Seasonality, in any business, can wreak havoc on cash flow.  Whether you’re in the construction trades, a wedding planner, or a lawn care professional, all business owners feel the burden of having to manage expenses during the ebbs and flow of the seasons.  From startups to maturing companies, analyzing your overall cash management strategy annually, while also including growth preparation, is key to long-term sustainability.

Strategize Periods of Downtime

If you own or operate a seasonal business, you’ll need to consider how to best maximize periods of downtime.  Generally, seasonal companies utilize that timeframe as an opportunity to train, prepare for busier periods, or recover.  Savvy companies may use the entire off-season preparing for growth by conducting effective sales calls while the rest of the competition is preoccupied.  Increasing sales staff should be a consideration to help boost your seasonal profitability. However, the costs associated with this new staffing, should be included in your overall cash management strategy. A well thought-out and executed sales plan during the off-season can lead to boosted sales during the peak season.

Sales Strategies

A well thought-out sales plan includes many components.  A good starting point is to determine who in the company will do the selling and how they will fit this into their job duties.  Would you need to hire a dedicated sales professional with unique networking skills?  The risk in hiring an outside resource to sell your product or service is he or she may not understand your company’s culture, process, or pricing right away.  However, the reward in hiring a dedicated sales professional is the significant impact he or she may have in helping your company grow.  Companies may also choose to hire support staff, while an owner or partner sells.  This can be a great solution, because who better to sell for the company than one of its most tenured and vested employees—the owner!  However, the owner’s highly sensitive duties may not easily transfer elsewhere.  Each company must individually look at their unique scenario to determine what makes the most sense for them.

Another serious consideration is determining what to sell.  Some businesses may decide to add complementary products, similar to their primary service, that improve cash flow during the off-season.  Others will choose to sell more of their primary product and have their efforts come to fruition during the peak season.   Importantly, businesses must carefully analyze which peak market segment will best serve their sales strategy. Do you have the opportunity to sell additional products to your clients or is your time better served trying to acquire entirely new relationships?  A great example of this is the lawn care professionals who put up Christmas lights during the winter.  They utilize their current customer base and found a way to improve cash flow during the off-season.

Planned Growth

Although growth is a step in the right direction; conversely, it can also impact a businesses’ cash flow.  Revenue growth causes a significant impact to the cash flow of any business. If growth isn’t properly planned, cash reserves set aside to cover gaps during the off-season could be exhausted.  Such cash reserves can be consumed to compensate new salaries or larger account receivables. Reserves can also be used for additional support staff for the peak season to ensure you deliver the same exceptional service to your existing and new clients.  Lastly, growth can also increase expenses through added inventory or necessary equipment upgrades.  The good news is, if you planned accordingly, the cash gaps are all temporary until you collect the profits from your new client base.

Seasonal companies who experience successful growth do not fail to strategize and plan their expansion.  A well-thought out, detailed sales plan should always be prepared and executed.  What’s more, consideration should also be given within this plan to the overall cash impact of generating any new growth. 

Give Yourself Credit

All successful plans include proper preparedness. The best mapped plans, however, can also be met with unforeseen roadblocks and detours. Sources of cash for growth can come from many places.  For example, companies may decide to use cash injections from partners to fund the first year short fall.  Others have taken a hard look at their collection and billing cycles and looked for software or methods to improve the accounts receivable cycle.  Lastly, some companies utilize lines of credit to avoid exhausting their cash reserves.

The above options may work for your company, but if you would like other ideas or a more in-depth discussion about your individual situation, please speak with one of First Bank’s business banking professionals.