Own your numbers: Managing liquidity and cash flow during a crisis.


Before co-founding LLA Hospitality, I (Cody) was a credit research analyst for Goldman Sachs. In this role, I was responsible for making recommendations to pension funds, insurance companies, and large investment managers on what fixed income securities they should buy or sell. As a credit analyst, I was always most interested in evaluating a company's ability to manage and generate cash. The old adage "cash is king" is never more true than in a time of crisis. While many of us manage our campground's financials by looking only at the profit and loss (P&L) statement, we wanted to take this opportunity to discuss ways to manage your cash balances by walking through the three primary portions of the cash flow statement.

For quick background, there are three primary activities that any business engages in that impact cash flow: operations, investing, and financing. Below you will find a brief description of what activities are included in each portion of the cash flow statement as well as a few ways to increase the cash flow to your business in each area.

Cody Sauer
Co-Founder,
LLA Hospitality
Cash flow from operations
Cash flow from operations begins where your P&L ends. As you are all aware, the net income figure on your P&L is always different from the change in cash you have in the bank at the end of a period.

To calculate your cash from operations, start with Net Income and add back all of the non-cash expenses (depreciation and amortization).
Additionally, operating cash flow is impacted by the change in inventory (think store merchandise), change in receivables (think deposits converting into registration dollars), and change in payables (think bills you have paid).

You have the most control over improving cash from operating activities. Below is a summary of recommendations to improve your operating cash flow.
Revisit your 2020 Budget: As the world has changed, so should your operating expectations for this season. Sit down and have a hard look at your 2020 budget. What operating expenses can you reduce to improve your expected cash flow? Times of uncertainty require extreme efforts. Look at the line items with large sums. You will need to know where your big expenses are when you start to negotiate with vendors.

Increase receivables: Most campgrounds take deposits in order to hold a reservation. Consider reaching out to guests that are coming later this year and ask if they would like to prepay for their stay at a slightly discounted rate. This will increase your cash on hand, but remember, if they cancel you will need to refund a larger amount. You can also consider selling gift cards at a discount.

Reduce or defer your payables: Contact any vendors who you owe money to or any utility providers and ask if you can defer or reduce your payments. Insurance is often paid in larger sums in advance. Consider increasing your payment frequency so you are paying only one month in advance rather than a full year. Ask other vendors for discounts. Do you have any other vendors that you pay well in advance of their service? Think about contracts for entertainment, marketing (billboards), or other services that will not be delivered for a few months.

Slash expenses: Do not spend money on any non-essential services until you have greater clarity on your revenue. Can you reduce the number of times you have your trash picked up each week? Can you delay the opening of your pool and defer the start-up expense associated with that? Get creative.

Focus on inventory management: As campground owners, we spend a large amount of money in the spring to stock our stores with inventory. Consider reducing order sizes or delaying shipment of any non-essential store items. This could save you tens of thousands of dollars at the beginning of the season.

Look into your business interruption insurance: Reach out to your insurance provider and ask about how you may qualify for business interruption coverage.

Consider ways to adjust your operations to generate revenue: Consider increasing the number of sites you make available for seasonal or monthly guests. If you are in an area where transient activity will decline, it may make sense to offer longer-term leases at a reduced rate. This may also allow you to keep your business open as having long-term guests may cause your business to be considered essential by your local authorities.

Reduce wage expenses: While this is controversial, wages are a large expense. Start with your own and take as big of a pay cut as you possibly can to support your team. Reduce hours but ensure that you are still able to serve your guests. Consider delaying start dates for your seasonal team members.
Cash flow from investing
In our business, cash flow from investing typically represents a use of cash or an outflow. This is where all of your capitalized expenses are recorded.
If you were to invest in expanding your campground by adding new sites or accommodations, this is where those transactions are recorded. Below is a summary of recommendations to increase inflows and reduce the outflows of investing cash flow.

To calculate your cash from operations, start with Net Income and add back all of the non-cash expenses (depreciation and amortization).
Sell non-essential assets: Sell any equipment that you have lying around that you are no longer using. This is an opportunity to clean house. Have old landscaping equipment that you have kept for a "what if" scenario? Sell it.

Postpone capital improvement projects: Postpone any capital improvement projects that you have scheduled for this spring. If you were planning to purchase cabins or add new sites. Wait. Keep that cash on hand, you might need it.
Cash flow from financing
Cash flow from financing activities are generally related to transactions with your lender or lenders and any shareholders of your business.
These cashflows are crucial to manage in times of uncertainty.

Again, below you will find recommendations of steps you can take to increase inflows and reduce outflows.
Reach out to your lenders: Contact your bank or any other lenders that have a claim on your property. Ask them to defer payments or allow you to only pay interest for a period of time. Staying current on your loans is important but lenders can help you manage these cash flow challenges. Ask your lenders if they are offering any kind of short term lines of credit that will help you boost your liquidity.

Contact the SBA: The Small Business Administration has set up economic injury disaster relief programs. More information can be found on their website at these links:

  1. Funding programs: https://www.sba.gov/funding-programs/loans
  2. Disaster support: https://disasterloan.sba.gov/

Consider bringing on an investor:
While we would caution partnering with anyone, this may be a time to reach out to individuals that you trust and see if they would be interested in investing in your business. To that end, we may be able to help.
We hope you find the above information helpful as you seek to actively control your campground's liquidity and cash flow. As always, if you need us, we're here to help.
We've got your back.
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Need advice?
We will be putting out free content - typically reserved for our in-house team and clients - that we think you'll find valuable in navigating the course ahead. We will publish this to our blog and LinkedIn pages which you can find here and here. If there are specific topics you would like us to write about, please let us know and we will do our best to accommodate.
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Need an operating partner?
If there ever was a time to partner with a professional management company, now is that time. You can find our thoughts on the need for professional management in the campground industry here.

For any campground that starts working with us before June 1, 2020, we are offering short-term minimum contract commitments. That means you can try working with us for just three months without any longer-term obligations. Interested? Please reach out here to discuss further.
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Need cash?
We appreciate that liquidity is important to you during this time. If you'd like to discuss selling your campground, we are in a position to help. Please reach out here to discuss further.
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