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Being a business owner is challenging, and if your new business is seasonal in nature, you have an extra set of circumstances to consider. A surf school may gain a lot of foot traffic during the summer, but what about the colder months? How about a snow removal company during the summer? 

Proper planning and cash flow management can help you stay afloat when business gets slow during the off-season, all while preparing next year’s game plan. Here’s how to navigate the ups and downs of a seasonal business. 

Learn How To Manage Your Cash Flow Year-Round

Cash flow is what keeps the lights on and your employees paid. Unfortunately, inconsistent cash flow can make it challenging to operate a seasonal business. Some seasonal businesses make up to 70% of their annual revenue in just a few months. The rest of the year, there might be little revenue coming in.

Proper budgeting and cash flow management are critical to staying afloat throughout the slower months. Start by understanding the length of your peak season. Next, plan for expected expenses and revenue generated throughout the year — be sure not to overestimate peak season revenue. As you operate your business for longer, you can use historical cash flows to increase the accuracy of your budget.

In some cases, you may need to rely on commercial financing to carry you through the slower months. Financing products that address cash flow gaps, such as business lines of credit and working capital loans, can be especially useful to seasonal business owners. The Small Business Administration (SBA), for example, offers a seasonal line of credit that provides on-demand funds to business owners. Be sure to use a business loan calculator to factor your estimated repayment terms into your budget.

Use the Off-Season for Planning

Outside peak seasons, business owners have more time to work on business development. Tightening the budget, tweaking your marketing strategy, and optimizing systems are great ways to stay productive during slower months. Also, consider preparing for emergencies by building a cash reserve — this can help you avoid panic borrowing to cover emergency expenses.

Be sure to revisit your supplier relationships. As you continue working with one supplier, you can try negotiating more favorable turns. Or, if one supplier didn’t work out one season, you can use the downtime to secure a better one.

Make Sure You Hire Enough To Meet Peak-Season Demand

Due to the nature of seasonal businesses, hiring demands are not consistent year-round. An Adobe survey found that 55% of HR professionals said the holidays and summer were the most stressful times in meeting the surge for temporary hires. Standardizing workflow and procedures can help reduce some of this stress.

Ski resorts, for example, may need more hands on deck during the winter months, while an ice cream parlor will be busier during the summer. Also, keep your hiring demands in mind after peak season. If you sell holiday merchandise, for instance, you may need additional workers in January and February to handle returns and organize the inventory.

If you’re seeking an affordable labor market, consider hiring teenagers. Teenagers are great for businesses with peak seasons in the summer because they’re typically on vacation during these times. Moreover, working with teenage employees may qualify you for a tax credit — the New Jersey Senate Labor Committee, for example, allows businesses to offset the cost of the state’s higher minimum wage when they hire workers under 18.

Don’t Forget To Market Outside Peak Season

Off-season specials and sales are common marketing tactics for seasonal businesses. If you own an event venue, consider offering cheaper rates in the winter to attract off-season weddings. Early sign-up specials are another way to bring in cash flow during slower seasons. A ski instructor may offer early sign-up deals to earn revenue during the summer before peak season in the winter.

Email marketing can help you stay on your customers’ radars during those slower months. A surfboard company can send email-exclusive deals in the spring, so customers are ready for the beach when summer hits. If you’re a traveling retailer, you can send out emails letting customers know when you’ll be in their area and the new products you offer. Consider emailing your customers a quick customer survey to research their most in-demand products or services.

Find the Right Balance Between Inventory and Sales

Securing enough inventory can help a seasonal business maximize its profit margins. Having too little inventory or carrying excess inventory has cost the global retail industry approximately $1.1 trillion in lost revenue, according to McKinsey & Company.

Some business owners make the mistake of over-stocking products that are in high demand during certain times of the year. However, demand can sharply drop after peak season, which can lead to cash flow being tied up in excess inventory. While off-season sales can help generate some revenue, business owners must also consider the costs of manufacturing the product, shipping it, and then storing excess inventory. 

Proper forecasting and inventory management can help seasonal businesses meet their inventory needs while capitalizing on profit.

Understand How Form 941 Works

Tax filing requirements can be slightly different for some seasonal businesses compared to other types of enterprises. Businesses must file Form 941 quarterly to report taxes withheld from their employees’ paychecks. Some seasonal businesses, however, may not operate during other seasons. For each quarter that you do not pay employee wages, you do not need to file Form 941. Although, you will still need to notify the IRS that no return will be filed by checking the “Seasonal Employer” box in part 3 on Form 941 for each quarter you file it.

Diversify Your Products and Services

Widening your product line or services can help you earn revenue during slower months. For example, a winter boot company is typically the busiest during the winter season. The company could consider selling sneakers and sandals to cater to the other seasons, helping improve cash flow throughout the year.

You may even want to offer different services based on the season. A lawn mowing company, for example, can offer snow shoveling services during the winter. Or an outdoor ice rink can be repurposed as a roller-skating rink during the warmer months.

Launching a seasonal business comes with a specific set of challenges. But with proper planning and cash flow management, you can build a solid business that thrives year-round.

About the Author(s)

 Ting  Pen

Ting Pen is a ValuePenguin Co-Founder. She previously evaluated corporate mergers and acquisitions as a Financial Analyst at Citigroup. Her experience in financial services combined with her entrepreneurial spirit allowed for her to start her own fin-tech company. Her passions lie in problem solving, growth, and travel.

Co-Founder, ValuePenguin.com
Straw Hat Farmer Seasonal Business