Planning for seasonal dips in income

Seasonal dips in income can be highly challenging when you’re a small business. But there are proactive ways to predict, plan for and overcome these dips in revenue.

The key to dealing with seasonal dips is to know when they’re most likely to occur, and to have measures in place to spread your income and revenue pipeline over the course of the year.

Understanding seasonality in your sector

If your business is seasonal such as pool supplies, or a ski gear specialist, you’ll be used to the peaks and troughs, but many 'non-seasonal' businesses experience times during the financial year where sales and revenue peak – and, on the flipside, where sales and revenue experience a pronounced dip.

When income is low at certain times of the year, it makes for challenging times.

So, what are the key ways to plan for this kind of seasonality?​​​​​

Forecast your seasonality

It’s vital to know WHEN you’re most likely to experience any seasonal dips. Looking at bench-marking reports for your industry is one way to predict the seasonality in your niche or sector. But you can also use your own accounting data to great effect. Look back through your profit & loss reports and spot where the peaks and troughs have occurred over preceding years.

Charge a premium in peak time 

One straightforward approach is to apply premium pricing for your products/services during the busy season. By increasing your pricing, you boost your overall revenue, giving you more working capital to see you through the leaner months when sales and income are at their lowest.

Offer additional peak-time services

Offering added extras and other additional service lines during peak time is another way to maximise the season. In the months where customers are most engaged, look to upsell these premium services and offer more value. Satisfied clients will be more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.

Target other markets

Exploring other related markets is another useful tactic. When you’re experiencing downtime, look for other ways to monetise your existing assets, products or services. For example, if you’re a hotel where sales peak in summertime, offer discounted conference space in the winter months to boost revenue.

Diversify your products/services

If one product/service has a known seasonal dip, look at adding an additional product or service to offset this downtime. For example, a a ski resort could promote bike-riding or hiking breaks during the warmer summer months to keep revenue constant. Likewise a pool maintenance firm could establish an outdoor fireplace business for the colder months.

Have a regional e-commerce strategy

If you’re dependent on a small local market, broadening your marketing and e-commerce strategies can help to attract a wider customer base – and bolster sales. Paid advertising through Facebook, LinkedIn or Twitter can easily target new geographical markets, bringing in new customers and giving your revenue a much-needed uplift during seasonal troughs.

Talk to us about planning for seasonality

f your business is struggling with seasonal dips, and the resulting impact on cashflow, come and talk to us. We’ll help you identify the timing of your seasonal downtime, and come up with a clear strategy for stabilising your income across the year.

Get in touch to start beating those seasonal dips.

Have you got a strategy for a financially stress-free holiday period?

Christmas holiday breaks are a time to spend with family, friends & have a chance to recharge for the year ahead. We look forward to warmer weather and finally setting up an out-of-office email for the break. However, for business owners, this time can be stressful without careful cash-flow planning.

Even if you do continue to operate through the holiday shutdown season, your customers' financial behaviour may not remain the same.

It can be pretty disappointing to work hard all year only to find that once you have paid staff, overheads and creditors, you have little or nothing left in the bank to cover your own time off.

The strategies and tips shared below are generalised, however, we are here if you need to budget and prepare a cash-flow forecast. We can also help if you need assistance in applying for short term finance to get you through the break.

Why is cash-flow planning particularly important at this time of year?

Staff leave needs to be covered in addition to your normal fixed overheads like rent, creditors and tax compliance. The budget and forecasting process ensures you know your numbers and are prepared. If you are shutting down, you won't be driving revenue during this period and sales may take time to get started again in the new year.

Here are some simple strategies that can help:

Decide your Christmas and holiday break dates

Confirm these with staff, customers and suppliers.

Budget and plan for annual leave 

Remember the pay rates may be higher than standard hourly rates, also factor in statutory public holidays.

Decide

If you are going to pay out leave in full at the beginning of the Christmas break or continue to pay as usual throughout the break.

Review your work in progress (WIP)

Plan to complete jobs or services that can be invoiced and paid before Christmas (remember if you don’t invoice and get paid before Christmas, you may not see the money until mid to late January).

Capacity planning

There is often a rush to get everything done before Christmas, whether it's the kitchen benchtop installed or the beauty treatment before the break, so make sure you have the capacity to maximise on this.

Stock-take

Do you need to order in goods now to be able to complete work in progress? Check that there is stock on hand available.

Making an arrangement with the Tax Office

if you find you can not make payments, it is possible to apply for an instalment arrangement. There are costs associated with this, however it may provide a solution that gets you through the holiday period. Talk to us, we can help.

Talk to us about enhancing your financial support

If you can’t make ends meet, now is the time to organise short term financial relief like an arranged overdraft of loan, rather than hoping it will come right. Please let us know if you need any help with cash-flow forecasting, budgeting or finance applications.

Get in touch to improve your cash flow.

What’s in the forecast?

When we set out on a fishing trip or hike, we always check the weather forecast.

It’s no different in business. The forecast tells us if there’s bad weather (poor cashflow) in store based on the direction we’re heading.

Your forecast will tell you:

The difference between a business forecast and a weather forecast is that, when the business forecast is showing bad weather, you can do something about it to make the sun come out. The forecast will tell you what’s going well and what’s not, so you can make adjustments to reduce the impact of bad weather.

Just as you wouldn’t go fishing without checking the forecast, you shouldn’t run your business without an annual forecast. So, don’t live in your raincoat, waiting to get soaked - take control and talk to us about getting your forecast done so you know what to expect.

“Planning is bringing the future into the present so that you can do something about it now.” - Alan Lakein

We’re here to help you, every step along the way. Get in touch!

Teaching kids about money

Teaching your kids about money is all about finding the right moments to have a conversation. Each time this happens, you’ll be helping to strengthen their financial literacy and build their ability to make good decisions with money.

The money we spend each day tends to be invisible. When was the last time you withdrew your cash for the week and used it to make purchases? Rather than dealing in notes and coins, we tend to reach for our cards or shop seamlessly online. It’s entirely possible to spend money without even reaching for your wallet.

This can give kids some confusing messages about how money is spent. The danger here is that they won’t develop financial literacy and will struggle to manage their own money later on. One way to help them to build their financial management skills is to choose moments to talk to them about money and why you’re making certain decisions.

These moments could include:

Shopping a​​​​t the supermarket

If you’re taking your kids on the weekly shop, get them involved in the process. Involve them in drawing up your shopping list and talk through your budget. Have them help you to find items, and weigh up differently-priced options. As a bonus, helping them to understand how a food budget works might just cut down on all those requests for treats!

Withdrawing money from the ATM 

Getting out money does seem a little magical. So it’s important that kids can make the connection between the money you go to work for, and what they see coming out of the wall. Talk to them about where the money you’re withdrawing will go and help to understand the importance of knowing what’s in your bank account.

Letting them make choices 

When it comes to pocket money or money from a birthday or Christmas, it can be helpful to let your children experience the consequences of their financial decisions. It’s tempting to tell them what to do with their money, but once they discover that they can only spend their precious cash once, take the time to talk with them about what they are feeling and how they might use their money differently in the future.

Choosing activities 

When you choose what to do as a family, don’t forget to talk through the costs of different options. Kids will appreciate balancing an expensive trip to the movies with a free picnic in the park or will be amazed when they compare the cost of an icecream at a parlor versus a whole tub at the supermarket. Encourage them to brainstorm and research low-cost ideas and get creative!