From a fireworks retailer to a wedding planner, there are many businesses that are heavily impacted by seasonality. As a seasonal business owner, you need to have an established business strategy that will prepare you for the period of slow revenue and irregular cash flow. Most importantly, you need to know how to get the most out of your peak season so you can stay above the water throughout the entire year.
Here are a few common mistakes businesses make when managing seasonality, as well as tips on how to avoid them.
Not Forecasting your Cash Flow
The “living in the moment” philosophy doesn’t apply to your seasonal business. To get the most out of your revenue, you should observe your past earnings and expenditures and forecast your revenue in the following year. Track your key metrics and create yearly, monthly, weekly, or even daily financial reports to prepare for your peak season on time.
Most importantly, be ready for surprises. There are certain kinds of expenses, like your rent or tax payments, which are fixed. On the contrary, there are many variable expenses and additional costs that may hurt your bottom line if not anticipated on time. What if a key tool your employees use breaks or the price of your insurance plan gets more expensive? To prevent these factors from destroying your business, observe your previous financial reports to see what the most common unexpected costs your business faces. Above all, make sure you set aside enough money to cover such expenses.
Not Keeping your Spending Low
Every business owner’s goal is to minimize their expenses. This is especially important for seasonal businesses, where your cash flow varies throughout the year. Here are a few key steps many seasonal business owners forget to take.
Hire employees rationally
The employees you will need in your busiest season are not the ones you will off-season. Precisely because of that, you should hire a smaller team of permanent employees. These are some roles that are crucial for keeping your daily operations, such as an accountant or an HR specialist. When the need arises, you should simply recruit temporary workers.
Hiring independent contractors will bring consistency to your business. At the same time, given that you’re hiring them per project, you will save lots of money and avoid paying pricey payroll taxes. Still, keep in mind that employment laws regarding overtime and working hours apply for both your in-house and seasonal employees.
Manage your invoices
Studies show that more than 64% of companies struggle with late invoices. And, this is not always the result of your customers’ irresponsible behaviors. The inconsistency of your billing system can also be one of the main causes of unpaid invoices. Here is how to solve this problem.
- Boost your cash flow with invoice finance. The financial institution will give you 80% of the value of your invoices within a few days, while you will get the rest once the invoice is paid in full. Parallel with invoice financing, you could also leverage asset finance. Simply put, you’re offering your inventory assets in return for a short-term loan.
- Deliver your invoices on time to prove that you care about billing accuracy and consistency. Send out your invoices bimonthly or after finishing certain parts of your project.
- Incentivize those people that prepay for your yearly services or pay their bills regularly. This will increase your cash flow, as well as boost your customers’ loyalty.
- Follow up on overdue invoices. Instead of penalizing your customers for not paying you within the strict timeframe, you should first remind them of their late invoices. Send them a polite reminder via email, call them, or even set up a meeting with them.
- Charge a penalty for late invoices.
Not Generating Revenue Off-Season
One of the major problems seasonal businesses face is the lack of cash flow during the off-season. Not only will this impact your bottom line, but it will also hurt your brand perception. Instead of just sitting and waiting for your hot season to come, you should focus on bringing value to your customers all year around.
- Diversify your services. Get creative and think of the ways you can appeal to wider groups of customers for a larger part of the year. If you’re running a landscaping business, then you can expect your peak season to come in the spring or summer. Still, why not use some of your equipment to offer snow and tree removal services during the winter? Even if you need to invest in some additional equipment like snow blowers, this will pay off in the long run.
- Be flexible when defining your peak season. Can you offer your services earlier in the year than your major industry rivals? This will boost your industry authority, attract your customers, and increase your cash flow before your most vital operating season begins.
- Migrate online. Establishing an online store is an amazing opportunity to sell your products off-season. Build a user-friendly website, create a solid social media presence, and take advantage of email marketing. These are just some of the numerous ways to get yourself noticed by a wider audience and start generating new leads. Switching to the digital landscape is not all about selling products. It’s about telling your brand story, building your online reputation, and gaining customers’ trust.
- Consider renting your assets (your owned space, machinery, or equipment) to another company. This may boost your bottom line during the off-season and help you stay afloat.
Over to You
Managing a seasonal business is not easy, but when planned right, it’s possible. Forecast your cash flow regularly, keep your expenses low, and focus on increasing your revenue off-season. Most importantly, think of the factors that impact your business’ seasonal fluctuations and focus on them when building your strategy.
Hope these tips will help you have a good season this year!