Money makes people funny- which is why talking about specific numbers can feel taboo, especially when it’s about something as threatening to our livelihoods as a recession.
The feds have confirmed that a recession is coming, if not already here. Very few businesses were adequately prepared to survive COVID, and this time we have fair warning. This post is dedicated to helping you avoid finding yourself in a position where you are losing income when there is plenty that you can do now to avoid the financial repercussions of a recession.
Please note that we are not lawyers or accountants and nothing covered in this post is to be taken as professional advice. As everyone’s business is different, all financial decisions are recommended to be discussed with your company’s financial advisor. These insights are our personal takeaways and how we are preparing our own business.
Save Now & In Various Places
With commissions pouring in like they haven’t in years, advisors should be well-equipped to pay their bills, provide themselves with a salary, as well as save for the future. We recommend having at least one year of operating expenses (which includes paying income) to be in the best possible scenario.
As we’ve recently seen with bank closures, it’s important to ensure that your funds are backed by the FDIC. This means that any funds exceeding $250,000 are not going to be covered. If you are holding a lot of cash in your business, you may want to look at diversifying where that money is held.
Reduce Spending & Evaluate Expenses
In order to adequately save for a year’s worth of expenses, that means you’ll need to know what your expenses are. It can be a daunting task to evaluate all the recurring and one-off expenses for a year, but it’s imperative in order to know how much your business needs to make to break even (and ideally turn a profit). One way to maximize the revenue coming in is to reduce unnecessary spending by cutting software that isn’t worth the cost and removing any inactive accounts.
Push For Travel Insurance To Be Purchased
Many policies protect the travel advisors’ commissions, which is exactly why we highly support promoting commissions as a “need to have” for all clients. While advisors can’t legally require travel insurance, the importance of a policy can be reiterated in your workflow messaging. Helping your clients protect their financial investment is an important aspect of recommending insurance, and it is usually the primary reason for insurance. However, for this specific scenario, we are recommending the selling of policies to protect the advisor’s income in the event of mass cancellations.
Diversify Your Service Suite & Charge Fees
The best way to appeal to various levels of household income is to provide various levels of services. In the event that large amounts of individuals see a change in disposable income, you want to be prepared to service those who may not be able to pay for a platinum-level/ VIP experience. However, when income returns, so will that client. Creating loyalty and meeting clients where they are during any season of life shows empathy and integrity.
Evaluate Your Terms & Conditions
There is nothing more devastating than realizing your client has not signed terms and conditions that protect your income in the event that there is a change of plans. You can put your business at risk by not verifying that your client has been provided with the supplier terms and conditions, as well as your own companies. Particularly when it comes to a planning fee, you want to make sure that the no-refund policy has been made crystal-clear (despite if a trip actually came to fruition).
Focus On Marketing A Less Vulnerable Niche
Certain niches, like honeymoons, can be less vulnerable to economic downturns. While the honeymoons may not be as grand, people will always get married and want to find a way to celebrate. Some of the first bookings to disintegrate are larger multi-generational trips. If you are focusing solely on one demographic, you may find yourself in a hard position in the event that your client demographic experiences widespread financial loss.