Managing Seasonal Fluctuations
Updated: Mar 2, 2020
Plan Your Cash Flow
You by now are probably sick of hearing that most small business fail in the first three years but why do they?
Well the problem with most small businesses is not that they are not profitable, nor the good or service they provide is inadequate. No the primary reason is cash flow or rather the lack. But this can be solved, even if you can’t increase your cash flow you can always plan it. It is much easier fighting an enemy you know than the one you don’t so plan where you will get money coming in from, how will you get it, and how much. The lack of this knowledge is what kills lots of small businesses. Also plan your expenses plan how much you will spend. Know your fixed costs. You will know if you need to borrow to keep your business afloat when and how much. We feel that planning cash flow is such an important aspect of the business that we will do a separate post dedicated to it some time in the future.
Plan Your Growth
Your growth should be in the cash flow prediction know how much you will have to spend so you can continue increasing your sales. By how much will your fixed costs increase. How much more income will you receive. Add up all of those costs and with the predicted sales and you will see if you have enough finance to grow or whether you need to borrow or if growth is a positive outcome all together.
Control Your Stock
This is important for any kind of businesses but especially for those which are seasonal. Stock requires a lot of money to purchase and may deteriorate so make sure that you are storing the right amount of stock for the right time period as it makes no sense to be storing great amounts of stock in the quiet period and be running out in the busy period so make sure that you have the right amount of stock for each season. And don't forget to factor in growth for the optimal stock levels. because if the business grows so will it’s stock requirement don’t forget it.
Manage Your Staff
If you are selling ice cream it makes no sense to have as many employees in winter as you have in summer so make sure that you have the right amount of employees hired at all times as they probably will be your greatest expense. You may consider taking on some people part time. Or some seasonal workers, or maybe keep the number low all year round and just give them over time when it's needed. In the end you have to decide what suits you more.
Plan Your Discounts
Yes snap sales are not really snap they have been planned.
Snap sales don't happen when the shop is full they happen when it's empty. It’s the flash sale which refills it. The key things being make sure that you have enough staff to cover the sale, make sure that you have the stock and make sure that it does not eat in to your profits too much.
Although there is no denying that sales can be a great way to gain publicity and to raise some capital in a short time. They can be used to bring in some additional cash flow during the quiet period but they must be planned or otherwise it may just go haywire and cause more harm than good.
Plan the actual Fluctuation
This may seem obvious but it is vital that you have enough money coming in all the time to cover the basic costs of your business's existence. So if you don’t have the necessary funds save up some form the high season to cover the costs of the low. Because if not done correctly this could cause your business in a lot of unnecessary problems.
Cut back on expenses
Let us expand this a bit further, what we mean by this is if you don’t need the machinery going then turn it off. Or even better make it earn for itself. I.e. if you don’t need it then rent it out. If for example you know that you will not need a freezer in the winter because you don't keep so much stock (again going back to the ice cream) then rent it out to someone who needs it just in the winter. Or sell it all together and just rent it out for the months that you need it for. Basically simply decrease the costs. As your business is quiet for a certain period of time make sure you save money in that time don’t spend as much as in the high season for you could be simply wasting your money.
And last but not least diversify. If you business is completely quiet during a certain period of time and you have nothing to do than the obvious answer may be to diversify. Do something which will bring in profits in the low season and will keep the business going. As going back to ice cream is they sell well in the summer than why not sell hot tea and coffee in the winter. Meaning bring in an activity which will have its fluctuations which mirror the ones of your core business or simply introduce a new activity which will stay stable throughout the whole year so you can rely on that cash flow when it if needed this should help you not only grow but stabilise your whole business so you earn money all year round and don't have to worry about losses in the low and not being able to cope with the amount of sales in the high as you can have the same employees do both the tasks so reducing the need for seasonal jobs. And creating stability on a similar level all year round. Limiting the space for worry and panic.