From retailers to contractors, many businesses deal with seasonal sales cycles, and they can be challenging for any leader to manage. Due to the nature of their products and services, seasonal businesses often see a rapid influx of sales and income during one or more defined periods of the year, only to see sharp decreases once a selling season has ended.
It’s essential for such businesses to plan for and manage these fluctuations to ensure they can sustain themselves year-round. Below, 16 Forbes Finance Council experts share their best tips for managing finances both in and out of seasonal sales cycles. Follow their advice to keep your cash flow strong, even in the off-season.
1. Scale Back On Capacity Investments
Because seasonal businesses are anxious to ensure they maximize revenue during peak season, they often fall into the trap of building up more capacity than needed. Instead, build for 90% peak capacity. If you take the missed revenue for five to ten days, you’ll reduce the cost of servicing capacity investments for the whole year. – Ramachander Raja, GEP Worldwide
2. Measure Your Performance At Multiple Points
You should actively be building cash reserves to prepare for the known pullback. Review your business on an annual basis (trailing 12 months) so that you are always aware of your position within the cycle. Implement metrics to measure performance period-over-period and year-over-year, and track your cash in the trough, at the summit and at all points between. Avoid the “ostrich approach”—engage when you don’t want to. – Matthew Goldston, PKF Texas
3. Examine Sales Trends
Most products have some sort of seasonality, albeit some have more than others. Businesses must examine sales fluctuations to see trends, determine any predictability that could affect staffing needs and forecast cash flow. Having a handle on these basics will help leaders better market their existing products and make decisions about off-season product lines they can expand into. – Andrew Lyon, Focused Energy
4. Diversify
The best way to weather seasonal storms is to develop multiple revenue centers. Launch one when another is doing less than great. This way, you and your business will be able to weather the ups and downs of cash flow and revenue challenges. – Sheryl J. Moore, Wink, Inc.
5. Identify And Plan Seasonal Revenue Streams
It is always good to diversify lines of revenue so that you have different seasonal sales cycles. For instance, for some lines of business, summer may be the peak season, whereas for others winter is the peak time. This not only enables you to see consistent cash flow throughout the year but also helps you diversify the business and have ample time to prepare for the next season. – Breana Patel, Bonova Advisory Inc.
6. Leverage Downtime To Reduce Burn And Pursue Marketing
Maximize the good times and optimize the off times. You want the most ideal market timing for growth, and as a seasonal business, it’s imperative to maximize your most important seasons through marketing, creativity, partnerships and offers. In off times, reduce burn while also trying to build revenue through low customer acquisition cost marketing efforts. This combination builds a healthier and stronger business. – Carlo Cisco, SELECT
7. Improve Your Customer Pipeline
Understand your pipeline and how it affects the future health of your business. Accelerate the timeline of projects as far as possible. Improve the process of qualifying your leads. If a potential client is too small or not within your target industry, disqualify them sooner rather than later—don’t consider them part of your pipeline because they are not a good lead for you in the long run. – Jody Grunden, Summit CPA Group
8. Build A Robust Forecasting Tool
For companies that deal with seasonal sales cycles, it is critical to have a proper forecasting tool that includes a detailed analysis of cash and inventory needs. Forecasting is as much an art as it is a science; spending time to develop a proper tool is difficult, but it pays off when you have to manage the swings of seasonal supply chains and customer orders. – William Lieberman, The CEO’s Right Hand
9. Advertise To Increase Nonseasonal Sales
First, I’d increase my income. I’d look at seasonal sales as the icing on the cake of my normal sales. This means I must create a normal trend of nonseasonal sales through good promotion, marketing and advertising and then ride the wave of affluence that comes when the seasonal sales season heats up. Lastly, have six months’ worth of business cash reserves and another six months of business credit available. – Jerry Fetta, Wealth DynamX
10. Value Cash, And Stay Lean
Retailers should ensure they’re holding minimal or no stock toward the end of a seasonal cycle, even if that requires some leftover stock to be sold at a discount. Smaller cash sales should be preferred over high-value credit sales. Rather than committing to fixed overheads, businesses in the contracting or service industries should be operated with independent contractors and variable costs out of flexible offices. – Debasish Dutta, ORANGE CORP
11. Regularly Evaluate Your Team Members
Track, predict and prepare for fluctuations. Seasonal sales cycles are another reason to evaluate which employees remain the strongest through tough times and good times alike. If you’re able to retain employees who have the best interests of the business at heart in any situation, you stand a far better chance of sustaining your business through tough times. – Julio Gonzalez, Engineered Tax Services Inc.
12. Open A Line Of Credit
Obtaining a line of credit during your peak season will ensure you get the best interest rate and loan amount while also setting the company up for success if it ever needs those funds during a downturn. Also, if there’s any type of monthly package that can be offered to offset a season, consider offering it. – Jackie Meyer, Meyer Tax, The Concierge CPA Coach
13. Ensure You’ve Scheduled Bandwidth For Seasonal Upticks
In our industry, we typically see an uptick in government spending on contracts toward the end of the government’s fiscal year—it’s fondly referred to as “dash for the cash.” We plan our proposal schedules to accommodate the additional work and enable a quick turnaround on proposals. This helps us best plan and manage the swings due to seasonality in our field. – Kelly Shores, GCubed, Inc.
14. Set Aside Money Each Month For Large Expenses
Businesses that have seasonal sales cycles should allocate money each month throughout the year for large-ticket expenses. For instance, instead of having to pay a huge amount of money at the end of the year for staff bonuses, a business should allocate money each month into a side fund for this expense. It helps smooth out cash flows when expenses are amortized over a longer period. – Michael S. Schwartz, Magnus Financial Group LLC
15. Stay In Close Communication With Stakeholders
Keep communications open with all teams when changes occur. There’s always a trickle-down effect across any organization when financial circumstances change, but with a seasonal business, one change can have four or 12 times the impact it would on a nonseasonal business. Providing all stakeholders with the ability to reassess needs is imperative. – Tom Torre, Bend Financial
16. Create A Detailed Cash Flow Forecast
Seasonal businesses need to understand cash flow more than anything else. Having a detailed cash flow forecast will help you to identify problems before they get too big. If you give your clients terms, the cash conversion cycle can take even longer. If you can plan well and adjust as things change, you can do very well in a seasonal business. – Brian Hayes, NOW CFO