In business, we all struggle with highs and lows, but for seasonal businesses – those that make the bulk of their profits at certain times of the year – knowing how to optimize the lows while riding the highs requires a particularly innovative and diligent entrepreneur at the helm.
Seasonal businesses are all around – from garden centers and snow removal firms to summer camps and beach stores. Some will choose to remain open for business throughout the year, while others will close during the slow months.
If you operate or are looking to start-up a seasonal business, here are some tips for minimizing the effect of seasonality and optimizing your business operations year-round.
Managing Cash Flow through the Peaks and Troughs
Investing your income during peak season while managing your costs and maintaining good credit during the quiet times is a must. Below are some strategies for ensuring that cash continues to flow even when your doors are closed:
- Manage your Invoicing – Whatever your business you want to make sure you can get a percentage payment upfront from customers as often as possible. This will improve cash flow and limit the problem of slow-paying customers. Likewise, consider negotiating extended payment terms from your suppliers so that you can spread the burden over 6-12 months rather than incur hefty pre-season demands for payments on goods you haven’t sold yet.
- Government Backed Loans for Seasonal Businesses – Government-backed loans are also an option, the Small Business Administration (SBA) under its CAPLine Loans umbrella program helps small businesses meet their short-term and cyclical working-capital needs. Part of the CAPLine Program is the Seasonal Line short-term working capital loan program which provides advances against anticipated inventory and accounts receivable to help businesses with seasonal sales fluctuations. Read more here.
- Alternative Income Sources – If you are able to diversify your business offering and you need to accrue additional cash flow during the quiet season, you might want to consider earning income from alternative sources. For example, landscaping service companies often shift gear in the winter by marketing their snow clearing services. Be sure to check whether you need to get an additional business license or permit to do this, Business.gov’s “Permit Me” tool can help you identify what licensing you may need.
The Seasonal Labor Market
Managing labor is also a big challenge for seasonal business owners. By hiring temporary employees you can significantly reduce your cash outflow during the off-peak season.
But on the flip side, recruiting, hiring and training temporary workers can be resource intensive on a small business, so you want to do all you can to mitigate your expenses by encouraging your employees to return next season.
Much of this comes down to quality of work life as well as incentives and soft benefits that make your business a desirable prospect for cyclical workers. Continued outreach to those employees during the off-season can also help keep your business top of mind – the occasional event or dinner will surely be appreciated.
Making the Quiet Season Work for You
The quiet off season months are a great time to regroup, review and plan ahead. You want to do everything you can during this time to maximize your time so that when you re-open your business once more your customers are there with you.
In addition to budgeting for the year ahead and taking care of tasks such as renovation, maintenance, etc., now is the time to take stock, review the competitive landscape, visit trade shows, and consider introducing new product or service lines.
This should also be your busiest time for marketing activity. Seasonal businesses only have a small window to capitalize on marketing, and this means getting ahead of the game and making your quiet season work for your future business now.
In addition, Business.gov also provides an online Managing Business Finance Guide that provides tips on getting business credit, accepting payments from customers, and more.