Seasons come, seasons go – and with it come the highs and lows of revenue, staffing, inventory, you name it. Seasonality is yet another pressure that can make it difficult for a small business to survive. But with some clever thinking and smart planning you can prepare for those frustrating fluctuations in trade.
Here are five ways to think for your business to survive seasonality and live long and prosper.
#1. Think laterally: diversify your products or services
Diversifying your business with products or services that appeal to a broader market or cater to more of your customers’ needs can offset seasonality. It may mean adding products or product lines to your existing ones; promoting your business to an untapped market of customers; or thinking laterally about your skill set and services you can provide. However, if you do diversify, be cautious not to get distracted from your core business and revenue driver.
#2. Think annually: plan for the year ahead
Seasons, weather, holidays and annual events can all affect trade, revenue and cash flow – positively and negatively – so it’s important to prepare and plan for these times, whether they’re the highs or the lows. Planning at least six months ahead will help you determine where you need to build in a cash cushion for quieter periods, or hire more staff for busier periods.
For retailers and wholesale suppliers, forecasting your sales and inventory for the year ahead can help to get a grip on seasonality and achieve balance in your income versus expenses. Use a business intelligence platform or point-of-sale system to analyse past sales and the inventory and sales needed on a month-to-month basis for positive cash flow.
#3. Think strategically: manage cash flow with invoices
Maintaining cash flow is a top priority for a seasonal business and one way to do this is to strategically manage your invoices on both the sales and supplier side of the coin.
For sales, this might be in the form of negotiated upfront payments for services to be provided, or fixed-price instalment contracts for payments at the start and midpoints of a season. Or on the supplier side, you might negotiate spreading payments over 60 or 90 days.
#4. Think practically: have a financial back-up plan
Particularly relevant to seasonal businesses is the need to prepare for the worst-case scenario. Having a cash cushion, such as a savings account or access to credit, can help you get through the quiet times; and platforms like Fundbox can advance payments for your outstanding invoices.
A short team loan also provides access to funds without impacting cash flow and can enable a business to invest in inventory, marketing and staffing costs prior to the start of their seasonal revenue stream or before they turn a profit.
#5. Think in advance: stay in touch with customers and clients
Whether you’re a ski company getting through the summer, a freelancer with no work over Christmas or a tax advisor waiting for tax-return time, use your off-season wisely. Make the most of this downtime to prepare for the busy times. Stay in touch with clients and customers, formulate new business opportunities, prepare and kick-start your marketing initiatives and get primed for when the season turns.
Talk to the team at Parallel / Desk Space for any further information about how to prepare for the seasonal high times and low times. You can also ask us for any other advice or recommendations.