If you’re a new RV park owner, or you’re looking to become one, the timing has never been better.
According to PR Newswire, “more than half of all campers (51%) say that they are now more likely to purchase an RV,” in an industry that’s currently worth over $2.14 billion and climbing (Grand View Research).
But while there are plenty of economic opportunities, it doesn’t come without its share of financial headaches. Because whether it’s knowing what goes into a park’s evaluation, what type of reporting is important, or just understanding a profit and loss (P&L) statement, there are a lot of factors that go into your park’s business.
So, what are the best financial tips for campgrounds?
We recently sat down with Michael Elliott, a CPA who works exclusively with campgrounds and RV parks, and he gave us a rundown of the financial “dos and don’ts” for park owners.
The Campground CPA
Michael and his team at Camp and Park Accounting work to serve the specific needs of campgrounds and RV parks in ways that traditional firms can’t. Michael and his family are avid campers, and he understands the industry better than most.
Michael loves helping parks find financial success. Whether it’s helping owners through consulting, getting a handle on their bookkeeping, or even just educating the operators on the ins and outs of lodging and income tax, he’s earned his title as “The Campground CPA.”
Here are Michael’s 7 financial tips for campgrounds and RV parks.
1. Before you buy.
Michael noted that a lot of new owners fail to do their homework when it comes to scoping out the property thoroughly. Whether it’s procuring a title, getting a land survey, or hiring an inspector to look at electricity, new park owners often fail to make sure the campground is in order.
The Camp and Park team has seen a lot of owners get into business before they’re ready, because they didn’t have a proper understanding how how much it would cost up or how many repairs it would need.
Whether you’re looking to build or buy, make sure you know how much a campground will cost before you get too far down the road.
Michael says that lot of campgrounds owners tend to over-evaluate what their property is worth, because many tend to be more “mom and pop” operations and the campground is their baby.
He mentioned that, understandably, owners are not making evaluations based on the current value, but what it could be worth. They see its potential, however, the market, or prospective owners, may not see it the same way – making it difficult to sell.
Capital expenditure budget.
To give you an accurate assessment, you’ll need accurate numbers.
This is more formal, and factors in your fixed assets such as the land and any existing buildings. This will not only show you the current assets or what improvements have been made to the park, but also what equipment you’ll need, and what hires you will need to make.
Be sure to consider…
- What will be the cost of future developments and amenities?
- Are there any non-operating expenses?
- Will you have electrical expenses?
- Will there be any differed maintenance?
- How much will it cost you to be fully staffed?
Plot these numbers out over the next 5 years, and this will give you a realistic idea of what the campground’s value is. This is another reason why it helps to have an inspector involved early in the process.
Michaels explained that while the industry-standard value of a campground is generally the value of a campground’s revenue multiplied by 5, his team also looks at the campground’s EBITDA (earnings before interest, taxes, depreciation, and amortization).
As a buyer, knowing the campground’s EBITDA (compared to the listed value) is the easiest way to make sure you’re not overpaying.
3. Owner financing.
Owner or seller financing is a loan between the previous owner and the buyer of the campground. Essentially, you make a downpayment, and pay back the previous owner over the course of an agreed upon period of time.
Michael has found this to be very popular in the industry, considering it gives the owner skin in the game and “makes them more honest on the deal.” That being said, he also advises caution as there have also been times “where the seller sticks around a lot longer than they want.” Not to mention that in some cases, if you miss a payment, the property can revert back to the original park owner.
Despite all this, Michael still believes owner financing is still “something that’s definitely worth considering.”
4. Finding your biggest expenditures.
The Camp and Park team has found that the two biggest expenditures for a campground are almost always:
- Repairs and maintenance.
- Wages and salaries.
The good news is that these are also numbers you can factor in and prepare for.
Profit and loss statements (P&L).
A P&L will show you the campground’s cost and revenue during a fiscal year. Camp and Park Accounting will take P&L and tax returns, and annualize them to see if any expenses are missing, as well as what the estimated cost will be for important repairs or hiring the right staff.
Michael’s team uses expense ratios (the total percentage of funds used for staff, marketing, and other related expenses) to benchmark their parks. To get a clearer picture, he compares expense ratios to that of other similar-sized parks that they work with and across the country.
5. Reporting and accounting.
When it comes to reporting, Michael says the biggest mistake campgrounds make is not having any records. There are “a lot parks with no financials.” He said that as a result, these park owners are losing market opportunities because you can’t substantiate their numbers.
“Not having your operational budget is a huge negative.”
If you want to clear forecasting, he says you need to know your current occupancy and what your future occupancy will look like through pre-paid deposits.
Additionally, accounting software is vital. Michael estimated that more than 80% of US Campgrounds use Quickbooks (both on desktop and online), and that it works really well.
Don’t make decision based off emotion.
While very complimentary of the earnest nature of most campground owners, Michael says “Parks owners think about their parks with their heart and not their head,” leading to a lot of emotional decisions that don’t benefit the business.
With that, Michael said that parks find incredible value when they incorporate the following amenities:
- Golf car rentals.
- Upselling with coffee, firewood, and other various add-ons.
- Bundling multiple weekends or deals.
The important thing is to make sure that the amenities you include actually add value to your park.
7. What makes a park successful.
While there are multiple factors that indicate a campground’s odds for success, in Michael’s experience, there are a handful of indicators that a park will do well (especially in its first few years).
Not only will long-term employees cut down on turnover costs, but they work to keep the park in good condition, which limits repair down to only 3 to 5% of your gross revenue.
Michael shared that his parks have seen “double-digit growth by doing nothing but online booking.” We can validate that thought, as our parks have also benefitted from a 25% increase in reservations just by taking online bookings.
Marketing your park.
Going hand-in-hand with online reservations and channel partners is an online presence. Michael’s campgrounds find more success with they capitalize on Google ads, and maintain good reviews.
Making your campground financially successful.
Especially for new owners, it’s so important to take the proper steps to ensure financial success.
Take advantage of Michael’s advice and…
- Know what you’re getting into before buying a campground.
- Use accurate numbers found from EBITDA and P&Ls to find the value of a campground and its expenditures.
- Don’t make decisions for your park based on emotion.
- Invest in long-term staff, online booking, and marketing your campground.
Michael has found that when parks take these steps, they all but guarantee lasting success and ease of mind. But it also helps to have the right team in your corner, so for more consulting, expertise, and financial guidance, consider partnering with a team like Camp and Park Accounting.
Online reservations with Campground Booking are an easy way to ensure financial success for parks of any size. Request a demo today!