Solving business seasonality problems
Problem 4: Dealing with peaks and troughs in income
It’s not just seasonal businesses that have to deal with peaks and troughs, most businesses will experience these fluctuations. In actual fact, both can throw up problems to an SME. You want to have the ability to capitalise on busy times and maximise sales, equally, in quieter times you need to be able to manage costs and make sure cash is there to cover necessary bills and expenses.
Here are a couple of top tips to be able to deal with the highs and lows.
1. Plan in Advance
Don’t bury your head in the sand and hope for the best! If you know that certain times of year are busier than others, it’s best to plan your finances in advance and make sure you take a firm hold of your incomings and outgoings.
Use your previous year’s trading to predict when you are likely to be busy and when you are likely to be quieter.
Take a worst case scenario, look at your cash flow, then factor this into your finances. You need to make sure you have the capital available to cover any unexpected bills, absent staff, late payers etc.
2. Use Quiet Time Effectively
This is the time to conduct staff reviews, find new suppliers or even catch up on the pile of paperwork that has had to be placed on the back-burner. How about setting targets for the year ahead? Maybe request feedback from your customers/clients and get their input on changes they would like to see. It’s a great way to spark new ideas, and your customers will feel their opinion is valued too.
3. Curb Spending
When your business benefits from seasonal rushes, it can be tempting to spend more than usual… but this is where you need to refrain! Even though that employee does deserve a bonus, you must first ensure your business has the capital to cover their monthly wages!
Similarly, if your business slows down over some periods, try to find ways to minimise your non-essential spending; perhaps swerve business lunches and overnight stays.
4. Expect Late Payments
There’s always a chance you could experience a cash-scarce period – but bear in mind that your customers could suffer with cash flow problems too. How can you protect your business from this? You will need to budget for late payments. Another good strategy could be to offer incentives for customers when they pay early.
5. Quarterly Rent
With most businesses having to pay quarterly rent this can be rather disruptive to cash flow. How can you take the pressure off? Well here’s where your forward planning comes into play. Save your rent on a month by month basis so you’re not struggling to find the full amount when it comes to the end of the quarter.
6. Get Additional Business Funding
Whether you’ve got a busy or quiet time, it’s common for businesses to experience some cash deficient times, but what can you do in this instance? You may be able to ask your bank for additional support, perhaps extending your business overdraft. Another option is to speak to a company specialising in small business funding. With a number of funding options, something like a small business loan could be the answer to tide you over.
Businesses will often experience seasonality or sometimes just a blip in fortunes. That’s why having a strategy to cope with both the busy and quiet times effectively can set your business on the right path.
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