Addressing the future impact of flooding on your business

Consider the following steps to take to help minimise the impact of extreme weather on your tourism business. 

1. Review marketing activity - can you move it/do you need to move it?

It is worthwhile looking at what you planned to spend on advertising and promotion. You also need to think quickly about the next few weeks and check whether any booked advertising is appropriate.

You may decide to cancel some advertising, either because it will not generate business at this time (or the money saved could be used more effectively at a later date), or because the message is wrong in the circumstances.

2. Review your offer

Think about your pricing during difficult periods. There is no need to offer huge discounts, but remember there are costs associated with empty capacity. Added value offers (3 for 2 for example) can be better ways to entice in new business, are easy to introduce and are less likely to devalue your product. Work with your local tourism and trade association, Destination Management Organisation and other businesses to assess the best way forward, both in terms of generating bookings and presenting a positive picture of your destination – not one in crisis.

Is there anything you can do to make your product more attractive? Activities or offers will reassure existing customers and encourage new visits. These could include:

• Offering added value  - 3 for 2 offers, for example
• Alternative options and itineraries - could you change tours to avoid flooded/sensitive areas?
• Emphasising relevant facilities - for example, do you have a drying room or could you offer a clothes drying service?
• Tweaking your welcome – perhaps offer hot drinks or soup to arriving guests?

3. Look at your costs

Have a good look at your incomings and outgoings.

• Review your costs
• Slow down your payments
• Delay (or cancel) spending that was planned.

In doing this, remember that your business is built on your staff and customers. While you are looking at cutting costs, you will need to strike a balance and ensure that you can still operate to the appropriate standard that your customers expect and can afford to promote your business to customers.

Have a good look at your business and divide your costs into fixed (things that don’t depend on the number of customers you have), variable (things which depend on customers) and one-off costs.

Fixed costs tend to be agreed regular payments, such as mortgages and rates. For most fixed costs you will have entered into a contract to pay and non-payment may mean that you lose your business.
Variable costs include staff, utilities and supplies. Review these and see if you can reduce them. Can you slow down any spending? Can you renegotiate terms with suppliers?

See if there are any buying groups which could make savings for you and ask your suppliers if they can deliver smaller quantities; check your energy and insurance costs. Can you reduce these – are you on the best energy tariffs and have you introduced energy saving measures?

Discuss different payment terms with your suppliers. A switch to 60 or 90 days payment from 30 days could help your cash position significantly.

Are there any non-essential/one-off items of expenditure which could be reduced, put on hold or cut? 

For example:

• Is any planned capital expenditure needed? Can it be postponed? If you are looking at damage repairs, make sure you get a series of competitive quotes in advance. Is the local authority or any local business offering support to those who have been affected? It is inevitable in this situation that lots of people will be looking for trades people to undertake repairs – resources will be limited and prices potentially higher, so consider what is essential and what can wait.
• Review all other areas of maintenance – can you do it yourself, or do you need to contract a professional? Review any non-essential professional services or work with other businesses to share costs.
• Speak to your bank – are they giving you the best deal? Do you have the best offer for your overdraft/term loan, interest rates, bank charges and credit card commissions?
• Review your gross margins on food and drink – are they sensible and can you achieve them?
• Keep your personal drawings as low as possible and only for your immediate needs.

If you have to reduce your staff numbers/times, be open and clear with your team so that they understand the rationale.  You must understand current legislation if you are making any staff members redundant or changing their contracts.  It is always useful to seek professional advice, or to view sites such as www.acas.org.uk. Ask for advice from your trade association, Destination Management Organisation and from other businesses, as they may have the information you seek. 

Make sure you have professional advice from a reliable source at all times – if you do not follow 'the letter of law', you could face more serious issues in the future. 

Considering all of these elements will help you to focus on the future and what expenditure you will be facing.

4. Assess your future finances

What do you think the demand on your finances will be over the next 6-12 months? Be realistic, it will help you when you are preparing your profit and loss projections.

If you see any cash flow shortfall in the immediate future, you will need to plan how to deal with this (for example through savings, the sale of surplus assets or an increase in bank support). Talk to your bank and remember, your bank will want to know:

• Your progress in managing your loan to date.
• What action you have already taken in terms of expenditure and reduction of costs and what plans you have for the future to continue this.  What will that mean in terms of savings?
• What your plans are and how confident you are in achieving your assumptions.
• What contingency plans you have in place.

You may need to ask for an additional overdraft facility, or for your current repayments to be suspended for a given period. You should take this time to talk to your bank about rescheduling once the season starts or bookings return; but remember you will have to pay your loan back at some point, so make sure you are not overstretching yourself. 

Clearly you need to survive in the short term, but you need to plan for the future, making sure that your business can be re-built and is sustainable and successful. Any time you spend on business planning now will pay dividends and will ensure you recover as quickly as possible – think about your robust financial projections over the short, medium and longer term. 

5. Who else should you talk to?

Make sure you speak to your suppliers, particularly if you need extended credit. They are likely to be sympathetic and understanding during difficult times. Don’t ignore suppliers seeking payments - it is important to maintain goodwill at all times. 

Keep an eye on your debtors too, although you may feel you should show the same understanding that you are seeking from others.

If you find yourself in a situation where you cannot cover your debts, seek professional advice as a matter of urgency.