Owning and operating a business is a dream come true for only 10% of Americans.
As wonderful as it is to be in that minority, owning your own business comes with a myriad of obstacles. In fact, a staggering number of small businesses never make it past a few years. The challenging market can be even more difficult for people who run a business that caters to seasonal customers.
These businesses could be food trucks, landscaping businesses, restaurants located in beach towns, etc.
Regardless of what you do, if your businesses experience seasonal lows, you must make managing cash flow dips a priority.
Follow along to find out how.
Managing Cash Flow Dips Caused by Seasonal Customers
Most people choose to start a business based on what they are passionate about and/or good at. Unfortunately, these standards are not always advantageous when it comes to securing a steady year-round income.
However, that does not mean you should quit doing what you love or give up on your business. Instead, let’s focus on learning some tips for managing cash flow peaks and valleys based on seasonal customers.
Understand the Seasonality of Your Industry
Hopefully, when you started creating your business, you did a fair amount of market research to better understand your industry. Additionally, most seasonal businesses are quite obvious. For example, not many people in Montana need someone to mow their lawn in the middle of winter.
However, it is never too late to learn more. You need to educate yourself as much as possible about what services or products you offer in relation to your consumers and their habits. The more you know about consumer behavior, the more you will be able to capitalize during the good times and survive during the slow times.
Always be Looking Ahead
Knowing what you do about your industry, you should be able to get a good handle on what each year of business looks like. For example, as a seasonal business owner, you should never look at your finances on a month-to-month basis. You need to create yearly revenue estimates and base your monthly budget on that.
Additionally, when thinking about spending money on unnecessary expenses, make sure that money will not be required to pay bills or make ends meet during your slower months. Sure, a couple of new work vans or power tools may help your company grow in the future, but will you be able to survive long without that money?
For help with financing in terms of growing your business, it may not be a bad idea to apply for a working capital loan. These loans are designed to help business owners with inventory costs, unexpected expenses, or business opportunities that may pop up.
Learn How to Cut Costs During Slow Times
Managing cash flow as a seasonal business means learning how to minimize your costs of operation during the slow season. For example, this process may mean cutting back employee hours, only having employees during the on-season, slowing down on paid advertising, etc.
Naturally, you should be able to cut back on production and supplies if you are not doing as much business. Set goals for your business and stay committed to achieving them. Write them down and hang them up where you will see them every day.
Find a Secondary Source of Income for the Off-Season
Almost all financially successful people will tell you there is a simple trick to ensuring financial security – redundancy. At all times, you should have a secondary source of revenue at play. Never rely on a single means of support.
There are countless opportunities for people looking to make some side revenue. You could start another business cleaning homes, designing websites, dog-sitting, or you could work for someone else as a freelance writer, a virtual assistant, or a remote call center employee.
Keep In Touch with Existing Customers
Another vital step in managing cash flow with seasonal customers is ensuring they will be back next year. You can do this by keeping in touch with them. Let them know they are on your mind so you will stay on theirs.
A great way to do this is through email campaigns and/or social media. You can sweeten the deal by offering better prices for returning customers.
Take Advantage of “Hype” Marketing
As a pre-emptive step to insure a thriving busy-season, use your slow times to hype up your products and services. Basically, you want to start getting people excited to use your business again.
Start the slow season with some hints of big promotions for the next year. Then, as your busy season starts getting nearer, drop the bomb by offering big discounts or even free services for people who take part in spreading the word.
You can do this through social media by running a competition or raffles based on shares, likes, comments, and more. The more people you can get to interact with your posts, the better.
Prepare Your Staff
Above we talked about having seasonal employees as a means of managing cash flow for your business. However, it is only fair that anyone you hire knows what they are agreeing to.
Make sure any employee you sign on know that they may have their hours significantly or completely cut during the slow season. This option will help you save money by not being guilted into keeping someone on when you do not need them. It will also help you avoid any negative reactions from unsuspecting employees.
Consider Changing Your Business Model
Depending on what type of business you run, there may be some wiggle room in your operations for managing cash flow dips during the off-season. For example, as a pool-cleaning business, instead of catering only to houses with private pools, reach out to local hotels and other businesses with indoor pools.
Alternatively, a landscaping business could offer snow removal services during the winter months and a food truck business could offer catering. You do not have to change what you do, but you can be more creative about how you do it.
Need Help Getting By?
Lastly, managing cash flow sometimes means having a safety net. No one ever said you had to do this on your own. It is okay to ask for help!
If you need some extra funds while times are slow, consider applying for a working capital loan. We write loans on your terms, not ours. Take a look at what we can offer!
Combining a high level of personalized service with a cutting-edge lending platform, Formula Funding delivers an unparalleled banking alternative. We offer a fast and efficient option to get your business the critical funding it needs without the red tape. We work with all credit grades, tax liens, judgments, and charge-offs – something unheard of at a traditional bank. Since 2010 over 15,000 small business owners have used our funding sources to grow and expand.