When Failing to Plan is Planning to Fail | Sports Destination Management

When Failing to Plan is Planning to Fail

Contingency Planning is Key to Success
Sep 04, 2021 | By: Ashley Whittaker
Photo courtesy of Sports Facilities Companies

In these uncertain times...  You’ve heard it ad nauseam for nearly two years. At this point, maybe you’ve learned to roll with the punches, turn on a dime, go with the flow – but are you surviving or thriving in these uncertain times? One of the biggest differences between facilities, events and destinations that are struggling to recover from the effects of an 18-month pandemic and those that are back to business as usual is the ability to create and execute effective contingency plans.

The goal of a contingency plan is to help your business get back to normal after an unexpected event. Being well-prepared means your business will be able to recover faster, minimize damage, protect your brand, avoid a PR nightmare and take care of your employees and customers.

Before you get to creating the contingency plan itself, consider how you can ‘cover your bases’ from a financial perspective. A good place to start is to minimize your financial risk through savvy contracting practices. Event owners and destinations alike must be able to work through contract terms that outline contingency plans and payment obligations. 

Discuss payment terms, timing, contingencies, and revenue-splits as well as common what-if scenarios during contracting. Event owners with late cancellations or underperforming events can find themselves having trouble securing contracts with premium destinations in the future – and facilities who fail to meet bottom line or economic impact goals because of failed or cancelled events open themselves to owner/community scrutiny and funding challenges.

The second component to minimizing financial risk is to have a ‘rainy day’ or contingency fund. Getting caught in a sticky situation with no financial safety net is a recipe for tough choices. The first step to creating a contingency fund is to be intimately familiar with the revenue and expenses of your business. 

Questions to ask

• What are costs that can be cut or delayed without penalty?

• Where can you create incremental savings?

• Where are some additional revenue opportunities to help add money to the contingency fund? (Depending on the maturity of your business, you will want to have 5-7 percent of your overall budget for your contingency fund for mature businesses. For start-ups, your target may be closer to 10-20 percent.)

Contingency planning is best done on both the strategic and tactical levels. Most businesses have a strategic plan for growth – but do you have a strategic plan for decline or disaster? As painful as it is to consider how you might pivot during economic turmoil or a global pandemic, it’s much more painful to find yourself scrambling because you did not craft the necessary strategies. Consider the plan in phases:

Phase 1: Minimize Risk

Flexible rental contracts – check. Rainy day fund – check. How can you mitigate risk with your own customers? Are your payment terms leaving you open for last-minute cancellations or drop-outs? Do you give refunds or credits for future events? 

Phase 2: Reduce Spend

If your event or your whole season is cancelled, delayed or anywhere in between, how can you stretch your budget and reduce overall spend? Start with the spend that has the least impact on your overall business and work backwards. One prime target for budget reduction is marketing or business development, but a quick word of caution: the length of your predicted problem should dictate how drastically you reduce this budget. If the problem is short, reduce or turn off your impulse advertising like social media and Google AdWords – if you’re not ready to take in new business, these aren’t needed. However, try to retain your SEO investment or other long-term strategies if possible because they take longer to restart and become effective.

Phase 3: Invest / Subsidize

Here’s where your rainy-day fund comes in. Be prepared to invest in or subsidize your business for the short to mid-term challenge – it’s worth it to protect your market position, brand, customer satisfaction, and reputation in the industry. These are the intangible assets that you’ll need to help jumpstart your business. Your contingency fund allows you to weather the ups-and-downs of the economy, industry, weather, or other market factors.

Phase 4: Hard Decisions

The hardest decisions we have to make as business owners are those regarding our people. It’s why we list this last. Your team members are the heartbeat of your business. The good ones are hard to replace, and the great ones are darn near impossible. When possible, you can reduce hours, compensation, and/or furlough your employees before making the final cut. As difficult as it is to consider – who is your “skeleton crew” that can run your business in lieu of your full or ideal staff?

Once you have the macro level strategic plan in place, it’s time to get tactical. Any Google search can reveal myriad free templates or guides online for creating your own tactical plan. No matter the format, the structure of the document is based on the “if-x, then-y” formula where “x” is the variable disaster and “y” is the solution. 

By defining and prioritizing risk factors and then crafting a solution in a low-pressure environment where you can collaborate with key team members, you’re able to put your collective best thinking on paper long before an incident occurs. By reviewing all the possible ways things can go wrong in your business, you are also able to define ways to mitigate those risks.

Many typical risks include natural disaster or weather-related issues, employee absence/injury, crowd safety, data breaches, and equipment failures. Many of the solutions to these issues require immediate action and are resolved in the short term. But, like these current uncertain times in the midst of COVID-19, some issues last much, much longer than anticipated. New problems require new solutions – and a nimble approach to your product and service offerings.  From new safety protocol to new ways to engage customers, businesses around the world have been challenged to adapt over the last 18 months.

Event owners who adopted new registration protocol, business development efforts, collaborated with destinations, and amended tournament formats were able to successfully return to play much sooner than their less nimble counterparts. On the same token, facility operators who implemented new sanitization and safety procedures, mandated mask wearing, social distancing, collaborated with event owners, and offered new food and beverage options were able to host events safely and open their doors to the public. Being nimble in business means being able to re-think even the most fundamental elements of your operation.

A critical element that must be included in all your planning and risk mitigation preparation is communication. Who do you tell, what do you tell them – and when? As part of the contingency planning process, define your audiences, communication tactics, and messages. You don’t want to be wordsmithing at midnight over a weather delay. 

Define what channels you use and what information should be distributed publicly versus privately. A phone tree, group text, messenger or e-mail distribution list can be set up ahead of time for internal communication. Press releases, social media, and customer communication emails can all be pre-formatted and wordsmithed, ready to be customized and distributed when needed.

What communication will you send to your customers? How long prior to the event will you send the information? What about partners, vendors, and stakeholders? As you consider your various audiences, define what they will need to know.

For employees, define roles and responsibilities during a disaster so each person knows what to do and how to do it, as well as establish priorities and timelines for your team. (This includes yourself!) Though contingency planning requires time, effort, and energy away from your typical business operations, it could be the difference between an issue being a minor inconvenience and a major business interruption. Because, as they say, “those who fail to plan, plan to fail.” SDM

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