A closely held adventure travel agency was having trouble predicting their cash flow. This was becoming more of a challenge as the company grew and there became a greater need to hire sales and support staff. In addition, the seasonality of the business is such that approximately two-thirds of annual revenue was received during a four-month period. The difficult predictability of cash flow timing was further exacerbated by varying terms in contracts with travel companies.
An experienced finance and operations executive, now a member of the E78 team, was engaged to address these issues. He initially conducted a SWOT analysis followed by a strategic planning session to help define the company’s long-term goals. From the strategic plan, he then developed a road map to achieve these goals. Part of the road map included a detailed monthly cash flow examination and future forecast that considered expected bookings, travel dates and cash arrival. The E78 executive also assisted the company in securing a line of credit, which allowed the company to maximize both cash utilization and marketing efforts throughout the year.
The steps taken helped the company implement its strategy and achieve long term goals. The improved cash flow planning and management capability allowed the company to shift marketing efforts, which increased future bookings dramatically and resulted in a near doubling of sales during the slower months. Over a five-year period, total annual sales grew by a compound annual growth rate of 8.2% per year. As a result, long-term debt was extinguished, and the company was able to purchase their building, which created diversification for the owners.