It’s Easter this weekend – the weather is great and the school holidays are in full swing.
In North Devon a large section of the local economy is dependent on holidays and tourism and therefore reliant on good weather to drive sales… and over the last few years the weather has delivered.
Other businesses, particularly in the food industry find that Christmas is the busiest time of year; in reality most businesses experience some sort of seasonality, but the effect is usually the same – seasonal variations lead to business complications.
Business that experience big seasonal fluctuations are faced with a number of challenges:
Make hay while the sun shines?
Instinctively it is difficult to turn away sales, even when you’re overwhelmed with orders already. However trying to satisfy every order or customer may reduce the quality of the service that you can offer and lead to complaints and unhappy customers. Happy customers are likely to return, but unhappy customers may cause more harm than good.
Peaks and troughs
Accommodating sales peaks at busy times usually means recruiting more staff but will this lead to problems in the quieter months? There may also be other facilities (machinery, equipment, vehicles) that are essential during busy times but are almost redundant during the quieter times.
One of the biggest problems that small businesses in seasonal trades face is variation in their cash flow – during the busy periods there is lots of cash coming in, and no time to spend it! And then when business is quieter….
Relying on one time of year to deliver the majority of sales or profits is a risky strategy – what happens if the weather is bad over the summer, or if a competitor has a more eye catching Christmas offer?
So if you’re a seasonal business what can be done to turn these challenges into opportunities?
The most obvious solution is to find a way to make your business less seasonal. That may mean finding new markets for your product all year round – ice cream is no longer solely for children in the summer – or it may mean finding a new product – selling soups as well as ice cream?
The next key thing to do is to understand exactly what’s happening with your sales. Do different customer groups behave differently? For example holidays for families are a very different market from holidays for couples without children.
Is there marketing in place to target each of the customer groups at the right time? Can you extend your season by targeting different customers?
I feel strongly that the only way to manage cash flow is to plan ahead.
If your business is seasonal it is essential to know how much cash is required in the quieter times to cover all the expenses. This gives you a benchmark for what “good enough” in the busy times is.
You may be able to negotiate payment terms with suppliers to enable you to reduce your outgoings when the business is quiet, or indeed keep your overhead payments to quiet times to reduce pressure when wages costs are higher.
Retail businesses, taking cash or credit cards payments, face a particular challenge when it comes to cash management. If all of your income comes in immediately but you have 30 days (or more) to pay for your supplies it is essential to make sure you have the funds available to pay the bills when required.
Most crucially, is there a point where you need to say “No”? Where you will have run out of the scope to supply? There is no need to be afraid of telling potential customers that your product or service is sought after and you’ve run out – it’s a sign that it’s worth having.
Do you have seasonal business? How do you cope with the variations? I’m always interested in finding out so leave me a comment below!