Seasonality can be brutal. If your business is like ours, summertime is pretty slow. The phones don’t ring, employees and clients are on vacation, nobody is available for appointments and not much happens in general. Even if summertime is busy in your industry, chances are that there are other times during the year that business slows down noticeably.
While a slower pace may sound like a dream if you’re coming off of a busy season, a slowdown can cause issues if not anticipated and planned for. Employees out of the office can impact productivity. Customers unavailable for appointments and silent phones can mean fewer sales. All of these factors can have a negative impact on profitability and cash flow. Here are some steps you can take to prepare for these slow times and minimize their impact.
Some businesses do 75% of their work during 25% of the year. This definitely makes resource management challenging. Even if your company isn’t in an extreme situation such as this, utilizing temporary staffing can help smooth out seasonal bumps in productivity. With staffing firms cropping up in more and more industries, the availability of temporary workers is on the rise. While the short-term cost of these employees may be more than an in-house worker, the flexibility they provide is attractive to companies that aren’t able to carry the burden of excess staff during slow times.
What happens to your sales pipeline shortly before quarterly sales bonuses get paid out? Chances are, you see a sudden spike in closed sales. What this seems to demonstrate is that our salespeople have some measure of control over the efforts to close their sales. With this in mind, there are a couple of approaches you can take to ensure that there are enough sales to get you through the slow times.
First, try sitting down with your sales force with a calendar and map out your seasonality. Awareness of the seasonal dips may be enough incentive to encourage them to build up their backlog prior to these dips. Assuming that your sales staff will only be motivated by sales commissions, an alternative solution would be to set your bonus payout dates immediately prior to your slow times.
If your vendors experience the same seasonality as you do, they may not have the manpower to keep up with customer orders in a timely manner during their slow periods. Hitting them with a last-minute rush order may not work out well and going to another vendor will likely yield the same results. To avoid running out of key materials, make sure that items needed for planned production are ordered well enough in advance to allow for any seasonal slowdowns.
During slow times, a business is likely to consume more resources than it produces. To ensure that your business has enough liquidity to keep things running smoothly during seasonal dips, it’s important to manage cash carefully. Here are a couple of cash management tips below. For more ideas, check out our free checklist, “25 Ways to Improve Cash Flow.”
If you and your customers are on the same sales cycle, chances are that they’ll be short-staffed at the same times you are. Payment of payables won’t be high on the list when departments are running on a skeleton crew, so make sure that you’re current on collections before things slow down.
One of the most important steps you can take in managing cash is to prepare a cash flow forecast. The forecast will tell you when cash will be tight. Then you can work with your banker to ensure that your company has the liquidity it needs. On that note…
Chances are, you are not your banker’s only client. They likely have many clients across several industries, so they don’t always know when business is slow for your company. Rather than waiting for your banker to ask you why this quarter’s results don’t look as good as last quarter’s, reach out to them. Do this especially before business slows down to let them know what your projections look like. While it may seem counter-intuitive to give your banker potentially bad news, your candor will give them confidence in you and make it more likely that they will work with you if you need it. Besides, you’ve projected that things are going to improve, right?
Regardless of when your slow times fall, taking steps to prepare for seasonal dips can help minimize their impact on cash flow and profitability. Now is the time to start to identify and address seasonal fluctuations. After all, the holidays are just around the corner…
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