Adventure Parks – Strategic Adventures Blog

This article originally appeared on Adventure Park Insider

Question: I am doing my homework on how to obtain financing for my aerial park; can you suggest any terms or keywords I should use when talking to lenders? Anything I should avoid saying?

There are two primary sources of funding we typically see for aerial adventure parks: banks and private investors. Each one will want to know some keys pieces of information from you.

Banks will want to know about personal guarantees, collateral, and of course they’ll want to see your business plan.

Personal Guarantees: Unless you have other profitable businesses, a bank will want to get you and any private investors to commit to being responsible for the loan should the business default on the loan.

Collateral: Real estate purchased for the business and any structures added to the property are regularly used as collateral. Unfortunately, the aerial park itself is often not considered for collateral, since the bank will not be able to get full value for poles and cables that are repossessed. The equity available in your home is oftentimes included for collateral, also.

Business Plan: A well thought out business plan is critical for a bank to take you seriously. It will detail your research into the marketplace, how you will operate your park, and highlight the expertise of your team. It also details the financials of the business and how the business will make money. Private investors are a bit different from banks and will want to know a few more details. These details include your expected ROI, EBITDA, and your valuation of the business.

ROI: Return on Investment. This ratio is expressed a few different ways: The first is in the number of years it will take to get their initial capital back (typically, private investors want a return within three years). It can also be represented as an average of what percentage of their money is returned on an annual basis (a three year ROI works out to 33.33 percent, annually).

EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization. This calculation is essentially a way to measure performance without having to factor in financing structures, accounting decisions, or how the business is taxed.

Valuation: the current value of the business. As a start up company without any operating history, the value of your business will most likely be whatever your start up costs are. Thus, if you spend $1 million to open the business, it is valued at $1 million to a potential investor. Now, should you be anticipating a higher than average return on investment, you may be able to get a higher valuation.

No matter what direction you end up going—banks, private investors, or both—you are going to need to know your numbers inside and out! The more prepared you are, the better your chances of obtaining funding.

The worst thing you can say is “I don’t know.” A better response is, “I’ll find out and get you an answer, ASAP.”

Good luck to you, and I look forward to climbing in your new park!

One of the most common questions that we get from prospective clients is whether or not their new business will be profitable. Most potential business owners want us to come to their site, evaluate their business model, check out the land, scope out the competition, crunch some numbers and give them a 100% thumbs up or thumbs down.

Easy, right?

Well…it’s not always that simple. There are a variety of factors that we take into account, any of which could be a make-or-break for the business. What we have done is devise a point-based system that will help determine the success of your business (and no, no one has ever scored a perfect 100%!)

Here are some of the factors that we look at, and questions that any new business owner, whether it is a zip line tour, aerial adventure park, climbing gym, or some other type of adventure business should be asking:

How far away is your land from the nearest population or tourist center?
How much space does the land have for your proposed attraction, and for future expansion?
Is the land currently zoned for commercial use?
Does your management team have adventure business management experience? What about other business management experience?
Who else do you plan to have on your team, and how much relevant experience do they have?
Is your project already capitalized or do you need investors? If so, are the investors already in place?
How much of a financial cushion does the business owner have? Are you able to go several months without generating revenue?
Who is your target market and where are they coming from?
Who are your competitors, and how high-quality are their services compared to your projected business?

If you see a question that you are not sure how to answer, or if you want to know your feasibility score, contact us at (888) 553-0167 or email us at info@strategic-adventures.com to learn more.

We look forward to hearing about your new projects!

http://www.strategic-adventures.com/content/feasibility-studies

It’s no secret that one of my favorite shows on television is Shark Tank. My other favorite is Hell’s Kitchen, but that’s a different blog post… On Shark Tank, business owners present their companies and ideas to a panel of successful investors by doing a quick 3 minute presentation before the “Sharks” start asking questions.

The first question is almost always “what are your sales so far?” In other words, are people buying what you are selling? If the answer to that question is a very low number, the sharks ask why no one is buying yet. If the answer is a large number, the sharks will wonder why the business owner is seeking more funding. What they are really trying to discover is what business model the owners are using. How is the business engaging clients and making money?

A business model as several key components that you must consider whether you are starting a new business or looking to grow an existing one. They include:

Your Target Market
Your Value Proposition
Sales Channels
Client Engagement Strategies
Key Activities of the Business
Key Partnerships
Key Resources
The Cost Structure
and Revenue Streams

If one of these components are missing from your business plan or strategic plan, you are not going to be as successful as you could be. One recent contestant on the show recently stated to the sharks when they asked about her business model “We don’t have a business model, we’re making this up as we go!” It should be very telling that all of the sharks lost interest the second that came out of her mouth.

What is your business model? Could you explain it to someone in a few minutes?

Paul

(My 10 year old typically watches the show with me. Last week I had missed the intro of one of the presentations and I asked him what was going on with the proposal. He replied “He’s been in business for six weeks, has $10,000 in sales and is giving his company a valuation of $500,000. I think he’s going home disappointed.” That’s my boy!)

http://www.strategic-adventures.com/content/business-plans

When you are writing your business plan, or having someone write it for you there are four key elements that you want to be sure are detailed in your plan. If investors don’t see all four of these elements, your chances of being funded are greatly diminished.
1. Detailed Financials – This should go without saying, and yet it is surprising how many plans we see here at Strategic Adventures that have minimal financial data. You need at minimum a Profit and Loss Statement, a Balance Sheet, Cash Flow Statement, industry related Business Ratios, and a detailed Start Up Cost Analysis. You should also be prepared to have your personal financial statements and tax returns reviewed.
2. A Business System – Investors also want to see that you have a well thought out method of operating. How are you going to run the day to day business? What marketing tools will you be implementing? Who is responsible for doing what in your business?
3. Experience – You need to show that you and/or your partners have experience in either running a business or in the industry you’ll be operating, preferably both. It may be time to brush up that resume!
4. Skin in the game – What level of financial commitment are you personally making in the new business? Investors don’t want to be in the position of holding all of the responsibility if the business hits a rough patch. They want to be sure that you won’t just walk away!

So as you’re preparing to make your plan or if you think you are ready to present a plan you’ve written, be sure you are covering the above points in as much detail as possible.

Paul

P.S. Are you getting a bit overwhelmed with writing a plan on your own? We can help! Call our office today at 1-888-553-0167 for a no cost consultation.

http://www.strategic-adventures.com/content/business-plans

Every day, I see marketing for the biggest, fastest, longest, blah blah blah zip line tour. And it’s all crap.

Why? Because that’s why people come the first time, but has zero relevance on whether they come back. If you want a zip line tour that is successful for the long term, you NEED people to come back and what gets them back is your quality of service coupled with how accurately your tour is presented in your marketing.

Case in point: I was developing a feasibility study for a client and had to go ride the competing tours in the area. I know, I suffer for my craft… Anyway, the first tour I visit said on their web site that they had the only tour in the area with zero hand braking. Intrigued, I booked my tour. Upon arriving at their office I signed my liability waiver. As I handed it to the check in person they loudly proclaimed “First to sign, first to die!” I was stunned. If I hadn’t been “undercover” I would have let loose on this unsuspecting individual. However, I kept quiet and waited for the rest of our tour group to finish signing their lives away.

On to the course! As with most tours, we start on a short training line to get everyone ready to tackle the longer lines. Now, guess what they show us how to do… Hand Brake! And not only do they show us how, they proceed to tell us that it is required for every single one of their 12 lines. Major disappointment.

From there I witness many other gaffes:

Guides not clipping in on platforms

Duct tape being used to finish cable ends

More jokes about safety and the impending doom of each rider

and many others…

All told, one of the worst experiences I’ve had on a zip line/canopy tour. Now hopefully I’m not describing your course! However, take a look at your marketing and see how it compares to the actual experience. It may be worthwhile to hire a secret shopper or two and get some solid feedback to see how your business is or isn’t attracting repeat business.

Paul

Judging by the inquiries we have received over the last month, I’d venture to say yes. We are also seeing much less push back from the surrounding communities when these aerial adventure park projects are being batted around at the county and state level, which I find interesting since many of these parks include zip lines. Has the recent negative press put zip lines and canopy tours in a defensive position? Share your thoughts!

Paul
Paul on Google+

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