How to successfully run a seasonal business? A seasonal business may not operate or earn money throughout the year, but the effort required to make it successful is practically a year-round dedication. In other words, running a profitable seasonal business is easier than it sounds. To help you through the lean months, here are a few tips on how you can maximize the earning potential of your seasonal business.
How to successfully run a seasonal business?
If you have seasonal work, the first step to developing an accurate estimate of the financial flow is to determine overcrowded seasons and recessions, and it is important that you be realistic in your estimates, so make sure that you do not overestimate the revenues that the peak season brings or underestimate the expenses of the recession seasons. If you have an existing business, the best thing to start with is to review the sales history data and identify the months with the highest revenue and minimum costs and vice versa. For new and emerging companies, you may need to rely on conducting competition research to estimate sales
Tip # 1: Manage your cash flow
Since your seasonal business does not make money all year round, cash flow is the most critical factor to consider, especially during your off-season. To put it simply, you should never run out of cash. The danger of using up all your money is actually greater when it’s abundant because you’re tempted to spend it on various business needs.
Because of this, you’ll have to prioritize expenses so that you still have enough cash during the lean months. You also need to be savvier with collections, especially when dealing with clients that take a while to pay. To better control your expenses and hang on longer to your money, ask your suppliers for longer payment terms so that your outlay is more evenly spread out.
Tip # 2: Establish and maintain good credit
Credit will keep your business afloat during its off-season. If you’re low on funds, having a credit line at your local bank should help you deal with at least two months of peak season costs. Another alternative is to apply for a small business loan. To make these options possible, however, you’ll need to establish and maintain good credit. Here are a few ways how:
Always pay bills and loans on time
Being prompt with your payments will show lenders that you are financially responsible and help build good credit.
Separate your business and personal credit
It’s simpler and easier for you to keep track of your personal and business finances if you keep them separate. Moreover, a separate business account would serve as proof of your company income when applying for a loan.
Maintain your personal credit as well
Don’t forget to look after your personal credit. If you haven’t established your business credit history, lenders will be looking at how you handle your personal finances.
Check your credit report regularly
You need to go over your credit report on a regular basis. Sometimes, there are inaccuracies in the report, which can hurt your credit score. You can do this by filing a dispute at the credit reporting agency.
To get a loan and establish your credit, provide collateral to the lender. This assures the institution that you can repay your debt.
Aim for banks that offer loans to your industry
There are banks that would rather provide their loans to specific industries. What you need to do is find out which lenders favor yours.
Tip # 3: Purchase only what you need
There are two main dangers to buying more than what you need for your seasonal business: first, you spend more than you have to, which would lead to cash flow problems when you don’t have any income. Second, you’ll be stuck with unsold supplies during your off-season. This wouldn’t be a problem if your supplies aren’t perishable, but if the rollout of your product/service is time-sensitive, having extra stocks could lead to waste.
To avoid such a scenario, you need to be more accurate in assessing your market’s demand. At the same time, try to negotiate better terms with vendors to minimize losses in case you overestimate the quantity you need.
Tip # 4: Be productive during the off-season
If you want to do better during the peak season, then you should make the most of your off-season. Consider the lull as an opportunity to work on the concerns you usually don’t have time for. This may include activities such as upgrading, maintaining, or repairing equipment; improving your skills; preparing your budget for the incoming season; conducting SWOT analyzes on your competitors; developing your mailing list, and marketing your business.
In fact, you can be just as busy during the off-season because of all the preparations you have to carry out, which can make you more successful during the busy months.
Tip # 5: Consider diversifying
Another way to make your business more lucrative is to diversify to other streams of income. If you plan on starting another seasonal enterprise, choose one that picks up during your off-season so that you can devote enough time to make it successful. More importantly, an additional source of income would allow you to earn throughout the year.
Here’s an example: if you run a Christmas decoration shop, you can expand into other holiday ornaments (e.g. Easter, Valentine’s Day, ANZAC Day, etc.). Likewise, snow removal businesses can offer pool cleaning services during the rest of the year. Just remember to apply for the new business’ corresponding licenses. To find out what you need, do a search at the government ABLIS website.
Tip # 6: Reduce prices during the off-season
Being in the off-season does not necessarily mean your company should be closed and not be making money; you have the option to keep your business running, which lets you to hang on to your core personnel. To attract customers during this stretch, you can introduce discounts. Take note, however, that this comes with a risk: if your mark-down is too large, it can change how customers view the value of your product or service.
Before you reduce your prices during the offseason, you’ll have to thoroughly assess how it’s going to affect your product or service’s perceived value. But if you do this correctly, you might be able to recover your expenses during the off-season and retain your core personnel.
Tip # 7: Consult an accountant to ensure tax efficiency
Since revenue for your seasonal business fluctuates throughout any given year, you should hire an accountant to make it more tax-efficient. For instance, you need to know what deductibles you’re entitled to claim. Furthermore, you’ll need some help filing your tax return, which can be confusing since there are a number of details to consider.
8- Calculate variable expenses:
How to successfully run a seasonal business? Remembering fixed expenses such as rents and utilities and incorporating them into projections of financial flows is somewhat easy, while variable expenses cannot always be remembered. There is a range of important variable costs such as quarterly bills, annual insurance premiums, and the months in which payment is due three times must be included in the estimates, so organizing these costs in advance will help you in the long run.
9- Think about the company’s credit line:
Despite your efforts to capture the details of the movement of cash, there may be times when you need to make a huge purchase, or you face unexpected costs, or your company is unable to obtain the returns that you were expected to receive. As these particularly difficult costs can be a challenge for seasonal companies that will bear these burdens during recessions, and when you have a business credit line, this can help your company bridge the gap in times like these, with this credit line you can get On money when you need it, often at a lower interest rate than the credit card gives you. So coordinate with your bank to determine your credit needs and see if the credit line is a good option for your company before you need it.
10- Adjust your expectations:
In order to maintain accuracy in your cash movement expectations and keep them on the right track, create a table that includes the next 12-month plan and keep updating it at the end of each month, and plans to add a new month to the end of each time the month is complete so that you always have a complete picture of your company’s financial condition. Where companies can, by setting expectations periodically, forecast cash deficits and benefit from periods that witness an increase in revenues when there is additional money.
When the purchase season approaches during the holidays and we move to the new year, it is good at this time to take a step back and ensure that your cash movement expectations are up to date, by knowing the amount of money entering from your company every month and out of it, you will be in a better position to continue to control The movement of cash in your company, which is one of the best things you can do for the benefit of your small company.