[This post was updated in April 2023]
Whether you’re just starting out in the tour and activity industry or have been in the business for a while, understanding your expenses can be a challenge. However, running a travel company requires expert knowledge of every cost to accurately set pricing(opens in a new tab), pay staff, and gain a profit. Expenses include anything and everything from software to fuel to taxes, so where should we begin?
Let’s start with the most obvious: what some call operating or running costs. Essentially, these are the day-to-day expenses of running your business. Staff is the first expense that comes to mind. If you’re a sole owner and operator, you can ignore this point and worry about your profits. But for those with a team, it means being aware of minimum wage requirements, insurance for your employees, and perhaps even superannuation or pension costs in addition to reasonable wage valuation. If you’re running tours internationally and hiring locals (which you should be doing), this means being aware of local insurance and pension payment requirements.
Beyond staff costs, other overheads include petty cash, transport, flights, equipment, servicing, maintenance, or fuel. Planning for varying fuel prices can be difficult if you’re using your vehicles a lot. In this category, it is helpful to separate your expenses into fixed (the ones that remain the same regardless of bookings) and variables (the ones that change based on customers or your output). The best practice is to overestimate costs, as it’s always better to discover you have a little more money at the end of the month or quarter than a little less!
Marketing costs can be nicely wrapped up in the phrase, “You need to spend money to make money.” Because if you don’t have your line in the water, you won’t get any bites. Advertising expenses can vary significantly from your brand to the platform you use. For new businesses, we recommend looking into social media ads(opens in a new tab) as a starting point, but be sure that your social media presence is up and running first(opens in a new tab). This means interacting and engaging with other profiles to build up your audience. The best part, this will only cost you time.
Another significant marketing factor is ensuring you use the correct methods to target your audience specifically. If you’re trying to sell your tours to a more senior crowd, then social media may not be your first point of call, or perhaps you’ll find that these potential customers are more likely to be found on Facebook rather than Instagram, for example. As social media is increasingly being utilized by more than just millennials (& gen z!), it remains a valuable tool for just about any demographic, so it shouldn’t be ignored. Other advertising options might include print media, email marketing, or visitor bureaus(opens in a new tab).
Google Adwords(opens in a new tab) is another marketing tool that many turn to. Knowing what Adwords to purchase can be complicated, and we recommend building up your SEO before delving into the deep end of buying keywords. Additionally, Adwords can take some time to take effect, so if you invest, start small and reassess after a few months.
Annual Business Expenses
A hectic schedule can mean you’re caught up in the fine details, but it is essential not to forget big-ticket items. Business taxes, permits, insurance (employee, building, vehicle, accident, etc.), lease payments, bank fees, and accounting costs can sometimes be a surprise when the end of the financial year rolls around. If you’re at all unsure about organizing your accounts, paying for an accountant doesn’t have to be expensive and can save you a lot of time and potentially money loss in the long run(opens in a new tab). An accountant might know what items you don’t need to pay tax on because of your business type or size. In some countries, having an accountant is required by law. In every case, getting advice is always better than wading solo into murky waters.
For new businesses, some other expenses include start-up costs. Although this could be a whole post alone, consider branding expenses(opens in a new tab), trademarking or registration fees, and license or permit costs.
Software and Other Digital Expenses
For better or worse, success in today’s market means having an online presence. Having a website that is beautiful, well-organized, and easy to use can mean a world of difference to your bookings(opens in a new tab) (and making websites that generate sales is our specialty). Saving up the funds to purchase a modern site should be kept in your budget, although this is understandably a longer-term goal for many tour and activity operators. Moreover, once you have your site built, consider the ongoing cost of site maintenance (more on this below!) so that it remains updated and appealing. An additional expense is booking software. A wealth of options are available, each with pros and cons(opens in a new tab). We recommend doing your research before you sign on, with some taking a percentage of your bookings (like OTAs) and others taking a fee. See what you like and what works best for your business. Other online investments might include email marketing software, integrated chat platforms, online waiver services, or photo delivery providers. And this list can grow as long as you like!
We understand better than most just how important your company website is. What is of equal importance, you ask? Website maintenance! Here at Tourism Tiger, our TigerCare team is your one stop shop for the best website maintenance around!(opens in a new tab)
TigerCare is a comprehensive suite of support services that we offer to all our clients in the tourism industry. Our commitment to our clients extends beyond the launch of their website. With TigerCare, you can rest assured that your website will always be up-to-date as we offer continuous support to host your site, make monthly updates, and add new content as your business expands. We offer a range of services that include website hosting, small design updates, daily backups, WP maintenance, SSL certificate, and outstanding customer service and technical support. With these services, you can ensure that your website runs smoothly, is secure, and meets all your business goals. At TigerCare, we take pride in providing you with everything you need to achieve a successful website and grow your business.
One final expense to always remember is having an emergency saving fund. Taking a small percentage of your monthly or quarterly profits ensures you’re secure and prepared for any unexpected event or disaster(opens in a new tab). As we learned from the pandemic, you never know when you might be left in the lurch. Understanding all your costs also means knowing that unexpected expenses can pop up at any time, so it’s essential to be prepared with an emergency fund!
Running a business is not easy, but being organized and prepared for as many obstacles as you can will make the process that much easier. Good luck!
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