'Tis the season to be jolly...
How do businesses manage seasonality? With the festive time of year in full swing (with sensible Covid restrictions, of course), many businesses experience an uplift in sales and make hay while the sun shines. But what about the rest of the year? How do business leaders make prudent decisions that affect their performance and impact their workforce knowing the knock on effects of a good or bad holiday season? In this blog, we will explore these themes and look at how using good quality management information can help.
1. Understand your trends
It is more than sensible and logical to look back at what has happened in the last 2 to 5 years to get an understanding of trends in your business. Whatever your reporting periods are, look to see any patterns at various times of the year and understand what has been the root cause of these peaks or troughs. Look at all aspects of your business, from sales to gross margin to overheads in the P/L to debtors, creditors and stock levels in the balance sheet. There will be clues in there somewhere to help you plan for the future and get your forecasting correct. Good quality, regular management information can of course aid with this historical analysis.
2. Manage your expectations
Understanding your trends above will undoubtedly help you to manage your future expectations around any seasonality and whether you think you are over or underperforming as a business. Build what you have learned into a solid business plan. This will underpin any demand expectations you have for certain product or service lines and help determine where you can focus your attentions, including ensuring your stock or supply lines are sorted.
It is also vital that you are capable of communicating to your employees any expectations around heavy or additional workloads during peak seasons, no matter what your business. Don't assume they will automatically get it because they will not have the same level of access to information or the experience that you do. Again, sharing some management information with key members of staff can really help to communicate these messages.
3. Cash is king
Remember that during busy periods, you are often likely to see a cash influx but that money may well be required for some quieter periods so squirreling some away for a rainy day is prudent. Understanding your peaks should give you the sense to preserve cash when you know you have troughs around the corner. Avoid unnecessary expenses and don't get carried away if your sales are higher than expected.
Proper cash flow forecasting is so beneficial to help see when challenges are on the horizon and when you can maximise your reserves. Linking this to your business plan and being flexible as your business matures are vital.
4. Diversify your income and get creative
Having all your eggs in one basket in the form of one income stream, or one peak time of year is rarely a good idea. If you recognise this in your business, maybe now is the time to get creative and make the most of your downtime to de-risk your strategy. Seeking alternative sources of income outside of your bread and butter is never a bad thing to keep the cash coming in. Seek complementary products or services that could fit into low seasons or make use of the time to think how to expand the brand awareness to exploit the next peak.
Don't be afraid to see what some of your competitors are up to either. They will be experiencing the same issues and problems so see if you can problem solve together. This may help to keep your business afloat when times get tough.
Having management information which highlights better performing product or service lines will help give you an understanding of where to focus your attention for your business diversification.
Do you run a company which experiences peaks and troughs and seasonality? Get in touch with us today to let us know how you manage it or if you think you could do with some support.
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