Is your business a seasonal one? Or do you have periods in a year where your sales decrease?
Many products have very obvious peaks in demand which cause business seasonality, such as…
• Holidays
• Christmas decorations
• BBQs
• School uniforms
But a great many more businesses can identify a seasonality or cyclical nature to their business, which might relate to more subtle factors.
• In house building, selling and renovation there is often a rush to “be in before Christmas”, then a lull follows in January.
• August and December can be less profitable months in many businesses due to reduced capacity with spikes in annual leave.
How to Manage Business Seasonality
So, what can business owners do to smooth out the boom-and-bust nature or a seasonal business?
Extend product range
- Extend the peak months by identifying new applications for your products. Example – Christmas lights used only to be seen in December. Now, they are in the shops all year round and are popular as a feature in summer gardens.
Introduce complimentary products
- Introduce complimented products with a different seasonality. An ice-cream seller could have one van for ice-creams for the beach, festivals and fetes in summer, and switch to a different van for selling jacket potatoes and burgers for street food in winter.
Match costs to business seasonality
- Match the costs to the seasonality. Taking on additional direct workers in the busy months to help boost capacity is a well-established principal – we’ve had seasonal fruit pickers as is working overtime in restaurants and pubs at Christmas.
Use a low overhead model
- Keep to a low overhead model. Overheads are the costs that businesses must pay all year regardless of how busy they are. Such as rent, finance costs, insurance, indirect staff. Base your overheads on what you can manage to pay in the quiet months as well as the busy ones.
Plan and monitor your business seasonality
- Or just embrace the seasonality by planning and monitoring. A profitable business in a seasonal market understands their profit profile over the year. That they will make big profits some months, and that these needs to be conserved with strict cost controls to see them through the poorer months.
Case Example: Ben & Jerry’s Business Seasonality
Ben & Jerry’s, a popular franchise for ice cream is the prime example of correctly managing a business seasonality. In the warmer months, their ice cream and summer-style profits increase. In order to leverage the approach to the colder months, where people will consume less ice cream, they focus on improving their brand identity, through social activism online and advertising. Other than the marketing efforts, Ben & Jerry’s focuses on balancing their tangible and intangible assets
- They manage inventory (tangible asset) with great measurement, and make sure they stock well for the warmer months, and stock limited amounts in the colder months.
- They actively collaborate and create limited-edition products to stay relevant, which enhances their goodwill. But they also keep loyal to their supplier connections, keeping their products consistent and premium to the price.
So, what do they do when December rolls around, and they prepare for decreased sales, and risk of liquidity?
They create Christmas edition products of course and use marketing to hype the campaigns.
It’s certainly better than doing nothing at all with a seasonal business, and they gain a steadier income through the quiet seasons.
Where do you start?
If you don’t already have a cashflow, build a cashflow with a professional such as JR Management Accountancy, so you can monitor your pitfalls and increases in sales. It can be tricky to balance internal business operations with getting out there and selling the goods or services.
Our team has experience working with farms, agriculture, and other seasonal businesses, so we know the highs and lows when we’re managing cashflows. We provide a free consultation, where you can sit down, have a cuppa, and tell us what you need. We build our services around our customers’ needs to make sure you stay compliant, and your business afloat.
Our kettle is always on. Call us on 01905 796512, and we can get your booking to what time suits you.
