Leadership Thought #335 – Navigating A Seasonal Business

Business is challenging enough without encumbering it with seasonality issues. I’ve seen many talented and hardworking small business owners struggle under the weight of non-seasonal business volume. It isn’t easy to staff appropriately, 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, many people navigate the “ups and downs” correctly, but they are usually disciplined about their business leadership actions. If you are in a seasonal business environment, I encourage you to consider the following:

• Keep your overhead low – rent or buy administrative capacity when needed; don’t build it.
• Invest your discretionary capital in revenue-generating strategies, not increasing your operational expense base.
• Make sure you have a flexible staffing model that allows you to increase and decrease staff based on actual volume—keep your core staff as lean as possible.
• Don’t get caught up in owning your equipment unless you can easily afford it. If you do buy it, then lean toward used equipment first.
• Don’t get used to always having a high balance on your Line of Credit—have a plan to get it back to zero at some point during the year and keep it there as long as you can.
• Try to bank with someone who understands your industry and business dynamics, and even pay a little more for this relationship.
• Don’t pay yourself based on your peak-volume months; instead, smooth the payment curve out based on a full year’s performance.
• Generate your wealth from profits, not salary, and avoid taking large distributions during peak volume months.
• Find creative counter-cyclical ways to break even in the off-season, such as shutting down operations during your slowest periods and taking an extended vacation.
• Offer clients discounts for buying during non-peak months.
• Talk to your existing clients about their off-season needs to identify new business opportunities, but don’t stray too 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 significant volume discounts if you can’t absorb the short-term carrying 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 ensuring you correctly time your business development efforts.
• Ensure you have a good accountant to help you with cash flow forecasting and realistic tax planning.
• Constantly examine the ROI of sales/marketing activities and channel more funds to 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 separate times to maximize seasonal advantages.
• When business is slow, prioritize spending more quality time with your family rather than 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 considered what they will do during the offseason. The wonderful thing about entrepreneurs is that they are typically optimists and mostly see the upside of any opportunity. They also believe their situation will somehow be different, and they can buck industry trends by thinking and acting differently. While this mindset may be proper in limited cases, it can also get you in trouble. Very few people successfully swim against the tide (especially for extended periods). If you are in a seasonal business, you must balance your optimism with pragmatism.  You must fully embrace the dynamics of your business situation and plan accordingly. There are rarely any silver bullets that will remove the seasonal aspect of your business model. If you choose this route, proceed carefully and responsibly.

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