Some businesses are seasonal by nature. For instance, pool maintenance and landscaping businesses thrive in the summer, while snow removal companies and holiday gift shops see sales during the winter season.
When the majority of your sales occur in a small window of time, you need a strong budget and operational strategy to keep yourself afloat during the off-season. To help, we asked a panel of Forbes Finance Council members how they recommend managing seasonal sales cycles.
1. Regularly review plans and forecasts against actual sales.
The best tip for a business to manage a seasonal sales cycle is to review sales, inventory plans and gross margin forecasts against actual sales results every month to ensure that the business owner understands the sales trends, product mix, inventory levels and, ultimately, profitability. – William Fink, TD Bank
2. Ensure access to working capital.
Budgeting and operations in a seasonal business are important, but it is also critical to manage working capital. Having adequate cash to purchase and deliver inventory is foundational, as is repeating the cycle even if customers are on 60- or 90-day payment terms. Thus, going into the seasonal period with a solid plan for cash is key to consistently delivering through the seasonal period. – Kerri Thurston, C2F0
3. Focus on cash flow forecasting.
Managing a seasonal business comes down to good cash management. Forecast cash flow, taking into account the time from purchasing to receiving, selling and finally being paid for inventory (it can take a while). If you use a line of credit to cover the seasonal sales cycle, it is important to have a plan to repay that once the sales come in. Understand your margins to ensure profitability too. – Brian Hayes, NOW CFO
4. Use your downtime for professional and business development.
I experience this problem just as deeply as any holiday retailer but in reverse. I run a debt-solutions company, and no one wants to think about their student loans or credit cards from Halloween through New Year’s Eve. I look at these slow times as project time. You have time to improve your skills through training, and you can work ahead on next year’s calendar. – Howard Dvorkin, Debt.com
5. Plan ahead and be ready to innovate.
Plan as far in advance as possible and carefully eye adjustments. Set monthly or even bi-weekly reviews to understand necessary adjustments. Never forget that cash is king, and constantly innovate on the product set to maintain competitiveness. Market research is also important—do not find yourself surprised by a market entrant that did not exist last season looking to take share. – Cutler Knupp, The Haskell Company – Dysruptek
6. Get creative with your sales and marketing.
Prepare for the important times and get creative in the less busy times. Some companies derive over 50% of their full-year revenue on Black Friday and Cyber Monday. Even if your business is seasonal, a creative sale or incentive and light push can de-risk your most important periods and help increase overall revenue. – Carlo Cisco, SELECT
7. Control your supply chain.
Have cash on hand, and keep inventory turning at a high rate. Because the business is seasonal, it’s all about selling as many hot products as you can, so control the supply chain to ensure you can buy and stock items quickly and sell them. The key point is to manage cash flow, as cash is king. – Khurram Chohan, Together CFO
8. Keep your operations lean and outsource if needed.
Although Covid-19 is an outlier and most entrepreneurs do not have gratuitous amounts of time to ponder the future, the lesson of preparing for the unexpected is critical. Ensure your operations are accountable and lean. If an entrepreneur is not capable of tracking payments, posting invoices or handling accounting, it may make sense to outsource. Even tax lawyers frequently hire personal accountants. – Andrew King, Bastille Group
9. Master the art of cash flow analysis.
A very important tool for any small business is cash flow analysis. By creating a profit and loss statement and tracking cash flow in real time, you can be prepared for seasonal ebbs and flows. This can help you decide if you need to cut back on spending or investments during slow seasons or save more during the offseason. – Luz Urrutia, Opportunity Fund
10. Introduce multiple lines of revenue.
It is always important to have multiple lines of revenue to address seasonality in a business. This helps offset any downtime from a line of revenue that may occur due to the seasonality of the business. The additional lines of revenue should be strategically created—one could be recurring revenue, while another could have an opposite seasonality. – Breana Patel, Bonova Advisory Inc.
11. Know your base expense burn.
A long cash conversion cycle (the number of days between paying costs and receiving payment from sales) can cause major cash flow issues—even for profitable businesses. This dynamic is compounded in the case of seasonal businesses. Knowing your base expense burn and reserving adequate cash for inventory purchases or slower-than-expected sales is critical to long-term seasonal business stability. – George Souri, LQD Business Finance
12. Explore an ancillary business.
This is all about discipline. If you have a viable business, this shouldn’t be an issue, because you’ll be on top of your numbers, living within your means and studying your P&Ls. Depending on your capabilities, you might also have an ancillary business that makes money during the offseason, assuming it doesn’t take too much of the focus away from your primary business. – Bill Keen, Keen Wealth Advisors
13. Keep adding new products, and re-define ‘seasonal.’
Always innovate and add new products. Customers want to see exciting new things—we are trained to always look for “the next thing.” Focus on marketing these new products, and make sure you are selling them during the off-season as well. Incentivize clients to spend during all seasons through promotions and deals. Also, “seasonal” is what you say it is. Make it start early, and extend it a lot. – Gabriela Berrospi, Latino Wall Street
14. Don’t overestimate your peak season sales.
The best tip is to be aware of the seasonal sales cycles and adjust the operating strategy to each seasonal trend. For instance, try to forecast the seasonal quarter sales and develop business strategies before the seasonal sales trend begins. Another thing to remember is to not overestimate a peak season’s sales—you need to prepare for unexpected events that may disrupt your business plans. – Lijie Zhu, Dragon Gate Investment Partners
15. Don’t spend money you don’t have.
No matter how predictable your business is, if you are depending on a few months to make up the majority of your revenue, don’t spend that money before it is earned. You never know what could happen, and if you spend it before it is earned and have a bad year, you may not have the money to survive another year. – Aaron Spool, Eventus Advisory Group, LLC