Clearly , this is the most simplified example ; you may want to split some of the key headings – for example , you might break down your “ advertising and marketing ” budget into online keyword advertising , magazines , official tourist websites etc .
The principles are clear , however : once your budget is mapped out , you can see what changing one or more variables does to your “ bottom line ” – for instance , reducing your assumed occupancy to 50 %, or increasing it to 60 %. If your budget is on a spreadsheet program such as Microsoft Excel ®, this is quick and easy .
The budgeting exercise also forces you to calculate important figures like your direct costs per room per night – and your detailed workings on this will also form part of your budget .
Note that we have left out the lines below “ net profit ” – taxation and net profit after tax . They are vital to you , though ! We only omit them as they will depend entirely on your own tax circumstances . Get professional advice , and build an estimate of your tax liability into your budget .
Success measurements
Measuring your success is vital in any business . In putting together your Business Plan , you will have set your overall financial objectives ; your budget would have quantified these in terms of a few key success measurements ; now you need to see how well ( or badly ) you are actually doing in relation to these .
If you are doing better ( ahead of your Business Plan ), besides congratulating yourself , you have accrued some extra financial credit , either to invest in the business , take out of the business ( if you have already allowed for and covered necessary reinvestment ), or to act as a financial “ cushion ” against unexpected costs or lean periods .
If you are doing less well than your original Business Plan , don ’ t panic but DO realise that your planned returns will not be there , so you need to adjust as you go along to get back to where you hoped to be . The first thing to do is to calmly and dispassionately look at the facts and figures of your actual current trading , and compare these with those used in your business plan . How far out are they ? Which ones are out , and which are OK ?
For instance , you may have budgeted for 65 % occupancy and achieved 67 % - well done ! BUT you may have only achieved an average room rate of £ 44 , after all the discounts you gave to get the bookings coming in , instead of the £ 55 you budgeted for .
Success is a combination of many things , don ’ t forget : good occupancy rate , good average room rate , low marketing cost per booking , low direct costs per booking ( eg breakfast & linen costs ), well-controlled overheads , and low cancellation and complaint / refund rates . Only if all ( or at least most ) of these are happening will success follow .
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