Whether you run a winter ski resort or a summer boating company, your seasonal small business must deal with several issues in a different way than year-round operations. The Intuit Small Business Blog recently spoke with two business experts about three challenges seasonal businesses face — and how to handle them.
1. Cash Flow
On one hand, you likely scale back on expenses such as marketing, advertising, or payroll during the off-season. On the other, you may still have ongoing expenses like equipment rental costs or a lease.
To get a realistic idea of what expenses to budget for, talk to a CPA or other professionals in your line of work, suggests Jane Barnes, an associate professor of business at Meredith College in Raleigh, N.C. Finding ways to extend your season — for instance, a landscaping business could offer snow removal in the winter — can even out cash-flow issues and help keep your staff busy in the off-season (see #2), but then you’ll have to cover payroll.
In a pinch, some seasonal businesses tap into their line of credit, though Bob McGowan, a professor of management at the Daniels College of Business at the University of Denver, says this shouldn’t become a habit.
Hiring and retaining part-time workers is challenging enough, but when you only pay for them for part of the year, building a sense of loyalty is even tougher. “If they’re good workers, you want them to come back next year,” Barnes notes. “Turnover is a major problem with most companies. Motivate employees, give them incentives, and make them feel like they’re part of the organization. Make them want to come back, so you don’t have to spend as much time, energy, and money hiring new people.”
If you can afford it, consider offering returning workers higher pay than new hires. Veteran employees may be ready to take on more responsibility since they already know the ropes.
3. Inventory Management
Storing excess inventory for a full year is not ideal for most businesses due to its expense, the following year is not ideal for most businesses — and if you deal in perishable goods, it’s often impossible.
“There’s an art to managing inventory,” McGowan says. “I would look at something similar you’ve ordered before and use that as a proxy. Try to get something that’s a close approximation to what you’ve done in the past, unless fashions change significantly from year to year.” For instance, if last year’s iPhone covers were a popular stocking stuffer, make sure you order plenty of covers that fit the iPhone 5.
If you are left with excess inventory toward the end of the season, you can decide if it’s worth holding an end-of-season fire sale to get rid of the goods or storing them for next year.
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