“Cash Flow is King” in Navigating the Covid-19 Storm

An article by our Founder – Shawn Mendes

It has been close to ten years, but it as clear as if it was yesterday when one of my Professors at Cranfield drilled it down into my head – “Shawn, while forecasts & profits are important, cash flow is king“.

Thereafter at work my ex-boss always said “Great report, but let me know when the money is in the bank”.

Today, more than ever, this holds true and relevant. Businesses that are able to effectively manage their cashflow will be the ones to survive the Covid-19 storm and thrive in the post Covid-19 business environment.

Profits are not always an appropriate indicator of portfolio performance, as they will often reflect changes in liquid assets of the company, such as inventories, capital equipment, or receivables, and thus does not indicate the true scope of future development. 

Cash flow, on the other hand, is a key determinant of a company’s ability to develop its product portfolio.

Professor Malcom McDonald

But the paradox of the situation is that in this period of the lock-down when customers are not spending money on travel and there are advisories in place curtailing travel, how can a travel & tourism related company generate cash flow.

In adversity, there is always opportunity. Get your team together (on a video call) and brainstorm. If you don’t have a team, engage your peers in a conversation. Talking helps, it not only incepts new ideas but is also very therapeutic in this world of social distancing.

To get you started, below are some aspects that can be explored and implemented within your business to get your company’s cash flow machine restarted.

Early bird (so early, that it was up since the previous night) specials

One thing which a lot of travel companies have done for years, and quite effectively, is early bird deals. If you want to create some cashflow you can promote some really early bird deals

While Covid-19 is quite different, industry recovery from past outbreaks like H1N1 or SARS reinforces the fact that travel and tourism is a resilient industry. It may not be what we were used to in the past, but for sure there will be resurgence of travel. Possibly more sustainable and likely more domestic than international.

Offering “really early bird” deals will allow you to collect cash now for far out travel. 

Keep the redemption process simple and flexible

If your organisation is down the chain from the source of supply (airlines, cruises, hotels) i.e. your organisation is a travel agency or a tour operator then now is the time to reach out to your suppliers and put together a “really early bird” special

Collection of dues

A thing which most businesses overlook or choose to overlook (because of the intense nature of the interaction, now more-so) is to make sure that any money owed to your company is collected.

Engage in those unpleasant conversations. We are all in the same situation, so empathy is key.

Rather than an email (or a series of “gentle reminder” emails) pick up the phone and speak to the key decision maker. If not possible, then to a person as close to the key decision maker. It is important to get the real picture from the proverbial “horse’s mouth”.  

If the debtor is not able to pay in full then work out a timeline for repayment or a staggered payment plan. Remember you too need the money to pay your staff and your creditors, so you need to work together with your debtors to make this happen. 

Postpone trip (of customer), rather than cancel

There has been a lot of pressure on travel companies to issue refunds. 

One should deal with these requests tactfully. Where possible, rather than refunding the customer’s money try and encourage your customer to postpone their travel. And as a show of gratitude you may include value-adds to your customer booking without any charge. If your company has a customer loyalty programme, you may upgrade the customer up a tier as a show of your appreciation.

If you are not the supplier of the final service (e.g. OTA, travel agency, tour operator), reach out to the supplier – airline, hotel, cruise liner, or attraction. They too are actively seeking ways to manage their cashflow and would appreciate your proactiveness and may even work with you to put in a programme allowing date change on already booked trips or extension of time-limit bookings.

Lender or partner ?

The last option should be to take out a loan, as you will not only have to pay back the loan but also pay the interest on the borrowed capital. 

You may consider this option if you have a definite and well thought out plan for utilisation wherein the investment makes guaranteed returns for your business.

Debt is like any other trap, easy enough to get into, but hard enough to get out of.

Henry Wheeler Shaw

If you can find equity partners to come and invest in your organisation you will lose ownership (proportionate to the investment) but you also might be enabling the survival of your business. 

A strategic partner adds great value to the business. Here again, you need to have a in-depth plan on the utilisation of the investment with clear milestones to make a potential equity partner comfortable in parting with their money. You need to remember that the potential equity partner is not bailing your business (and definitely not you) but instead is seeking to make a risk-calculated investment and is expecting a return on the investment.

God (and Government) helps those who help themselves

The government has implemented various schemes. National, state and local governments are supporting small and large businesses during the Covid-19 outbreak. 

The United Nations World Tourism Organization (UNWTO) has complied a list of respective country and international policy responses that aims to mitigate the effects of COVID-19 crisis in the travel and tourism sector and accelerate recovery for the industry.

Keep yourself informed on your government schemes. If you don’t have an internal resource with expertise in policy matters, governance, and/or accounts reach out to a professional who has the expertise to explain to you on how you can access government support and to understand your options. 

It’s simple, if you don’t ask you dont get (help). Hence, it should be a management imperative to be aware of all the avenues of support. 

Refresh, before the restart

You can run parallel businesses and this might be a good survival strategy

I understand that every travel business will not be able to do that – a cruise company can not be an airline. A hotel can not be a cruise liner – but a hotel room can be an isolated working space ?

While we are sitting in a box (at home), we need to be taking out of the box. We need to be creative in how we look at our survival strategies. It will be a way to retain staff and bring in some cash until travel comes back. 

Product development and diversification will allow you to create some cash flow in the short term. 

In product development, you can develop a new product for your existing customer base. Let say your company conducted culinary tours taking your customers to places around the world to taste different food. In such a case you could maybe create an online platform / YouTube channel. The chefs of the same places that were on the itinerary are now undertaking a virtual tour and sharing their recipes virtually. Your customers can prepare the receipe from the safety of their home. Access to this online platform can be chargeable (or free). And you can even embed a “really early bird” offer at a heavily discounted price on the online  platform allowing your customer to book the actual tour today for when it becomes available. 

An even simpler example of product development would be that if you are an international tourism related business up-skill on domestic tourism in the down-time. Maybe focus on a single destination in your state or country. As when travel restarts domestic tourism will be the first part of tourism that will recover. 

In diversification, you can develop new products for new markets. Let’s say as a travel company you have a strong idle workforce. This workforce by nature of their work are experts in destinations across the globe. As a diversification strategy your organisation can start an online destination training school for students of travel and tourism or anyone who is interested in learning. 

And when normalcy returns, you will have a new revenue stream in addition to the revenue you will get from restarting your pre-Covid business.

Do unto others as you would have them do unto you

If possible, allow your staff to utilise their leave and spend time with their family. Leave is not work from home. Also, utilisation of leave entitlement will ensure that the leave is not accumulated towards an actual cost to the business.

If your staff need to be put on temporary discontinuation of service, encourage them to be productive during the down-time by enrolling them for an online course that would benefit their work in the future. 

In the unfortunate circumstance that there is no other alternative, support and encourage staff who may be laid off. Actively encourage them to train in other work skills, help them stay positive, and assist them in finding a new job. Treat your staff well as you may want them back when business resumes. 

Stakeholder realtions

Stakeholders, both internal and external, are an important part of your business. It is crucial and productive to maintain good relations with all your stakeholders. 

Even if you have difficulty paying your stakeholders, keep the communication channels open and honest. Do not ghost them. 

Strong working relationship between you and your stakeholders will determine the rate of resurgence of your business once we are out of the lock-down period.

We are all in this together. While all of us are not in the same boat, we are definitely in the same storm. And we need to help ourselves and each other. Stay productive, never give-up and create beacons that will show us all the way out of the storm.