Statistics show that America alone, can spend $465 billion dollars on Christmas. Australians spend 40% more than they earn in the entire week up to Easter, and British holidaymakers spend around £13 billion on summer stay cations every single year. These are just some of the seasonal times of the year where people are willing to spend a bit more cash, but these statistics alone show exactly why seasonal companies do exist. Work really hard and get customers to notice you when it counts, and market yourself to the bone in the lead up, and you could easily rake in enough money to keep you afloat until the next season. It isn’t always as simple as that though.
If you are a seasonal business owner, you may well struggle to keep cash flow going in the slowest months, which can be a worry. Your business may well experience extreme highs and extreme lows in revenue. You could well have found it deeply problematic that your cash flow is inconsistent throughout the year and in some months, you might not get any cash flow at all.
These kinds of issues can leave you with plenty of concerns including:
- How will the business stay afloat over the slower months?
- How will you fund any business growth?
- Can manufacturing, operating or general costs be covered in slower months?
- Is it even worth running a seasonal business at all if you can never really thrive?
These are all truly relevant concerns, that other seasonal business owners share with you. It is important to note though, that it is not all doom and gloom, and with the following 5 tips, you can not only manage your seasonal business finances well, but actively work towards a growing and thriving business just like the one you envisioned when you first started out.
1. Plan Your Cash Flow
Planning is so sensible in business,but especially with seasonal businesses. Identify your slowest seasons, your most profitable season, and any periods in between where you are ‘just ticking over’. It really does pay to predict the kind of numbers to expect throughout the year so those slower months can be better prepared for. You can use all kinds of different tools to help you with this such as a professional accountant or IFA, an online accounting tool, or learn how to do the accounting yourself, which is a good skill to have in general.
2. Make The Most Of High Season
Whether you want to grow, or just continue as your are during the slower months, you will need to get in enough money to cover those costs. For a seasonal business, this means working completely flat out during your high season. Every year figure out how you can improve your game to get as many customers as possible. You can generate money from existing clients, get new customers and offer new services to increase profits. But most importantly, you must prepare for high season effectively. During low season you should be keeping your clients and customers engaged through email marketing, newsletters and social media. You should be contacting clients and customers in preparation, and advertising everything you have on offer so once the time comes, people will be coming directly to you.
3. Keep On Top Of Payments You Are Due
Late payments can be incredibly devastating when you rely on cash flow, especially when things are going slowly. To try and ensure you get paid on time:-
- Set up a deposit scheme where clients put half of the cost of work into an escrow or pay it upfront then pay the rest when the work is complete.
- Send out invoices to clients as soon as the work has been signed off.
- Be polite when you send invoices as this makes clients more likely to want to pay you on time.
- Let your client know your invoice payment deadline.
- Send polite reminders and don’t get shirty, it never ends well.
- Provide multiple ways your clients can pay you to make it easier for them.
4. Be A Frugal Business
Warren Buffet is worth over $60 billion dollars and yet he still lives in the same home he bought in 1958 for just over $30,000 dollars. There’s a reason some of the richest people in the world are so rich that isn’t just amazing business sense. Being frugal means you never live above your means and you only spend what you can afford. The same rules apply for business, especially seasonal businesses. To keep costs down you could:-
- Outsource work like online marketing or writing instead of hiring somebody full time to do it.
- Hire people part time for high season.
- Get better at haggling and negotiating with clients for a better price.
- Hire equipment rather than buy it.
- Consider using self storage as office or warehouse space instead of expensive contract spaces.
Being frugal with business costs is always a good idea, and with a seasonal business, you can always be more frugal with money.
5. Have A Backup Plan
It may be that you will find the opportunity for growth after a few years of trading, but with a seasonal business, those first few years can be very fragile and more often than not, sadly ventures do not survive the slow season. 11.5% of UK business ventures fail annually, and that figure is rising not only because more businesses are being born, but also because the competition for customers money is increasing. So whether you want to be able to grow sooner, or you just want some sort of backup in case the first couple of slow seasons are crippling the business (a new business will naturally make less in its first few years whilst the brand establishes) it makes sense to have a backup. This could be an angel investor, an invoice discounting solution, a standard business loan, or even backup savings from friends and family if that route is viable for you. If you can, line up the backup rather than actually accept it when you don’t need it, as you don’t want any kind of debt if you can avoid it.
As any small business owner knows, starting a business is not glamorous work. – Kevin McCarthy
Seasonal businesses are just as viable a business as any other, they just come with their own special challenges. The right business owner will not only be able to overcome those challenges, but turn them around to turn them into an advantage. Managing the seasonal business finances, is just one of the basic housekeeping jobs to enable you to make your seasonal business flourish and thrive.