Published: 1st February 2018
Throughout the world there are numerous flourishing businesses that run on seasonal business models. However the directors of these will almost unanimously agree that maintaining the health and profitability of seasonal businesses year on year is can be an extremely challenging and complex task. If you are a beach café, how do you survive the winter months? Or if you manufacture Christmas gifts and decorations how do you keep afloat in the summer?
If you are the director of a seasonal business, there are certain issues and factors that directors of seasonal businesses should bear in mind and some further important business planning tips that could ensure the yearlong health of your business.
Some statistics state that the reason that up to 90% of small businesses close is due to poor cash flow management and with seasonable businesses cash flow can present even more of a problem.
The first, and most important, task when running a seasonal business is to produce an accurate cash flow forecast for the entire year, on a monthly or ideally weekly basis. This can either be completed based on your previous year’s income and expenditure or by looking at the published figures from other comparable businesses. It is important to be utterly realistic during this exercise so that you can draw up an accurate budget which will allow you to manage your expenditure and cash flow and make sure that you don’t end up getting any nasty surprises.
Knowing when you are likely to have your highest levels of income and charting what costs you will be paying and when, along with maintaining very good relationships with your suppliers and bank, may allow you to manage any regular payments so that they more closely follow your projected income pattern.
If requested, many banks will allow variable payments to loans and other credit facilities, especially if it sees that higher payments are being made up-front with lesser payments to follow in your more fallow periods. Similarly suppliers may agree to payment terms of up to 120 days to allow you to purchase stock in advance of your busy period and then settle the invoice once the money is rolling in. It may also be worth trying to negotiate similar arrangements with rent payments, rates and any hire purchase agreements.
There are also a number of other funding streams that may be very useful to the directors of seasonal businesses, allowing the further management of cash flow throughout a variable income year. Working capital loans, purchase order finance, trade financing, invoice factoring, asset refinancing and merchant services advances can all be employed to successfully keep on top of your cash flow. Financial services group BTG Advisory provides a useful overview of these in their article What Type of Working Capital Funding Is Best for My Business?
Just because the majority of your business is done in a certain period, it doesn’t mean that there aren’t any opportunities to expand your business into your traditionally quieter periods too. Look at ways to expand or diversify your business. For example some marquee hire companies are investing into specialist ‘winter’ structures, with more solid walls and advanced heating systems, and traditional ski resorts are also marketing themselves as summer holiday destinations for those who enjoy outdoor pursuits etc.
Another scheme may be to look into offering special deals and discounts that are specific only to your quieter periods. End of season sales can also be useful to get rid of excess stock which could tie up vital cash required for your off-season months. Or why not consider utilising some of your existing resources and temporarily repurposing them to tap into a different seasonal market that’s peak coincides with your current with your low season.
If your business is struggling in a seasonally driven market, then the experts at Real Business Rescue have nearly 30 years’ experience in helping company directors to navigate their way through all of the options facing them. We understand that all businesses are different and will take the time to understand your issues before delivering a number of personalised rescue options. Contact us today to arrange a free and confidential same day meeting at one of our UK offices.