Top tips to stay sane if you run a seasonal business

seasonal business

Top tips to stay sane if you run a seasonal business

Whatever industry your seasonal business operates within, or whatever size it may be, the way you navigate the annual peaks and troughs of seasonal demand will have a direct impact upon the productivity, growth and overall success of your company.

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Many businesses can fall foul of seasonal sales cycles due to inadequate planning, lack of working capital or too narrow a focus. Indeed, periods of high demand can be just as detrimental to cash flow as low seasons if your seasonal business is not adequately prepared.

Here we offer a few important tips for staying sane when running a seasonal business.

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Know your seasonal business cycles

 

To run a successful seasonal business, you must fully understand the sales cycles within which it operates, recognise how those cycles affect it, and plan accordingly.

What are the key points/events in the year that dictate your demand cycles? Perhaps it’s a festive landmark such as Christmas or Easter, or a longer, seasonal period such as winter or summer, or even a business event such as an annual trade show.

Understand your sales cycle fully and its impact on your business – what payments need to be made during low seasons, where are the highs and lows, at which points have you experienced financial difficulties, or spikes in demand? Are there any contingency plans that need to be organised for unusual occurrences such as unseasonable weather?

How far ahead do you need to build your business up to prepare for the high demand seasons? It’s just as important to make the most of the good times as it is to survive the slower times.

Once you have gathered all the information available to create detailed sales cycle forecasts that can factor in the characteristics of your particular demand circumstances as well as external factors such as changes in laws, legislation, and economic shifts, you can create a strong plan for your business.

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Keep a tight handle on cash flow

 

According to Dun & Bradstreet, 90% of small businesses close their doors because of poor cash flow management.

What is cash flow management? Basically it means getting money into your business as quickly as possible and leaving it as slowly as possible. It means planning for the future and mitigating risk.

Cash flow management is also likely to be the biggest challenge you face as a seasonal business, and must therefore be a fundamental part of your plan. You need to ensure you have both the necessary cash to make the most of peak revenue opportunities as well as keep the business afloat during quiet periods.

Create an annual projection for the company if possible. Quarterly forecasts will generally not be detailed enough to fully understand the challenges that lie ahead. Work out what cost savings need to be made during low seasons to prepare for peak periods, and what additional spending those surges in seasonal demand will require.

While money may only come in at certain times of the year, your business has expenses that must be paid year-round. Get a firm handle on all your monthly costs, both variable and fixed. It may be worth considering hiring someone with experience in cash management to help you plan.
If possible, have a minimum six month cash flow buffer to see you through unexpected dry periods.

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Improve your invoicing

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Invoicing is crucial to healthy cash flow, and late payments are a scourge to small business, with 14% of small businesses citing late payments as their biggest concern (Kauffman Foundation).

Improve your invoicing processes to avoid late payments. Offer discounts to customers for early payments, offer them multiple payment methods, and always invoice as soon as possible.

Get creative with your invoicing. Try to secure upfront payments for services, and suggest split installments on certain contract payments so that you can get one payment in high season and another in low to even out cash flow cycles. Also, it may be worth trying to secure deposits for a proportion of the total invoice amount, to pay ongoing expenses for production or delivery.

Make sure your customers know your payment policies by including them with invoices.

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Make the most of the low season

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Surviving the slow months often requires adhering to strict budget constraints and effectively planning ahead to ensure you have the necessary cash flow to keep the business afloat.

Yet it also provides an opportunity to reassess certain areas of your business with the relatively free amount of time, and begin work ‘on’ the business, rather than ‘in’ it. As a seasonal business owner you could use the slow months of the year to make future plans for the business and get organised, as well as hold training, develop new products, check inventory and supplies, and even integrate new technologies into your business.

Of course, it’s far easier to dedicate time to such efforts when stress about cash flow doesn’t exist.

To alleviate this as much as possible, be sure to continue the momentum you enjoyed over peak season into off-peak periods. Out of sight means out of mind, so keep in regular contact with your customers during the off-season. You can do this by offering discounts and holding out-of-season sales to help uphold higher revenue levels and clear unused inventory, as well as hosting events and engaging your customers via social media and other digital mediums.

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Adapt to survive

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As a seasonal business, it’s important to fully understand your core market and focus your efforts on maximising success when opportunities present themselves. However, it’s equally important to address the lower demand periods, and many SMEs find that the annual dips in business can be offset effectively through diversification.

Seeking untapped market segments, refocusing sales and marketing on international markets, developing new opportunities overseas, or branching out online can smooth out the peaks and troughs of annual demand, resulting in a more secure business model and an expanding customer base.

Finding additional sources of income through new promotions, products, services, or by exploiting other ‘seasonal peak sale’ markets can also help your business maintain a healthy cash flow all year round. For example, a business that provides garden landscaping services or machinery in spring and summer may be able to diversify into snow clearing and winter weather services during colder months.

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Optimise your operations for success

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To be able to ride the waves of seasonal demand, it’s crucial you optimise your inventory, staffing and sales levels – both for shifts in demand and relative volatility within seasons.

Use a BI platform or point of sale system to analyse past sales, looking at supplier receipts to understand what inventory you needed to generate those sales. You can then create a solid benchmark for planning ahead. Having great supplier relationships and utilising a JIT inventory system would be a better way to go instead of having excess stock. Excess stock reduces your profitability and liquidity in your business.

Also make sure you check your systems and logistics are fully capable and prepared – try seeking advice from your logistics provider on seasonal strategy and be sure to make them aware of your peak sales periods both in the UK and overseas, so they can flex to meet increased demand and offer extra support as needed.

Aligning your operations with demand may mean taking on temporary seasonal staff to meet increased customer requirements. Bringing these people in ahead of time to make sure they are fully trained and equipped for the job will ease the transition and prepare your business for maximum success.

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Talk to your suppliers

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To help manage your working capital when demand drops, it may be worth negotiating better payment terms with your suppliers, and make some of them variable rather than fixed monthly payments.

Try talking with your vendors about arranging a payment plan that adjusts to your changing needs. If you can, discuss spreading payments over 60 or 90 or 120 days to allow for variations in working capital. They might also allow you to make higher payments when cash flow is high, and lower payments when cash flow is low.

To be able to approach your suppliers form a position of strength when it comes to negotiation, you must do your best to retain a healthy relationship with them throughout the year. This is where having the correct funding solutions in place can come into its own.

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Seek alternative support

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Having a sound financial system in place that allows you to seize opportunities and prevent your seasonal business from falling into debt during the slow season is essential.

An extra working capital line of credit is often crucial for dealing with unpredictable costs, be they due to increase in demand or change in supplier terms.

Having the correct funding in place can help bridge gaps in working capital, smooth out cash flow and add liquidity to your business, allowing you to optimise your stock levels, preempt spikes in demand, and be better prepared for seasonal fluctuations.

To effectively bridge the shortfall in cash flow the solution must provide flexibility. Make sure there are no set up fees and no non-usage fees, to ensure it’s there when needed and doesn’t penalise you for good financial planning. Getting this line of credit pre-approved is also fundamental to having the security necessary to smooth out troughs in cash flow.

Pay4’s pre-approved, rolling credit facility allows you to optimise your business for the peaks and troughs of seasonal demand. 120 days unsecured credit and no setup or no non-usage fees means you can acquire the inventory you need, operate from a position of financial strength by adding liquidity into your business, negotiate successfully with suppliers, and avoid lengthy application procedures when demand hits. All helping you to stay sane throughout the year.

Top tips to stay sane if you run a seasonal business