When it comes to seasonal businesses, the usual rules of cash flow tend to go out of the window. It is very vital for your business that you understand these differences or else it could hurt your company. Maintaining a sufficient cash flow is important, and there can be a lot of ups and downs in this process but here are a few tips that should help you along the way.
Budgeting is something that can make or break a business whether they are seasonal or not. But, especially with a seasonal business, if you can craft the right kind of budget, you can set yourself up for success no matter the season. You have to take into consideration which season to spend the most money and be able to plan example. A good example would be heating costs being higher in the winter or higher payroll in the summer due to the hiring of temporary workers.
Identify Slow Seasons
Having a knowledge of when you typically have a slower business is also very key in managing one’s cash flow. Sometimes the slow season will be simple to pinpoint. For example, a ski resort would likely be slower during the summer, or an ice cream truck during the winter. Other times, it might be as clear, and that is a dangerous thing as a slump in sales can creep up on you without you realizing it. Take a look at past records and try to see where your business has slowed before. You can also predict when you can expect slower business based on projected consumer spending, weather patterns (if it pertains to your business), and market demands.
Chances are you will be able to find ways where you can cut down on some of your expenses. A lot of times you will find that hidden costs sneak their way into your budget which makes them easy to get rid of. It might even help if you consider to shut down for part of the year as a “forced vacation” as this could help drastically cut costs and it should work as long as you are able to budget for the personal expenses during that time.
Set a Line of Credit
Setting up a line of credit might be very beneficial for your seasonal business to make certain that you will have funds available during periods of slow revenue. You will want to work with a financial institution that encourages this kind of cash management, as well as with the business lending teams so that your business has access to as many financial services that exist.