We’re headed towards colder months. Landscapers are prepping their equipment for hibernation. Ice cream stands are doing the same. If you run a seasonal business, you are familiar with this cyclical wind down.
How do you prepare your business for seasonal wind down, and how could you do it better? You might be tempted to finally take a breath and start to check out when the high season begins to fade away. You certainly deserve some rest when the offseason arrives. However, you’ll want to take some proactive measure as the busy season slows to ensure you take advantage of the slow season.
The low season is critical to appropriate resource allocation and preparing for the next busy season. Additionally, cash flow is strained during the offseason, and you need to make sure your business doesn’t overspend when revenue is down. Don’t miss the opportunity to take advantage of slower days.
As the high season comes to a close, proactively concentrate on three things:
- Preparing your business for the slow season
- Cash flow
Preparing your business for the slow season
For most small businesses, employees are the number one expense. This includes payroll, benefits, training and any other expenses related to your staff. As you wind down for the season, make sure your workforce is right-sized. You may need to reduce your number of employees, or limit their working hours.
If you don’t adjust your staff to meet reduced business, you will overspend during the slow season. Overspending on employees during the slow season can quickly become detrimental to your business. It doesn’t take long for spend on employees to outweigh the revenue coming in. Don’t wait. Reduce your workforce as business slows and you wind down for the season.
Preparing for the slow season doesn’t stop with workforce reduction. Take a look at your other large expenses and determine which can be reduced during the slow season. Potential expense reductions include:
You may need to get creative with rent reduction. If you rent both office and retail space, maybe you can negotiate a lease that allows you to drop the retail space during your office-only season. If you can’t forgo the retail space, perhaps you can sublet the retail space to another tenant during the offseason.
Such negotiations take time. Don’t wait until you have expensive, unused space on your hands to think about reducing rent. Start these conversations with your landlord during the wind down, so you don’t overpay when business is slower.
If you don’t use your equipment during the slow season, prepare to eliminate or reduce costs associated with that equipment during the slow season.
For example, if you run an ice cream stand during the spring and summer, don’t keep your freezers cold during the fall and winter. Turn them off, thaw them out and clean them for storage. Even if your power bill for cooling the freezer seems minimal, month after month, season after season, the money required to cool your freezers adds up. Evaluate all of your equipment with a similar analysis.
Examine your entire utility portfolio and historical use with a view similar to powering your equipment. Shut down HVAC systems to unused areas. Cut water to buildings or rooms that are unused during the offseason. Do you subscribe to the enterprise-grade internet during the busy season for the sake of your business systems (point of sale, customer-service, etc.)? Can you sacrifice some of this speed during the offseason? If so, downgrade your internet subscription until the busy season comes back around.
Utility costs add up. Keep only what you need, and reduce utility levels as much as possible during the down season. Conduct your analysis before the offseason comes, so you can immediately reduce utility bills as soon as your busy season ends.
Anticipate cash flow
Intuit’s® 2019 The State of Small Business Cash Flow report shows that over two-thirds of small business owners lose sleep at night because of cash flow concerns. 61% of small business owners interviewed reported regular cash flow problems.
Add cash flow problems that plague small businesses across industries to the revenue fluctuations inherently built into your seasonal business, and you cannot afford to ignore cash flow during your seasonal wind down.
Start cash flow planning with a historical analysis. Look back at your cash on hand at the end of the last few busy seasons. Next, look at your slow season expenses during that same time period and identify trends. Are you spending more each year during the offseason? Or, is your offseason spending flat or decreasing? Do you see any relationship between the cash on hand at the end of each busy season and your slow season spending?
Once you have an understanding of what you generally spend during the offseason, take a look at your cash on hand this year. Are you better situated than typical, worse off or about the same? Your cash position at the point of seasonal wind down should determine any behavioral adjustments you need to make in the coming slow season.
If you are more cash strapped than usual, you may need to cut back on activities you typically participate in during the offseason. For example, you may be unable to attend offseason industry events, or run regularly planned marketing campaigns. Instead, you may need to run a liquidation sale of existing inventory, or take out a bridge loan to get you to the next busy season.
If you have more cash on hand, you may be able to make investments to boost your business in preparation for the next busy season. Whether it’s a new marketing campaign, employee education or product development, use your cash to the benefit of your business after especially successful busy seasons.
Your cash flow at the close of high season should be the guiding factor in your slow season spending. Make sure you fully understand your cash flow position, including a historical analysis, as you wind down your business for the season and plan for the coming months.
Make a plan
Once you prepare your business operations for the slow season, and have a firm understanding of your cash flow, it’s time to make a plan. Most seasonal small business owners can’t afford to shut down the business and forget about it until the busy season returns. There’s plenty of opportunity to improve your business during the slow season:
- Update business plans: roadmaps, new offerings and employee advancement
- Execute marketing campaigns
- Catch up on administrative tasks: tax strategy, staff growth, and policy and procedure development
- Host training and education for business leaders and general staff
For many seasonal businesses, the high season comes and goes in a flash. The busyness of the season prevents you from taking time to rest, plan or take care of basic administrative tasks. This doesn’t mean that such activities aren’t important. They are very important to the long-term success of your company. In fact, the immediate attention to customers and sales during the busy season leaves some critical business tasks uncared for.
You can refer to these administrative tasks as working on the business, as opposed to the day-to-day responsiveness that is working in the business. The offseason is your time to work on the business.
Research indicates that entrepreneurs spend roughly 70% of their time working in their businesses. As a seasonal business owner, with only portions of a year to drive sales, it wouldn’t surprise anyone if your time working in the business is significantly higher than average during the busy season.
Even if you enjoy working in the business more than working on the business—which is true of 73% of entrepreneurs—you can’t afford to ignore the business benefits of working on the business. Employee development, administration, marketing and other tasks help nurture the business into future growth and long-term sustainability. As a seasonal business owner, working on the business is the slow season priority.
You need to be calculated about these offseason tasks. They add up and are time consuming, especially if you ignore them during the busy season. If you don’t construct a plan for taking care of operational tasks, your slow season will come and go, just as fast as your busy season.
As the season winds down, start building a list of offseason action items. Take a few minutes a day and edit the list. Once your list starts to grow, start prioritizing. What is the most important task for your business to accomplish during the offseason season? Are you behind on taxes, or some other responsibility? If so, move those tasks to the top of your list.
Were your customers unfamiliar with your latest product or service offering when the last busy season started? If so, marketing campaigns might be a critical offseason activity for your business. If you lost business to the competition last season, your offseason may need to focus on marketing research and industry events.
Use your down time
The specifics of working on your business will vary depending on your business needs, but you need to identify those needs before the slow season begins. Once the offseason arrives, you need to be working on your business, not planning to work on your business.
As your busy season slows, work on your offseason plan. Tweak that plan daily as you begin finishing the busy season. When the customers fully disappear for the season, you want to hit the ground running with offseason activities.
Seasonal wind down is a natural aspect of any seasonal business. Be proactive during this time to ensure that you make the most of the offseason. Reduce operational costs, understand your cash flow and have an offseason plan as the slow season approaches, and you will be prepared to make the most out of the slow season.