There are a lot of ups and downs associated with running a seasonal business, starting with managing cash flow. Off-season dips can leave you wondering how to keep things running smoothly. That’s true whether you’re a retailer preparing for the holiday season or a construction company planning around the latest forecast.
You may not be able to control the weather, economy, or consumer demand, but you can take proactive steps to manage the ups and downs of a seasonal business.
1. Forecast, revisit, and revise
Whether you’re a new business owner or a seasoned entrepreneur, forecasting should play a major role in your yearly planning. Forecasting can help you gauge sales for the year to come, but it can also help you spot trends, opportunities for growth, and even potential problems you may encounter.
It’s tempting to complete this activity and move on, but doing so could leave your business vulnerable. Revisiting your forecast from time to time can help you better position your business in the weeks and months to come. This is particularly true as different circumstances can drastically affect cash flow during close and busy periods.
For instance, new tariffs may change the price of the inventory and lead to higher holiday prep costs. Similarly, an unseasonably rainy summer may lead to fewer jobs or longer completion windows.
Revising your forecast based on fluctuations and trends can help you brace for the impact and plan appropriately.
2. Create a budget
Budgeting and forecasting are often lumped together but they have a few key differences. To manage your seasonal business, you should do both.
A forecast is an educated prediction about your business that is based on historical activity and current trends. A budget, on the other hand, is the plan you put in place based on your forecasting assumptions and your growth goals.
A budget gives you valuable insight into your existing capital, estimated revenue, and anticipated costs. It’s an invaluable tool for managing your cash flow during seasonal peaks and valleys.
3. Have a contingency plan
Budget and forecasting are great ways to avoid cash flow problems and spot opportunities for growth when things go well. But you know what they say about the best-laid plans.
A good contingency plan considers potential risks and includes resources to help you cope.
For instance, what resources are available to you if a major piece of equipment breaks and you need to free up cash to fix it? Can you rely on a vendor to offer a net 60 or net 90 agreement? Do you have a credit card with affordable rates? Are you prepared to access funding from a reliable lender if needed?
Creating a contingency plan will help you answer those questions and better prepare your business for the downswings.