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Congratulations! If you have completed the course task sheets then you have answered most of the important key strategic questions which you need to understand your business. Taken together, these questions make up the largest part of an effective business plan; they will give you direction and will help you with the final questions concerning finances—investments and revenue forecasting. This subject will be covered in detail by Jean-Claude in the section concerning 'Finances and Pricing.' But you can't begin to make these decisions without first answering these key strategic questions.

How to Determine Your Budget for Start-up and Ongoing Operations (How much money do you need and when?)

1. Look at your list of resources and calculate the cost of each item, both the purchase price and also ongoing maintenance costs. Include depreciation costs, as items will need to be replaced due to wear and tear. For example, a mountain bike may only last one season before it needs to be replaced. Tip: You can reduce wear and tear if you have a set of operating procedures to reduce damage (for example ensuring that all camping materials are cleaned and stored correctly after use). Often more expensive items last longer than cheaper alternatives; this is certainly true of rental bikes in Montenegro as the conditions are quite tough (with karst limestone terrain and lots of ascent and descent). More expensive bikes last longer and can also command a higher rental price.
2. Look at your list of partners and contact each to agree on their prices or commission for services. These will be operating costs so you will not normally need to make any investment until you have a booking. Many service providers will require a deposit payment, and some sales partners work on a fee basis (for example tour resellers and OTAs). You will need to cover these costs before you receive a final payment from guests

How to Estimate Future Revenue and Growth?

This is a much harder question to answer. This is also where your vision for the company will come in handy. Although I advised you to have an ambitious vision for your company, we also need to consider a more conservative estimate. Larger companies often adopt a 'top down' approach. They would estimated the total size of the market—for example before the COVID-19 pandemic, Montenegro was receiving around 3 million visitors annually, so we could estimate what share of that market we could attract to take one of our activities. However, that would require a lot of assumptions about our competitors and how they will react, and about the types of people coming to Montenegro and whether or not they were already buying a full package of activities. For a business of our size, I don’t think we would have learned a lot from that approach. 

For smaller businesses it's better to take a 'bottom up' approach. Work out the potential revenue for your company for a specific period by calculating the total number of possible sales for each product or product line and multiply this by the average value of each guest. Think in terms of your capacity. How many customers can you serve with the resources you have, with the limitations imposed by seasonality and the weather, and consider what you want to achieve in your vision (for example you may not have chosen to chase the maximum number of guests). This calculation will give you the most optimistic estimate of future revenue, which would be unrealistic particularly in the first few years of business. But let's say you did assume full capacity, and then full sales—that would obviously be your most ambitious estimate for future growth. But full sales is much harder to achieve. You need to consider the situation based on 3 scenarios—full capacity (let's say 90% as there is always some level of wastage), then 50% and finally 30%. 

What we have found is that it takes time to grow a business. It can take 2-3 years or longer to develop a valuable sales partner such as an international outbound operator from first contact to first guest, and normally a new partner will test the waters first with just one or two departure dates in the first operating year. If you do well they may come back and ask for more regular departure dates in the following year. 

When you are starting out it can be difficult to forecast future growth, but there are a number of factors you can consider. Start with expenses, not revenues. When you're in the startup stage, it's much easier to forecast expenses than revenues. 

How to Use Your Business Plan

1. The plan should be a working, 'living' document. Circumstances change so you will need to review the key strategic questions on a regular basis, at least annually. This is particularly true if you are a start-up business. In conflict they say that "no plan survives the first contact with the enemy." The same is true in tourism; your plan will change once you begin working with guests, trade partners and service providers. We have all witnessed recently how wider societal and economic changes brought on by the COVID-19 pandemic have affected tourism.
2. Use the business plan to set tasks for your colleagues and create deadlines to measure your progress. Discuss the key strategic questions with your colleagues and make sure that they understand the plan—how your business functions, what is important to your company, what you have set out to do and how you will achieve it.
3. Use your business plan to demonstrate the value of your company. For loans or investors the business plan will help you to demonstrate why your business is worth backing and will answer many of the questions which a potential backer may have.