Money Management: Campsite Business Financial Planning

Financial prudence will go a long way to you establishing a long-term successful campsite business.

And as far as business and financial planning is concerned, there are some standard instruments of use.

Here are a few which will help you keep sight of and maintain those campsite profits.

Cash Flow Forecast

Cash flow is defined as

“…the net balance of cash moving into and out of a business at a specific point in time.” (Harvard Business School Online).

The cash flow forecast is a statement of all cash inflows and outflows within a business taken as a snapshot at a specific time.

When running a business it is critical to keep a constant eye on net cash on hand  with a view on future flows.

This way you can:

• forward plan dealing with business expenses
• very quickly identify any issues resulting in negative cash flow
• communicate confidently with suppliers and creditors

Operating with such monetary foresight helps you keep your business accounts in good standing with suppliers.

This means no hitches or spanners thrown into your operational performance.

Expediency to keep your business up and running.

(*n.b. It’s important to note that a business that enters in to negative cash flow i.e. having a greater cash demand than a cash supply at any given time, isn’t therefore unprofitable as a result. It just means that the monies required to have on hand vs. the monies actually received at any particular time were not aligned sufficiently. It might be that after all the trade has occurred for that reporting period, say month/quarter/year, that the business works out having made money rather than lose.)

Example cash flow calculator:

Go to Cash Flow Calculator

(Screenshot taken from “Business Plan Bonus“)

Further reading: https://www.investopedia.com/terms/c/cashflow.asp

Profit and loss

Profit loss or income statement is defined as:

“…the resulting balance that remains when all of a business’s operating expenses are subtracted from its revenues.” (Harvard Business School Online).

In short, a grand scale subtraction equation which takes away all monies due to go out vs. monies due to come in.

Simplified, it can be summarised as:

income – expenses = profit/loss

Profit isn’t all just one kind however.

In business, we have a variety of definitions of profit which describes monies left over or owing at different stages of financial treatment.

Here are a few example profit definitions common to every business:

• Gross profit = direct cost of sale minus sale revenue
• Operating profit = (direct cost of sale + indirect costs) minus sale revenue
• Earnings before interest, tax (EBIT) = operating profit minus depreciation/amortisation

Each has its own analytical use in evaluating the overall performance of your campsite business.

How are they used?

These metrics to be used in combination with one another like the indicators on your car dashboard telling you in what state of health your car is really running.

‘Driving’ your business safely without them just isn’t possible.

Example profit/loss calculator:

Go to Income Statement Calculator

(Screenshot taken from “Business Plan Bonus“)

Further reading: https://www.investopedia.com/terms/i/incomestatement.asp

Balance sheet

Possessions both physical and intellectual can have a remarketable commercial value.

By definition, assets are described as:

“…resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.” (Investopedia)

To realise their value, assets can be used to generate revenue or capital sums.

For example, a shepherd’s hut purchased for a sum of money can generate value or benefit for your campsite in two ways:

1. Booking income from rent.
2. Capital sum from a sale.

The same could be said of a patent held by you for a piece of software that is licensed out for use.

You might generate revenues from the licenses sold. But also from the capital sale of the patent to another owner.

In both ways, the patent or registered design can be used to realise a value for your business – although in principal it’s an intangible piece of information that can’t be touched.

On the contrary, a liability is defined as:

“…obligation of a company that results in the company’s future sacrifices of economic benefits to other entities or businesses.” (Investopedia)

One example, might be a burden on debt, for example, from a loan. This would be a legally binding contract that requires full repayment according to a given schedule.

In such case, the loan contract signed would be seen as a liability and recorded on your balance sheet.

The overall balance of asset value vs. liability describes the health of your business’s financial possession as far as:

…value owned vs. value owed.

An important backstory to your current trading position.

*A point on liquidity: the biggest fear of a business in this modern era of commerce is insolvency…

i.e. not having sufficient profitability to cover all of your creditor obligations, leaving you exposed to legal action against for recovery of monies owing.

One of the first moves of a business facing insolvency, much like a sinking ship, is to cast off all the lading and tackling.

In other words, relieving the ship of the additional burden of otherwise valuable cargo and equipment in a time of jeopardy.

In the case of a business, a stock inventory for example might be significant profitable value if sold.

But when facing impending insolvency (legal action from creditors to recover debts), the short term liquidation or converting of inventory assets in wholesale amounts immediately – for survival…

…is worth MUCH more than holding onto the stock for future sale.

Frankly, they’ll simply be no future sale is the shop is repossessed by the bank.

This is reality faced by every business suffering the threat of insolvency.

So, as a precautionary measure it’s worth always running a business that has a greater asset value than liability debt.

And to hold assets that can readily be sold and hold consistent market value.

This way you always give yourself the best chances of avoiding ship wreck if your liabilities are called in, by force.

Example – balance sheet template:

Go to Balance Sheet Calculator

(Screenshot taken from “Business Plan Bonus“)

Further reading: https://www.investopedia.com/terms/b/balancesheet.asp

Labour budget

Labour is one of the most misunderstood aspects of small business financial planning.

Many owner/managers run into trouble when trying to decide whether to count their own time and labour in their financial calculations.

For example, you might ask:

If I expect to spend approximately 30 hours a week running my campsite – do I charge for my time and pay myself a salary within my business plan, or not?

The answer to this always is:

No value is given without cost. For value gained somewhere, value has to be lost elsewhere. It’s a closed system. You can’t create business value, you can only transfer.

On that basis, you’d be short changing yourself not to include your personal time involvement at cost within your business expenses.

Otherwise, you’d be saying, I’m happy to run my business free of charge.

Which business manager out there would want to walk in your shoes?

They just don’t exist, right? We all need to eat, after all.

Unpaid labour is a fallacy.

And actually, can be a major trip up when trying to exit your business.

Just think – what if a prospective buyer of your business, doesn’t want to run it themselves?

They’d have to hire a manager, right?

Now consider how attractive (or otherwise) your profit/loss or income statement might look with the additional expense of a market rate operations manager added on top…

…this can and has often been a deal maker vs. deal breaker.

Example – payroll statement calculator:

Go to Payroll Calculator

(Screenshot taken from “Business Plan Bonus“)

Further reading: https://www.xero.com/uk/glossary/payroll/

Break-even

A business break-even point is defined as…

The equivalent of the biting point in a manual transmission car.

The point at which the driving motions of the car become engaged by the torque or thrust of the engine output.

This is where the action happens and you and your passengers start to derive the benefit of being onboard.

Being carried by your business as a financial investment vehicle is very much the same.

The first thing done is fuel the car with all the necessary input to produce drive.

Bu then under the driver’s command the component’s of the car are brought into engagement to produce motion.

And I’m sure you’ll agree that a business just isn’t a business without carrying the owners and workers financial burden.

There just wouldn’t be any point otherwise.

Crossing the break-even barrier brings your business into profit and reward. The equivalent of coming out of neutral and entering into drive.

A critical moment and metric for every business. Perhaps the point-operationally where your business actually becomes a ‘business’.

Example – break even calculator:

Go to Break Even Calculator

(Screenshot taken from “Business Plan Bonus“)

Further reading: https://www.investopedia.com/terms/b/breakevenpoint.asp

Key performance indicators (KPIs)

Speaking of cars, where would you be without your trusty dashboard as a driver?

In business, your key performance indicators do the same job as a car dashboard for a driver.

They tell you how your car is doing at any point in your journey.

• Petrol
• Speed
• Light display
• Water levels
• Oil reserve

All critical to maintain and have under your control behind the wheel, all readily readable at a glance of your dashboard.

The same should be the case for your campsite business key performance indicators, say…

• gross profit
• average booking value
• direct cost of sale
• sales conversion rate
• bookings by volume this month

…they quietly tell you: “…speed up”, “…slow down”, “…full beam for limited visibility.” etc.

Go To Part 11: https://campsitebusinessplan.co.uk/knowledge-base/project-management-for-campsite-start-ups/