Seasonal businesses are very common, especially in locales where travel and tourism are important industries, where weather has an impact on outdoor business operations, and where retail sales slow during the winter months.
To ensure sufficient cash flow through the slower sales season, business owners employ various survival techniques. Some find alternative business options for the slower part of the year. Some hire employees only during the busy times and lay them off when the season ends. Some close their doors and reopen the next year for the busy season. Some save part of the earnings during the busy time to cover expenses during the slower part of the year. Some arrange for vendor relationships that allow them to make larger payments when cash flow is high and lower payments during slower times of the year. Some find ways to create off-season demand through partnerships with other businesses, or by offering deals to local customers, or by moving sales online.
The key to success in a seasonal business is management of cash flow. A good cash flow forecast will help with analysis of funds available and costs throughout the year. Some expenses can be structured so they fit the revenue available for the season. For example, you could negotiate with vendors to accept larger payments during the busy season and smaller payments during the off season.
Management of inventory is another critical tool. Any inventory at the end of the season should be marked down and sold at a discount to increase off-season revenue and reduce carrying costs. Some suppliers might even allow merchandise to be returned for a credit against next season’s orders.
For some seasonal businesses a line of credit might be appropriate. Check with your banker about programs available. Your local Small Business Development Center (SBDC) office also has information about programs offered by the U.S. Small Business Administration (SBA), your state’s Business Development Department, and many other financing sources for small businesses.
Finally, consider diversifying into off-season alternative products or services. For example, in many parts of the country landscaping companies take on snow removal services in the winter months. What are the alternatives in your industry or area? Are there potential opportunities to sell online or outside your region?
The off-season could also be the perfect time to take a vacation or revise your business plan—you can use the slower time to prepare for the next season by assessing customer wants and your business’s financial performance.
Have a question about your small business? You can reach Arlene at email@example.com or leave it in the comments here!
[ Down to Business is a weekly small business advice column featured in The World Newspaper, originally published online by the Oregon Small Business Development Center Network, and republished here with permission. ]