The calendar year is almost winded down, so it’s the perfect time to reflect on the budget for your business. Budget management should always be a priority, but this is an ideal time to consider what worked and what didn’t during the last year. This allows you to tweak your budget for 2016, and create a stronger financial plan for your business as it continues to grow and develop.
3 Costs to Consider When Managing Your Tour and Activity Budget
- Operating Costs — To put it simply, your operating costs are defined as the costs it takes for you to run your tour and activity business on a daily, weekly and monthly basis. There are two types of operating costs to consider: fixed costs and variable costs. Fixed costs stay the same, no matter how many people book a particular tour or how many activities you offer in a week. Some of the most important fixed costs to consider include your rent, insurance and equipment. Variable costs are related directly to your business output, and can change based on how many bookings you have at any given time. Some examples of variable costs include gas, maintenance and marketing.
- Marketing Costs— Your marketing costs are overhead costs, that decrease your profit margin. Ideally, you will want to be increasing your profit margins each year. The best way to increase your profit margin is to raise your prices, but you should make a few considerations before implementing a new price for your tours. First, consider the demand for your product. If your tours are consistently booked and selling out, then you should be able to easily raise your prices and still continue to see bookings. Second, you should look at the prices being charged by your competition. If their rates are comparable to yours, it may not be the right time to raise rates. To improve your return on investment for your marketing efforts, you can find ways to decrease the marketing costs, by for instance allow agents to sell your products.
- Distribution Network Costs — In order to grow your business and increase bookings, you need to establish a distribution network of agents who will sell your products. This requires you to pay a commission for their sale. By splitting your booking channels with an expert distribution channel manager, you can increase your bookings without spending a significant amount of money on distribution network costs. This helps you organize the various payment levels for specific agents, and minimize the costs of managing your distribution network on your own.
In addition to considering these important costs for your 2016 budget, you might want to take some steps in order to make budget management easier.
Rezdy is an online booking system that is designed specifically for tour and activity providers. This portal allows you to manage your distribution network and increase your online bookings, while also providing you with useful tools that can help you manage your financial assets better.