About two months after opening, the business plan is usually reviewed again. Nobody has requested it; the first real figures have started to arrive, and it is the right time to compare them with the original estimates.
Ceningan Divers has been open since August 1, so that review is taking place now.
The figures themselves remain confidential. They belong to the partners, and the numbers of a dive centre on one island would not help plan a business elsewhere. This article instead covers what went into the plan, which elements are proving most important, and which ones would receive more weight in a new version.
What goes into a dive resort business plan?
The same sections as most small business plans, with particular weight on the market, operations and the partners.
For anyone writing a first plan, a template such as the BDC business plan template is a good starting point. It is Canadian and free, and it covers the sections a bank or a partner will expect to see. Most of it applies equally well to a business on the other side of the world.
The market
The market section answers three questions: who is coming, from where, and why. For an island next to Nusa Lembongan, most divers come for the area, the manta rays and the big-animal diving around Nusa Penida, and only then choose a dive centre. The market question was therefore less "will people come?" than "why would they choose this centre over the operators already established here?" That is a positioning question, and it connected directly to the brand work completed at the start of the year.
Operations
Boats, compressors, tanks, gear, staff, insurance, permits and maintenance. A dive centre is an equipment business as much as a hospitality business. Equipment fails in salt air, often on the busiest day. The plan needs a budget line for repairs, and the first eight weeks show that this line should be larger than most owners expect.
The partners
This topic is covered in its own section below.
Why does seasonality matter so much in a tourism business plan?
Because the year is not twelve equal months. This is the most important principle for anyone writing a tourism plan.
In Bali, activity follows the dry season and the holidays in the guests' home countries. In some months the boats are full and the centre turns guests away. In others, the same staff and the same rent are paid with a fraction of the guests. The annual average may look acceptable on paper, but the bank account does not operate on the average.
Opening in August meant starting during a strong period. That is an advantage, and also a risk, because the first weeks of figures give an overly favourable picture. We keep that in mind when reading them.
The same applies to every seasonal business: a ski hill, a lakeside cottage rental, a waterfront restaurant in Canada. A plan that shows revenue as a flat line across the year does not reflect reality, and anyone reading it should be aware of that.
We therefore recommend building the plan month by month, estimating high season and low season separately, and using conservative assumptions for the shoulder seasons.
How much cash does a seasonal business need for the low season?
Enough, on the last day of high season, to reach the next one, plus a margin. This is where seasonality becomes a question of survival.
Profit and cash are two different things. A business can have a good year and still run out of money in its weakest month, because the strong months came first and the bills continued afterwards. In a seasonal business, being profitable over the year answers only half the question. The other half is the amount required in the bank at the end of high season to reach the following one.
That amount should be written into the plan, and then increased. Equipment also breaks in the low season, which is also the period when maintenance is best scheduled.
How should a plan account for unforeseen events?
Through the cash reserve. In July, two weeks before the opening, ash from Mount Raung in East Java closed Bali's airport, and then closed it a second time. Flights were cancelled, travellers were stranded and bookings were moved. None of this was in the plan, and it could hardly have been anticipated precisely. It does, however, illustrate the purpose of the cash reserve: covering events nobody anticipated, because in tourism there is always at least one. A volcano, a storm, a currency fluctuation, or negative news about the island that has nothing to do with the business.
Our preference is for a smaller business with three months of reserves over a larger one operating week to week.
How should partners' roles be documented?
In writing, early, while everyone agrees. Partners reach agreement easily at the start, which is precisely when roles should be recorded.
At the beginning, enthusiasm is high and everyone plans to contribute to everything. Sitting down to decide who is responsible for what can feel awkward. It is far more difficult a few years later, when two people remember the same conversation differently. Our agency experience in Vancouver showed that this situation is not rare.
The points worth putting on paper:
- Who is responsible for what, day to day: actual areas of responsibility rather than titles
- Who can spend money, and up to what amount, without consulting the others
- How decisions are made in case of disagreement
- What happens if a partner wants to leave, falls ill or stops participating
- Who owns which assets, including the domain name and the social media accounts, which are frequently overlooked
A formal shareholders' or partnership agreement should be prepared by a lawyer. The business plan does not replace that document, but it is a good place to describe the roles in plain language first, while relations are good.
Is a business plan still worth writing?
Yes, provided it stays concise. The question is frequently raised at the moment, with the rise of the lean startup approach and rapid pivots, and the argument that nobody reads business plans. The criticism has some merit: a forty-page plan left in a folder is wasted effort.
The analysis that the plan requires, however, is valuable: month-by-month cash, partner roles and a realistic view of who the customers are. All of this fits in ten pages. A business seeking financing from a bank or an investor will need properly prepared business plans in any case, so the work is worth doing well.
Some estimates in any plan will prove inaccurate, and the first weeks already show where ours differ from reality. That is expected. The purpose of the plan was to identify which elements were assumptions, so that we would know what to monitor once the real figures arrived. Those figures are now arriving.