No matter what industry you are involved in, most businesses have seasonal highs and lows.
Having said that, however, some retail businesses have a more dominant seasonal component as compared to others. Such businesses earn their maximum profits during specific prime seasons in the year and experience a lull at other times.
Having good credit is thus a necessity in a seasonal business. This is because, irrespective of the inflow of new businesses, certain obligations like maintenance and taxes need to be taken care of all year through. Thus, a business owner must be prepared to cover these fixed expenses even when there is no or minimal cash flow.
Efficient budgeting and innovative thinking is the need of the hour. As an entrepreneur, you can follow these 4 hacks to best manage your off-season expenses:
#1 Explore off-season opportunities
In order to manage seasonal business, one has to do more than just pinching pennies. Many smart business owners devise plans to switch gears during off-seasons. This involves diversifying income streams which in turn can ensure a more consistent cash flow.
This plan B also allows a business owner to better utilize his retail location, retain key employees throughout the year, and grow and prosper even when the business is going through a dull phase.
While diversifying income streams is a brilliant way to keep your seasonal venture afloat, you must be careful before overextending yourself in an unfamiliar line of work. Also, you need to be doubly sure that you have the resources as well as the capability to pull it through.
#2 Mind your cash flow
Unfortunately, a lean period in a seasonal business does not rid you of either your fixed or variable business expenses.
Despite your best efforts to maintain a detailed cash flow forecast, there may be times when you encounter unexpected expenses and need a little help to keep your business afloat during the off-season.
This is where every business owner should turn to business loans so that he can keep his assets and staff in good shape. A proactive approach in this matter, before the arrival of the lean period, is advisable. Take the assistance of a trusted loan provider and understand what kind of business loans suit your business needs the best.
#3 Consider a flexible workforce
The flexibility of the workforce allows seasonal businesses to match payrolls to seasonal shifts in revenue. While it is important to retain some key, full-time employees all year round, for other less important profiles, freelancers, and temporary workers can provide work at a much lower overhead cost. As a seasonal business owner, you would do well to engage a flexible workforce.
#4 Contemplate buying or leasing equipment
Leasing instead of buying equipment to meet your business needs frees up your reserve funds. These can then be diverted to sustain your day-to-day business running if you ever lack cash due to an off-season income drop.
This method allows you to gain the use of an asset with less initial expenditure than would be required if you purchased the same.
However, before taking this step, be sure to weigh the pros and cons, and determine whether you would be better off leasing an asset instead of purchasing it.
Anticipating your business cycle and being proactive is instrumental in managing your expenses in a seasonal business. Engage in a little creative problem-solving and come up with innovative solutions to keep your venture afloat and cash flow consistent.