If you’re a tax preparer or CPA, you may have a busy season and a slow season. If you operate a ski resort, business is likely to cool down as the temperature rises. Most retailers see a big jump in sales before holidays, followed by a slump as credit card bills arrive.  

Running a seasonal business comes with its own set of challenges. It’s not just about the holidays with these companies. It’s about business cycles.

So, before starting or expanding a business, know and understand the cyclical nature of your business. Your company may hit the ground running and grow so quickly that you assume business life will always be good.

One good season does not maintain a seasonal business. Develop revenue projections based on seasonal data that goes back over several years (assuming you’ve been in business that long), and develop a clear picture of cycles within your industry.

If you’re starting a new business, you won’t have an earnings history yet, but you can find industry data that can help identify the seasonal nature of your industry and business.

It’s difficult to prepare for seasonal cycles if you don’t know what to expect.

While last year’s numbers may not turn out to be as good as this year’s numbers, earning history is at least a yardstick. Using past performance, you can determine best-worst case scenarios and prepare yourself and the company for the worst.

So, here are some simple tips to get your company through the ups and downs of your seasonal business.

Don’t mix business and personal finances. That can get complicated quickly. If you “loan” your small business money to get through lean times, both your personal and business finances may suffer. Set up business accounts with your bank and keep business capital and personal income in separate accounts.

Utilize a commercial credit line. Work with a bank that understands seasonal ups and downs. Obtain a commercial credit line from your bank. It could be a good solution to smooth out seasonal bumps in company revenue. When times are slow, draw on your commercial credit line to maintain business operations.

The best thing about a credit line? You only pay interest on what you borrow, so you eliminate that interest payment expense as you pay down the company credit line from busy season revenues.

Pay yourself a salary. Many small business owners pay employees, but they don’t take a salary themselves. They dip into whatever money is left over after payroll and operational expenses are covered. Instead, the Small Business Administration recommends that you “…try to maintain a consistent [payment] schedule and salary amount…to avoid wasting company earnings when times are good.”

Plan for down time. You know it’s coming. You’re a seasonal business that has to navigate through periods of feast and famine. So, when cash flow is good, stash some of that cash in a company savings account to cover expenses during your lean season – the one you experience each year.

Once again, hone your company earnings projections based on the company’s past performance. The more data you have from past years, the more reliable projections can be.

Add revenue streams. Expand service and product offerings related to current services or products your company sells. During the summer months, you rent watercraft. In winter, you may switch to snowmobiles. A tax preparer may diversify into bookkeeping services while waiting for April to roll around again.

The more you have to offer, the more flexibility you have to get through down times, while growing during the busy season.

Market off season. When the competition pulls back marketing efforts, it leaves a vacuum your company can fill during slow months. Send out a regular newsletter, offer off-season specials, be the first in the mail for HVAC maintenance when seasons change.

When business slows, small business owners tend to pull back on marketing. In fact, when business slows, it’s the ideal time to expand your marketing. If you’re a summer seasonal business, sending holiday greeting cards keeps you in touch with your customer base – even when they aren’t buying. If you stay in touch, customers will be more likely to remember your name and return next year.

Getting through slow times in business isn’t difficult if you plan ahead and use banking resources to help during cash-tight seasons.

 


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.