Your campsite business is a personal investment vehicle.
Its purpose should be to deliver a financial reward that matches what you need, given your circumstances.
If you don’t set your sights on what matters, then you have no real aim for success.
So. let’s take a look at how to set some fundamental goals for building campsite business success.
Quantify your earnings expectations
Starting right where it counts the most.
Raising your aim for what earnings you expect to take home from running your campsite business.
Stay motivated
Motivation plays a MASSIVE part in running a sustainable business.
If you are to have any chance of keeping the wheels of progress turning every day, whilst bearing the strain of operation gladly…
Then getting back a meaningful return for your labour is paramount.
Otherwise, it just doesn’t make any sense.
Be realistic
Sure, there are lifestyle benefits to campsite ownership, like location and social interaction,
But unless it pays the household bills – it’s all but a dream.
Don’t neglect the bottom line pay off.
It might not be ALL about that. But running a campsite business would be a VERY expensive hobby, wouldn’t it?
Decide what your campsite should do for you
So, let’s run through a few questions,
The answers to which, will DICTATE the minimum level performance of your campsite business…
Here are those performance-related questions…:
- What do you currently earn?
- Does your current income cover all your personal expenses?
- Do you have any debt?
- Do you meet all your repayment obligations?
- If no, what income would allow to catch up and to continue satisfying all current debt repayments?
- At that rate of payback, when would you effectively become debt free?
- Ideally, what would be your preferred (realistic) debt-free date – by which to pay it all back?
- What therefore would be your target income (monthly) for achieving this repayment schedule?
- Do you meet all your repayment obligations?
- What about your future ? Are their any personal financial milestones you’d like to reach?
- Perhaps savings to:
- travel
- retrain
- pay for a child’s wedding
- Perhaps savings to:
- Will this campsite business be your only source of income?
- If no, how much time commitment must you give to your other work obligations?
- …and what realistic time availability do you have to run this campsite business?
- If no, how much time commitment must you give to your other work obligations?
- What staffing arrangements do you have in mind for running the campsite operation and manage the business?
Scope your working capital needs
The reality is…
Every start-up business takes a bit of time to start paying you back.
The same is also true of an existing business that you buy.
During this transition phase of settling into your stride, the business will actually be a liability.
(Not yet an asset.)
In other words,
…it’s going to need funding out of your pocket (either entirely or in part) until it can stand on its own.
What is working capital?
Working capital is the money your campsite business will need you to fund before it rewards you back.
Calculating how much working capital you need and for how long you need it is a MAJOR milestone in planning.
Why is it important?
It is the vital cash flow your business operations will need to stay afloat whilst it gets strong enough to carry you.
Without enough working capital, you fall behind in expenses and overheads.
This is one of the most DAMAGING blows an early business can suffer.
How much working capital is enough?
So,
…planning carefully just how much money you need to stump up in advance, is critical to clearing the first few hurdles.
In the case of your campsite business,
“How much” working capital depends largely if you are taking on a ‘going concern’, or not.
Working capital – when buying a campsite as a going concern
A going concern is an existing business.
It would imply (but is not always the case with such) that the business comes with a ready profitable, cash flow.
This would mean from day 1, it will begin to fill up the bucket of investment returns.
If run well, you can literally predict when you expect your returns to kick in.
Why?
You have bookings in the pipeline, a loyal customer base and an established market share.
In short, your business already works – you just have to keep peddling.
Working capital when – starting a new campsite business from scratch
But what about if you start up from scratch?
Well, it STILL is possible to meet that same schedule for returns as a going concern,
But you’d have to prepare for a MUCH STEEPER gradient.
(Which should always include some slippage for making mistakes and learning lessons.)
Couple that with a first attempt at the business and you’d do well to extend your working capital period somewhat.
Say, with a start-up from scratch you might need 24 months (personal and business) expenses saved as a lump sum.
Watch out – a going concern might have hidden costs…
A profitable, going concern might need less time to bring back returns, but in practice:
- You might hit some unforeseen snags…
- Some renewal payments might be due early on in your takeover…
- You might incur cost increases – like on land rent, for example…
- Also, your business might actually make as much as you thought on paper…
So, you’ll only REALLY know when you’re in the seat and running at target.
But 24 months might be a reasonable working capital budget.
Estimate your expected earnings vs. site capacity
Your campsite earnings are directly linked to the site capacity.
After all, you can only make as much sales revenue as the number of available pitches will permit you.
It’s like a cup.
If you have thirst for 2 litres and only have a 1-litre bottle,
You’ll be left wanting.
Capacity planning and income is the same relationship.
One is a container to supply the other.
For example,
Let’s say that your expected earnings from the campsite were £30,000 per annum before tax.
What size campsite would be appropriate to generate that personal income?
Some factors for consideration in your calculation would be:
- number of pitches
- types of pitches
- average price per pitch
- season length
- average seasonal occupancy rate
- net profit percentage
The factors above will play their part in
Below is an outline process that you might take to calculate the related size of campsite required…
Step 1: Reverse engineer turnover from net profit (earnings)
What’s a reasonable net profit be for a small to medium sized campsite with a mix of serviced and unserviced pitches?
Take this example:
Coastal 120 Pitch Campsite And Letting Cottages For Sale
St. Mary’s, Isles of Scilly, UK
- Asking Price:
- £1,025,000
- Turnover:
- £265,000
- Net Profit:
- £125,000
(Source: UK Businesses for Sale)
Going by this (…albeit singular…) ‘real life’ example – we see a net profit of 47%.
Even if we downgrade that to 37% to remain conservative, we’d extrapolate a turnover figure of £81,082.00
Step 2: Estimate the season length
As is the case with most UK campsites, the season duration of your campsite might be 8 months of trade.
Step 3: Calculate average turnover per month
To achieve this, you’d simply divide annual turnover by number of trading months per year…
So, in this example we have:
£81,082.00 / 8
= £10,135.25 per month of trade on average
Step 4: Decide on an average occupancy level
According to the UK Campsite study, peak occupancy in May could be 70% pitches filled and at the other end of the spectrum 12% in December.
A mid-range average of about 35% annual occupancy of pitches spread evenly across all 8 months of trade might be a sensible guess.
Step 5: Estimate the number of available trading nights possible in the season
Simply, count the number of days within the chosen span of trading months:
March to October
= 8 months (inclusive)
= 245 nights of trade
Step 6: Work out the average turnover per night of trade
Equals £81,082.00 divided by 245 pitch nights
= £331.00 of turnover made per night on average across the whole season
Step 7: Decide on an average pitch price per night
Doing your research on existing campsite websites, you might find a mid-point rate per night of around £22.00, like with this campsite:
Manor Farm Campsite – Prices 2022
Step 8: Pin down your minimum number of pitches required to hit your turnover target
Divide average nightly turnover by average pitch price
= £331.00 / £22.00
= 16 pitches
…now, to adjust the figure to account for your average occupancy of 35%
= 16 / 0.35
= 46 pitches
Step 9: Identify the minimum size of campsite you’d need to generate your target earnings
You need a 46 pitch campsite minimum to achieve your earnings expectations.
Step 10: Estimate working capital required to compliment your start-up business plan
By our example above 37% of turnover would remain after running costs as net profit.
Therefore making annual running costs 63% of turnover
= £81,082.00 x 0.63
= £51,082.00
So, as a measure of prudence – you might want to account for between:
£51,082.00 and £102,164.00 working capital within your business plan.
Go To Part 5: https://campsitebusinessplan.co.uk/knowledge-base/intro-campsite-financial-analyser