With the holiday season about to kick off, many seasonal businesses will be shifting their operations into high gear as they prepare for their peak period. Every month, around 534,000 new businesses are launched and a significant percentage of them are aimed at catering to customer demands of a specific season like Easter, Christmas or even summer. For any business owner, there are a lot of misconceptions and fears about starting a business, which are magnified for those launching a seasonal one. While it is true that seasonal businesses face some unique roadblocks throughout the year (and particularly during off-season), the key lies in planning ahead and being adaptable throughout the year.
Get Your Cash Flow Management Right
For seasonal businesses to survive, owners must focus on two main pillars: good cash flow management and maintaining control of your costs. Around 82 percent of small businesses fail due to inconsistent cash flow. For seasonal businesses, this worry is enhanced as sales can slow or be practically nonexistent during those off-peak seasons.
This is where good cash flow management comes in. In your peak seasons, create a dedicated reserve fund where you set aside a small percentage of your sales for those slower months. Also, you can time invoices and offer credit options so that you can have payments still coming in during those off-peak months. However, be careful since the downside to offering a credit option is that there is a chance of debtor defaults. A good credit collection policy and a well versed, efficient team are needed to ensure your accounts receivables collections stay on track.
Make Operational Adjustments
The other main aspect of ensuring your business’ survival is taking control of your business costs, particularly in the off-season. Minimizing your costs in those times means you end up with fewer expenses to account for in a time where receipts would have slowed. While some expenses like loan repayments cannot be removed completely during those months, there are ways to cut expenses.
Start with your opening and staff hours. During recruitment, make it clear to employees that offseason hours would be part-time. Alternatively, if you find that the costs of running the business during off-peak seasons exceed any projected revenue or you are unable to service your debt, it may be wiser to close your business. In this case, you may qualify for a discharge of your debts to cover outstanding creditors due to the drop in income. If you are renting an office or factory space, consider a seasonal lease or subletting it in the slower months. However, be sure to establish clear communication channels for the business and let customers know in advance of your changed hours. This avoids any confusion on whether the company has stopped trading, and what hours it is open.
Focus On Off-Peak Marketing & Research
The months when your sales and manufacturing have slowed is the perfect time to focus on other parts of the business, such as marketing, customer research and building your business’ brand. Take advantage of your downtime to formulate a good marketing campaign or come up with unique ways to build your brand offline and online. You can also use this time to conduct market research and customer surveys to identify the trends and changing demands of your target market. You can then incorporate these into your product or service offerings when you do launch your line for the season or when buying supplies for your peak season (if your business is more of a middle man). Keep in mind to keep advertising/ market research activities cost-effective since profits would have slowed.
Make Use Of Forecasting For Expenses
Forecasting comes in useful for those seasons where sales and customer traffic picks up. In the lead up to these periods, businesses have to spend more on preparing for increased business including hiring additional staff/extending work hours, increasing inventory and an increase in variable expenses such as electricity. However, due to the slower months, many businesses find themselves unprepared financially for this bump in costs. Forecasting helps businesses estimate and then put away money/arrange financing to cover these costs. For a cost-effective option, business owners can opt to do the work themselves with the help of business forecasting apps or software. Alternatively, you can choose to outsource it to a business planning and projection professional.
Seasonal businesses do come with a set of distinctive challenges you need to be ready for but they are not insurmountable. Ensuring sustainability of seasonal business centers on planning ahead and the creation of off-peak safeguards. Do this and your business stands a formidable chance of being one of the 50 percent of businesses making it past its initial years.