Question 1

What's the difference between fixed and variable costs?

Accepted Answer

A fixed cost is an expense that does not change with an increase or decrease in the number of goods or services produced or sold. For a tour, this is your guide's flat-rate pay or a park permit. A variable cost is an expense that changes in proportion to production output or sales. For a tour, this is the cost of a lunch or bottle of water for each guest.

Question 2

Should I always aim for the maximum group size?

Accepted Answer

Not necessarily. While it might generate the most revenue, it may not be the most profitable if your variable costs are high. Furthermore, you must consider non-financial factors. Does guest experience or safety suffer in a larger group? Does a larger group have a greater environmental impact? The 'best' group size is a balance of profit, quality, safety, and sustainability.

Question 3

How do I handle costs that change at certain thresholds, like needing a second guide for more than 8 guests?

Accepted Answer

This calculator assumes fixed costs are constant across all group sizes. For a scenario with changing fixed costs, you should run the calculator twice. First, run it for group sizes 1-8 with the cost of one guide. Then, run it a second time for group sizes 9-16, but add the cost of the second guide to your 'Fixed Costs' input. You can then compare the results tables to find the true optimal size.

Question 4

What is a 'break-even' point and why is it important?

Accepted Answer

The break-even point is the group size at which your total revenue equals your total costs, resulting in zero profit and zero loss. It's the minimum number of guests you need for a tour to pay for itself. Knowing this number is crucial for setting your minimum booking policies and avoiding running tours that lose you money.

Question 5

My profit-per-guest decreases as the group gets larger. Is that normal?

Accepted Answer

Yes, this is very normal. Your fixed costs are spread across more people as the group grows, so the impact of that cost on each individual guest becomes smaller. This causes the profit generated by each additional guest to be higher at the beginning. Don't focus too much on 'profit per guest'—the most important metric for decision-making is the 'total profit' for the tour.

Group Size Profitability Calculator

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Understanding Group Size Profitability

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