• What We Do

  • Archives

Leadership Thought #335 – Navigating The Challenges Of Managing A Seasonal Business


Business is hard enough with encumbering it with seasonality issues.  I’ve seen many talented and hard working small business owners struggle under the weight of non-seasonal business volume.  It’s hard to staff properly, keep good people and manage your cash properly.  If you’re not careful it can begin to feel like a “feast or famine” situation which over the years can start to wear you down.  Of course there are many people who manage to navigate the “ups and downs” properly, but they are usually pretty disciplined about their business leadership actions.  If you are in a seasonal business environment, I encourage you to consider the following:

  • Keep your overhead very low – rent or buy administrative capacity when you need it, don’t build it;
  • Invest your discretionary capital in revenue generating strategies not in increasing your operational expense base;
  • Make sure you have a flexible staffing model that allows you staff up and down based on actual volume – keep your core staff as lean as possible;
  • Don’t get caught up with owning your equipment unless you can easily afford it and if you do buy it, then lean towards used equipment first;
  • Don’t get used to always having a high balance on your Line of Credit – have a plan to always get it back to zero at some point during the year and keep it there as long as you can;
  • Try and bank with someone whom understands your industry and business dynamics and even pay a little more to have this relationship;
  • Don’t pay yourself based on your peak volume months but instead smooth the payment curve out based on full year performance;
  • Generate your wealth from profits not from salary and don’t take large distributions during peak volume months;
  • Find creative counter-cyclical ways to breakeven in the offseason or shut down operations altogether during your slowest periods and take an extended vacation;
  • Offer clients discounts for buying during non-peak months;
  • Talk to your existing clients about their offseason needs to identify new business opportunities, but don’t stray to far from your core competencies;
  • Consider offering service and maintenance agreements with regular payment and work schedules throughout the year;
  • Don’t take advantage of large volume discounts if you can’t absorb the short term costs;
  • Negotiate favorable payment terms with vendors that smooth out your cash flow issues whenever possible;
  • Spend your slow periods planning for the busy months and make sure you timing your business development efforts properly;
  • Make sure you have a good accountant who can help you with cash flow forecasting and realistic tax planning;
  • Constantly look at the ROI of sales/marketing activities and channel more funds to those strategies/tactics proven to have the highest return – don’t waste money just to diversify and be creative;
  • Use the offseason to bolster your skills, increase your knowledge and enhance your product/service offerings;
  • Consider operating in different geographies at different times to maximize seasonal advantages;
  • Make spending more quality time with your family a priority when business is slow rather that fretting about the lack of work.

If someone asked my opinion, I wouldn’t encourage them to go into a seasonal business until they have carefully thought through what they are going to do during the offseason.  The great thing about entrepreneurs is that they are typically optimists and mostly see the upside of any opportunity.  They also believe that somehow their situation will be different and they can buck industry trends by just thinking and acting differently.  While this mindset may be true in limited cases, it can also get you in trouble.  Very few people swim against the tide successfully (especially for any extended period of time).  If you are in a seasonal business you need to balance your optimism with pragmatism.  You must fully embrace the dynamics of your business situation and plan accordingly.  There are rarely any silver bullets which will remove the seasonality aspect of your business model.  If you choose this route tread carefully and responsibly.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: