In business, we all struggle with highs and lows, but for seasonal businesses – those that make the bulk of their profits at certain times of the year – knowing how to optimize the lows while riding the highs requires a particularly innovative and diligent entrepreneur at the helm.
Some small business ideas are seasonal in nature. If you pick the right business you can work really hard for a couple months out of the year and take it easy the rest of the year. That doesn’t usually mean you’re not working at all, there’s usually quite a bit of preparation the rest of the year for those few months of crazy business. Some businesses are just slow certain times of the year, but you still have to be there open for business.
Seasonal businesses do have their draw backs, one of the biggest drawbacks is cash flow. It can be hard not to spend when you have cash in hand, but you do have to budget for the off months. There may still be rent to pay, and other fixed costs that you’ll have to have cash for when there is little or no cash coming in the door.
That’s not to say that you can’t make a wonderful business out of something seasonal. There’s definitely money to be made there. You just need to be extra careful to set up your business plan and your budget to include some down time.
As the old carol says, Christmas comes but once a year. But for Filipino entrepreneurs who manufacture Christmas décor, it’s actually a year-round business that needs to be attended to every single day.
Much more hardworking than even the indefatigable Santa Claus, Christmas décor makers and exporters are this early already in different stages of production for products targeted to roll out all the way to the year 2010. They are sinking in huge sums of capital for operating expenses, and in the face of the spiraling raw material and fuel oil costs, theirs is a tough balancing act indeed!
On top of these woes, the Christmas décor entrepreneurs also have to contend with the emergence of cheaper foreign sourcing alternatives for their products. Indeed, mention of China, Thailand, and Vietnam now encroaching on what used to be their exclusive turf immediately sends shivers down their spine.
For all these challenges, however, the manufacture and export of holiday products remains a profitable business. As Antonio M. del Carmen, director of the Ateneo Center for Continuing Education Entrepreneurship Program, says, there’s no such thing as a seasonal business for a seasoned entrepreneur.
“A business enterprise involved in cyclical products or services can normally sustain its viability through the proper allocation of its resources and revenues over the whole-year period,” he explains.
He continues: “To use a figure of speech, you have to make hay while the sun shines and save up for the rainy days. This is easier said than done, of course, since everything really depends on the level of profitability of the enterprise during the on-season operations. But if the business makes enough margin to cover overhead expenses during its off-season operations, efficient cash flow management should enable it to sustain its viability.”
Here are some of the strategies to keep seasonal enterprises viable the whole year through:
- 1. Conduct off-season sales. Jackets, sweaters, rubber boots, and other raingear are often put on sale during summer months. Conversely, swimwear, summer outfits, and swimming paraphernalia go on sale during the rainy season. The objective of an off-season sale is obviously to generate cash flow even at a minimal or negative profit margin just to cover fixed operating expenses. To move inventory, businesses doing Christmas or other seasonal décor may also hold export-overrun sales or garage sales.
- 2. Generate advance orders. To provide enough time for production and shipment, Christmas décor is normally marketed to the United States, Canada, or the European countries as early as the second quarter of the year. Another good way to get advance orders is to sell corporate Christmas giveaways, which can be ordered as early as the third quarter of the year
- 3. Reinvent, re-engineer, innovate. Entrepreneurs need to be more creative, continuously reinventing or re-engineering their seasonal products and services to create demand even during off-season periods.
Tips and Advice
For some businesses it is easy to identify when the busy period is likely to be. If you run a toy or gift business, you are probably working very hard right now in the run up to Christmas.
How can you prepare for the busy season in your business?
- Before your busy season hits, make sure you’re prepared. You should do anything you can do ahead of time to make your life easier during your busy season. Check your inventory, make up anything you can ahead.
- Clear your calendar to make the most of your busy season. Don’t plan vacations in the middle of tax season if you’re an accountant. Plan to be open for business, and ready to work when the customers are looking for your services.
- Hire and train your employees before the busy season hits. Training your employees when you have the time is much easier than trying to train them while you have 10 impatient customers staring at you.
How can you prepare for your businesses slow season?
- Save some of the money you made during the busy season to help pay the bills during the slow season.
- Take care of paperwork, maintenance, and any other activities you can so you can focus on keeping your customers happy and making money during your business season.
- Learn more about your business during the off season. If you need to take classes, or learn more about your market, the off season is a great time to do it.
- Make notes on how you can work smarter, and improve your next busy season.
Success is in the Off-Season
A seasonal business has to some extent an advantage over a year round business. When operations stop, there is a quiet time to regroup and refocus. Unburdened from having to run their businesses, many seasonal business owners use their off- season to plan out the operational and fiscal goals for the following year. Others use it to update systems or material or for the maintenance and repair of equipment. Off-season is also a time to begin preliminary sales and marketing activity.
In short, running a successful seasonal business means thinking ahead and having a lot of flexibility. Though it may be a challenge the rewards are great.
sources: everyjoe.com, entrepreneur.com.ph, fastupfront.com, photo from content.ll-0.com