeholders. Our third recommendation is to communicate with your employees, clients, and partners. No one expects you to have all the answers in these uncertain times. Still, it’s important to be as transparent as you can.
If you have a reopening date, let your employees know! If you don’t, that’s okay, too—but make sure that your employees know where you stand, and what your line of thinking is. The more information they have, the more they will trust you, and the more willing they will be to return when you do reopen. The same is true with your partners.
As far as communication with existing clients, you’ll want to keep them in the loop as well, with guidance on things like safety and sanitation, reopening dates, and any new policies that may be in place. The more you can communicate why you are doing what you are doing, the more connected they will feel to the whole experience, and the more likely they will be to come back.
The catch here is that you’ll want to be very careful to limit how frequently you communicate, especially via email. I’m sure you’ve been managing a barrage of COVID-related emails lately, from every list you’ve ever subscribed to, and trust us—your customers are experiencing the same! The last thing you want is for your business to get lost in the noise—or worse, add to it, and inspire your subscribers to unsubscribe.
With customer email, it’s always best to limit your exchanges to one or two quick touch points a month. You can go into greater depth on your website and in social media.
4. Take care of yourself. Finally, it’s important to remember to take care of yourself. Recall the air travel admonition, “Put your own oxygen mask on before helping others.” While we’re probably not spending too much time in the air these days, that analogy has never rung truer.
Between the stress of a pandemic and the added challenge of having a bunch of outdoor professionals locked inside for weeks on end, we’re probably all feeling a little bit on edge. But if you don’t take time for yourself, you won’t be at your best to complete any of the steps that we’ve outlined.
So, take breaks. Go out for a hike. Do some living-room yoga. Read a book. Whatever you need to do to get to your “happy place.” The importance of that can’t be overlooked.
Above all, be gentle with yourself. None of us are experts in managing the sort of crisis we are experiencing, and we are all just doing the best we can.
We don’t want to end this with platitudes like “We’re all in this together” or “It’s time to embrace the new normal.” There’s not much that’s normal about those of us in the aerial adventure industry! But we are all stronger together, and we can take solace in the way everyone is banding together to share knowledge and best practices, as well as what we’re doing to plan and move forward.
Someday we’ll look back at this and tell the people who come after us about what this time was like. Barefoot, in the snow, uphill, both ways. And then we were punched in the mouth.