Managing Seasonal Fluctuations

When you think about seasonal fluctuations in business, it’s probably the obvious ones like Christmas for retailers, or Valentine’s Day for florists, but in fact they happen across just about every sector. And they vary, depending what business you’re in.

Accepting that peaks and troughs – whether the notorious ‘summer slowdown’ or a short and sharp blip — are inevitable, is the starting point for planning how to manage and make the most of them.

Forewarned is forearmed

First, you really need to know what your busy and less busy periods are likely to be. If you’ve already learnt the hard way, use that information to plan ahead. If you’re just starting out, do your best to project what might happen but it may take some time to see the full effects. Make sure that you’re equipped to deal with peaks — plenty of stock/staff — so that you can take best advantage of them.

Track the trends

Even if you’ve been in business a while, it’s a great idea to keep a record of what fluctuations you observe over the course of a year. These are some of the things you might keep track of, but if there are others that you know are relevant to your business, include them too:

• Sales data – What are your peak highs and lows
• Promotions – What’s the net effect of your sales and marketing activity ?
• Seasonality of specific product categories  – Do some products perform better during certains months?
• Daily Fluctuations – How is your revenue over the course of a 24 hour period?
• Natural Conditions – How are you affected by weather fluctuations?
• Moving Holidays  – Do Bank Holidays, Christmas, Easter and Chinese New Year impact you?
• Your Competitors – Is your business impacted by an specific seasonal activity by your competitors?
• Tax Returns – Do pre june 30 spending patterns impact your business?
  

As for the down times, the hardest thing to manage is usually cash-flow. Even when cash isn’t coming in, it’s always going out.

You need to make cash-flow projections, based on sales forecasts and estimated costs — and it pays to take a realistic rather than optimistic view. In other words, don’t overestimate your sales or your access to funding, and don’t underestimate costs and possible delays in payments (see this post about keeping payments timely).

Outgoings include cost of stock, and if you need to buy up big to cover a busy period, you’ll need the cash to do so. Employee wages may also fluctuate considerably (see below), so take this into account (and don’t forget super). You need to include your interest payments if you have any loans or credit facilities.

If you need access to extra funds to cover costs, try to avoid the most expensive options such as a credit card. An overdraft or loan facility can help with cash-flow, but check the repayment terms and make sure they suit you. Some banks offer loans that can be paid back flexibly, when you have the cash. But do be careful; the interest will certainly continue to accumulate. If you have unpaid invoices (accounts receivable), one option is invoice factoring, where you essentially ‘sell’ those invoices (at a discount) for immediate funds.

“ Don’t forget to put aside money from peak periods to cover dry spells. Instead of leaving cash in a bank account, look at options like high interest accounts, or even term deposits if you know exactly when you’ll be needing the funds. Don’t lock them in if you need flexible access.”

Diversify: alternative income streams

There may be other ways you can help to smooth out the cash-flow. If your business is very season-specific, are there ways you can expand into lines that are less seasonal?

Think of surfwear — summer is obviously the peak season, but manufacturers and retailers realised a long time back that they needed to broaden their horizons to stay viable. These days, surfwear brands design and sell for every season, even when the beach is the last thing on people’s minds.

Seasonal staffing

After cash-flow, staffing is probably the next most important thing to consider.

• If you need to take on extra staff at certain times, try to build up a good network of casuals/freelancers. Always be very clear about the terms of their employment.
• If you’re taking on extra people during a generally busy season — let’s say retail at Christmas — shortages can push up wages, so you need to bear this in mind and keep an eye on the market.
• Don’t forget that there are organisations that can help match businesses and short-term/casual staff, such as Gforce in Victoria.
  

Happy housekeeping

It’s not all about managing potential difficulties. Slow periods can be a great time to catch up on the sort of ‘housekeeping’ tasks that can go by the wayside during busy times but are crucial to the success of your business.

• Admin. Make sure everything is up-to-date and running smoothly; do a stocktake; sort and clean up paperwork/computer files/email.
• Marketing. Don’t let out of sight be out of mind. Keep in touch with clients/customers; work out your next marketing campaign; have conversations.
• Update. If there’s anything about your business that you’ve been wanting to rethink or improve, especially processes, now’s the time to do it.
• Train/educate. Is there a course that you or a staff member have been wanting to do?
• Plan ahead. This is a great time to incubate new ideas and plan for the future.

Stop and smell the roses

Richard Mohan runs Midyim Eco, a micro-agribusiness specialising in unusual peppers, in the beautiful Sunshine Coast hinterland. The season for his biggest seller, pimento de padron or the Russian roulette of peppers, is May to November. So what does he do for the rest of the year?

“Well, we do keep growing peppers for our major customers [in a polytunnel], but that’s just a small amount, maybe a quarter of our usual crop. We looked into growing some other winter crops … but in the end we decided that we didn’t want to work 16-hour days, 365 days a year. So we take it a little bit easy!”

Whether you power on or power down, learning to ride the waves of seasonal change is one of the most important things you’ll do for your business.