Understanding Business Seasonality

As we start to turn our thoughts towards summer, it is worth just pausing to consider if you have any seasonal effects on your business. For some businesses, for instance in tourism, ski resorts or ice cream vans, it is obvious when the peaks and troughs are, while for other businesses this may not be quite so obvious. Yet seasonal factors can play an important role for many businesses without them being conscious of the effect they are having on the business.

In general, summer is a slow season for businesses, as are Christmas and New Year. This could mean less work for staff, a drop in sales and, as a result, a drop in income and a potential impact on cash flow, which may not become apparent until two or three months later. Conversely, other businesses are extremely busy for various and sometimes less obvious reasons.

Unless your business’ seasonality is obvious, you may not be aware of these subtle seasonal fluctuations. If you are not aware, then when the low season comes it could easily catch you off guard. Of course, in periods of high demand you may not be able to cope without a plan to deliver your goods or services. It is therefore vital that you know and understand your high and low seasons, however subtle, in order to adapt your schedule, your budget and plan accordingly.

 Get to Know Your High and Low Seasons

 The simplest way to understand your business’ high and low seasons is to do a bit of business analyses on your sales lines. This approach applies to any kind of business and it is always worth doing some analysis on this regularly. It is important to look at both your sales and income as your invoicing and cash received may show up differences. For instance, you may invoice in month and normally expect to get paid at the end of that month, but when you invoice in December, you may not actually get paid until the end of January. Always base projections of seasonality on at least two or three years.

9 Tips to Help You Deal with Seasonality

Correctly identifying seasonal influences is the first step to dealing with them. You then need to put in place some strategies to help you deal with seasonality and mitigate against the risks they present.

1. Cut Overheads: Cut any unnecessary overheads; rent extra equipment and take on temporary staff for peak periods rather than have them sit idle for a few months.
2. Manage your Inventory: Ensure your stock is relevant to your high and low seasons. Do not hold too much over, keeping a close eye on sell by dates and shelf life.  
3. Cash Flow: Look ahead at least six months and ensure you secure cash reserve during the high periods to cover cash flow. Ensure you discuss your seasonality with your bank or funding partner, negotiate an overdraft or advance of funds in preparation for those down periods, should you need it.
4. Alternative Income Stream: Consider diversifying from your core business, build lateral partnerships or add new products and services and find new markets.
5. Smart Marketing: Take the opportunity to increase your marketing and customer nurturing, whilst your competition is quiet. Be creative and find new ways to keep in touch.
6. Special Offers: We all know the midweek 2 for 1 deals at certain pizza establishments. They are simply offering deals to fill what would otherwise be empty seats. So consider which offers you can make to get sales and payments to cover quieter periods for your business.  
7. Staff Training: Use the down time for staff training and team building. Investing in your staff is time never wasted.
8. Stand Downs: Plan some down time; consider business close down periods, such as between Christmas and New Year or during August. Or ask your staff to take most of their leave when you are quiet.
9. Change Your Business Model: Change your business model to offer retainers for your advice or services. Bundle products together and charge monthly fees to spread costs over a year.   

 Seasonality affects nearly every business, with few exceptions, whether you are aware of it or not. Ensuring you are aware and then building seasonality into your business plan, your forecast and your marketing plan will go along way to help you succeed.

If you would like to know more about Dealing with Seasonality and get more tips on marketing and how to utilise technology, please download our free e-book “Dealing with Business Seasonality”.