Are you heading for a seasonal dip in turnover? Want to know how to best prepare for that?
Seasonal dips in turnover can be a big problem for SMEs, which can in itself have a knock on effect as to how you handle your payment of expenses and payroll. There are however, several ways you can foresee and even predict dips in turnover, so that you can both plan for and navigate them with success. Let us help you discover what those deduction techniques are and how to implement them.
Step 1. Understand what ‘seasonality’ means for your sector
Seasonality is a term used for the characteristic of a time series, that is governed by regular and predictable changes, that occur every calendar year. For example, if you are a sea-side hotelier your ‘seasonality’ in terms of peak trading months are more likely to be in the summer months. Whereas if you trade in ski equipment, then your peak trading months are likely to be in the early and mid winter months.
There are other factors of seasonality that may affect your business and this could be where manufacturing materials, or the products themselves are seasonal. For example, if you are a restaurant that offers a seasonal tasting menu, you may not be able to serve strawberries in your menu until the season aligns with your grower’s output. Likewise, if you trade in sportswear you may see an uptick in sales for swimwear in the summer months and a dip in swimwear turnover in the winter months.Four key factors will help you determine what seasonality means in your sector for you business;
- Understanding your customer and therefore how they purchase your products and services throughout the year
- Understanding your competitors and how they trade throughout the year
- Look at market trading reports as benchmarks to discover how the industry plays to seasonality
- Looking at your previous year’s Profit and Loss Statement for cashflow indicators and your sales records for product information. It might be wise to look at a number of years before you get into the finer details of the past year, so that you can seek patterns in dips between ranges, or individual products.
In many cases dips in turnover may be obvious and in others you may need to do a bit more probing. Take your time with this step and you will be able to plan ahead in a much more successful way.
Step 2. Plan how you intend to battle seasonal dips in turnover
There are a number of things you can do to plan for dips in income and they remain the same regardless of the size, or complexity of your business. Essentially, you are seeking a way to increase your opportunities to make money in or around those seasons, to counteract the effects of a reduction in sales as you go ‘out of season’.
Firstly, you need to look at your seasonal product/service range and map out your next year in estimated future sales. You will quite quickly see visible gaps you need to plug. We recommend that you try one, or several of the following plug options to fill those gaps.
- Start charging a premium during your peak times – one straightforward approach is to simply 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. ‘Upsell’ products (additions to an existing sale) are one very quick and easy way to do this. For example, offering a personalised Christmas wrapping service at Christmas time, or offering personalisations of adaptable products. Satisfied clients are more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.
- Use online ads to boost your peak sales - Paid advertising through Instagram, Facebook, LinkedIn or Twitter can easily target new geographical markets, or a further exploration into an existing market, bringing in new customers and giving your revenue a much-needed uplift during peak trading times. Sometimes selling more of what you have when the trend is high, is a great way to prepare for your quieter months.
- Target other markets – exploring other related markets is another useful tactic to plan for. Look for other ways to monetise your existing assets, products or services to new audiences. For example, if you’re a restaurant offering private dining experiences to the public, maybe consider offering private dining packages to large companies who regularly entertain guests.
- Diversify your products/services – if one product/service has a known seasonal dip in sales, look at adding an additional product or service to offset pending dips. For example, a pool company could establish an outdoor heating, or fireplace range for the cooler months.
- Have a more regional e-commerce strategy – If you are used to selling very locally, broadening your service area and therefore your marketing and e-commerce strategies can help to attract a wider customer base – and boost sales.
- Think digitally! - If Covid has taught us nothing else, it has taught us that bricks and mortar businesses need to establish an online presence. More than that, digital product and service offers have vastly increased in the last year, as many people have started hosting online classes, events and so forth, to battle the loss of income from their physical versions. One such successful transition has been gyms, or personal trainers opening online classes and memberships.
- Reconsider your costs - If you have a string of high expenses related only to peak seasons, but continue into your quieter times, it may be wise to establish either special agreements with those service providers for ‘out of season’ pricing, or a reduction in ordering. Alternatively, you could source new providers that can deliver the same, of not better service provision at a slightly more agreeable price. This can also be true of products, or materials you buy in.
Step 3. Make sure you have the infrastructure for increased turnover
There will be parts of your new turnover plan that need investment, whether that is in time or money. Try to think beyond this and ask yourself;
- How will I deliver this new or increased range of products/services?
- Do I need to seek advice, or licensing before I create my new revenue stream?
- Can my existing team implement and manage this new revenue stream?
- Do I have the space for increased product, or service offers?
Deciding which new idea you have the means to implement may be based on one or several of the answers to these questions.
Finally, Talk to us about planning for seasonal dips in your turnover
As accountants part of our job as your business partner, is to help you establish seasonal dips in your turnover and ways in which you can create and implement new revenue streams on budget. We understand the details of your finances, so we can show you where your cashflow will allow for things like capital investment, or which costs could be reduced.
Get in touch to start beating those seasonal dips.