Seasonal businesses balance periods of whirlwind activity with stretches of calm. Getting everything in order for those busy times (not to mention figuring out how to make the money last all year long) can sometimes be a challenge.
Wayne Bergman, a Hudson, Ohio-based executive business coach at ActionCOACH, works with seasonal SMBs in many sectors. He has helped companies sort through and overcome the difficulties of running a seasonal business, from understanding how year-round finances work to developing hiring schedules. No matter which industry you're in or where your business is located, the strategies he lays out can help you plot a roadmap to seasonal success.
Figure Out the Finances
First, develop a complete financial picture for your business. "What are the fixed costs you're trying to cover for a 12-month period?" Bergman asks. Your seasonal business may only bring in money during a portion of the year, but some expenses come due every month, such as rent on the space to store supplies, insurance premiums, repairs and maintenance on equipment, trade association dues and website fees.
Don't forget to include costs for employee training in your calculations. "People aren't going to come in for training if you don't pay them," reminds Bergman. Because most of that training happens before you open for the season, you need to include enough money in the budget so you have the ability to pay before the cash starts flowing in.
Now it's time to set a profit target for the season. "Once we understand their fixed costs on an annual basis, we can then figure out what their profit target is," Bergman explains. After determining how much profit your business needs to make, you can establish your sales target for the season.
Sales History and Goal-setting
Seasonal small business owners should make meticulous recordkeeping a priority. "Most of their goal-setting is based on their historical sales, and their historical seasons," says Bergman. Knowing how economic and other factors have affected consumer spending in the past will help you estimate next season's sales. Understanding how material shortages, difficult employment markets or a lack of available real estate have affected you (or similar businesses in your area) in the past will give you a leg-up on tackling those types of challenges in the future.
Improving the profitability of your business each year also requires a thorough look back at the performance metrics of previous seasons. "Where have they made money in the past?" Bergman asks.
Develop Sources for Market Research
Evaluating historical data is only half the story. You must also understand the market pressures that are likely to affect your business in the next season. "I encourage seasonal business owners to look at trade magazines, business publications, or industry associations they may belong to, and talk to other businesses inside their communities," Bergman says.
Mining the knowledge of those around you provides a wide perspective on how demand is shaping up and where potential challenges lurk. You can also learn the tricks other small businesses use to cope with issues ranging from slow seasons to employee turnover.
Calculate a Calendar Countdown
Bergman uses the example of a landscaping business in Cleveland, where lawnmower engines usually start running in the middle of March. "We back it up and say, 'We've got to do recruiting, training, and all this other stuff. Then we back calculate for March 15.'" By working backwards, you'll be able to identify when employees need to be ready and when equipment maintenance must be completed.
For retail small business, you can also determine how early your products should be ready for shipping or display and when to begin advertising. The trick is to create this countdown calendar early. As soon as you close up shop for the season, begin preparing for the next. "I encourage all of the businesses that shut down during the winter time to do their 2014 budgets now," Bergman says.
Julie Knudson is a freelance writer whose articles have appeared in technology magazines including BizTech, Processor, and For The Record. She has covered technology issues for publications in other industries, from foodservice to insurance, and she also writes a recurring column in Integrated Systems Contractor magazine.
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