Avoid the small business seasonal blues

The greatest challenge any business faces – especially a small, newly-established business – is cash-flow. Profits are neither here nor there if the money isn’t in your account when you actually need it. As most businesses have a ‘seasonal’ element, with peaks and troughs of demand, this instability is an added pressure small business owners could well do without. Just because the majority of your income is generated in one or two short bursts during the year, doesn’t mean bills stop coming in during the quiet times.

Financial planning is important for any business, but absolutely crucial to the survival of a business whose income-generating opportunities are restricted. This means giving careful consideration to every aspect of your business, from your invoice-settling and staffing policy, to the type of premises you work from, any tax implications of seasonal income and the repayment terms of your financial commitments, to ensure they reflect the reality of your income cycle. If, for example, you run a seaside fish and chip shop and generate 80 per cent of your income over three months, you should avoid being tied into flat overdraft or loan repayments that will stretch you financially when trade is slow. Similarly, if you sell fireworks, does it make sense to commit yourself to a retail premises when the internet or mail order offer a more financially viable alternative? 

Something else you need to bear in mind if you are running a seasonal business, is the effect it could have on your work-life balance. If your season is short, then you might need to work long, unsociable hours to make the most of your income-generating window, which means you’ll have less time to spend with your family rather than more.  

Of course, there are some businesses that aren’t affected by seasonal fluctuations in demand. Business-to-business consultancy services such as Auditel, for example, are usually in demand all year round. After all, if other businesses have quiet periods when profit and cash-flow are an issue, then having access to expertise to manage costs and keep unnecessary expenditure under control is an attractive proposition for them. If this can be achieved by outsourcing expertise to avoid the added costs of taking on extra in-house resources, then so much the better. What’s more, while many businesses suffer if there’s a down-turn in the economy, consultancy services like Auditel thrive by helping businesses that are feeling the financial pinch to release hidden profits and maintain their competitive edge. As a self-employed entrepreneur, there are also lots of benefits to running a home-based business as a sole-practitioner. By keeping overheads and financial commitments to a minimum, it’s much easier to maintain a stable cash-flow and forecast profits. And, if you take on a couple of big projects that stretch your capacity, you can simply join forces with colleagues, sharing profits rather than taking on the expense and hassle of employed staff.

At the end of the day, of course, success in any business demands commitment and hard work and seasonality shouldn’t put you off an opportunity if you believe it matches your interests, skills and business objectives. However, the challenges faced by seasonal businesses are complex and far-reaching, so it’s important to thoroughly research the implications and take specific advice. More information about planning for the demands of a seasonal business and managing an unstable cash flow can be found on the Businesslink website.