Do you run a business where cash flow is about as predictable as a rollercoaster? If so, you’re in for a treat today.
Just for you, here are three game-changing strategies that can make all the difference.
1. Forecast Your Expenses
Imagine having the uncanny ability to predict the future – specifically, your financial future.
While we can’t create a bona fide crystal ball, I can offer the next best thing: the art of expense forecasting.
Yup – this one is an art as much as it is a science.
In the unpredictable world of business, this can become your financial superpower. In fact, I can guarantee you that the 5% of businesses that do succeed have integrated forecasting into their processes.
And don’t let the term scare you off.
It just involves creating a pathway – kind of like an expected roadway – showing the next steps you expect to take, the weather you expect to run into, any potholes in the way, and what you should bring with you.
Most importantly, it outlines when and how much cash you’ll need for what you plan to do, and when that cash will be waiting for you along the side of your road.
It’s multi-seasonal, and it takes everything into account, from the turning of the leaves to the desert dryness you may come across.
You want to steer clear of two common pitfalls that forecasting eliminates:
- Spending Too Soon: Picture this: You have a big cash inflow, because maybe your business is seasonal; and you’re tempted to splurge (yup – I’ve done it!), invest, or expand right away.
But here’s the catch – this season will end, and you might just exhaust your resources right before a drought. You could find yourself strapped for cash when you need it most.
- Hoarding Instead of Growing: On the other hand, some business owners stash away their earnings, ever convinced that if they don’t, everything will crash down around them. They avoid any investment or growth opportunities and keep themselves small – smaller than they want or need to be.
While saving is always a good first step, an excess of caution can accidentally stunt your business’ (and your own) potential.
Now, let’s get practical. Here’s how you can create your expense forecast:
- Format Matters: Begin by setting up a spreadsheet or financial software. Create columns for each month, starting with the current month and extending to the end of your seasonal cycle.
- Allocate Wisely: In each monthly column, allocate funds for your various expenses. These include operating costs, salaries, marketing, and any other financial commitments. Be meticulous in distinguishing between necessary expenses and profits you can reinvest.
- Stay Flexible: Understand that your forecast isn’t set in stone. It’s a living document that can adapt to changing circumstances. As you progress through the seasons, revisit and adjust your forecast to reflect reality.
2. Flex Your Labor
One of the most significant challenges for seasonal businesses is managing labor costs during the off-season.
Unlike businesses with a consistent flow of customers year-round, seasonal ventures often experience a feast-or-famine scenario.
During peak seasons, you may require a substantial workforce to meet high demand.
But what happens when the crowd thins and business slows down?
Traditionally, business owners have dealt with this by maintaining a full-time staff throughout the year.
This approach provides consistency but comes at a cost – you’re paying salaries even when the business isn’t generating revenue.
Here’s where the concept of labor flexibility comes into play.
Effective labor flexibility in seasonal businesses hinges on a few key principles:
- Transparency: First and foremost, be transparent with your employees about the seasonal nature of your business. They need to understand the financial dynamics and the inevitability of off-season downtime.
- Collaboration: Encourage your employees to seek temporary work during the off-season. Support them in their job search, whether it’s by providing references, helping with resumes, or offering flexible scheduling.
- Contracts and Agreements: Consider hiring contract workers who are aware of the seasonal nature of the job. They can join you during peak times and pursue other opportunities when the season wanes.
Labor flexibility isn’t just a financial strategy; it’s a dance of collaboration and understanding between you and your employees.
By adopting this approach, you can optimize your labor costs and keep your business in step with the seasons.
It’s a rhythm that ensures your workforce is ready to shine when the spotlight returns – a true workforce dance!
3. Review Variable Expenses
Seasonal businesses often deal with fluctuating cash flow.
During peak times, you might find yourself flush with funds, but when the off-season arrives, your income can be more like a trickle.
In such a scenario, keeping a tight rein on your expenses is crucial.
But not all expenses are created equal.
Take a magnifying glass to your fixed costs and identify areas where you can trim the financial fat during the off-season.
When times are good, it’s tempting to invest heavily in marketing and advertising to capitalize on the season’s revenue potential.
However, this approach might not be cost-effective during the off-season when customer demand drops.
Similarly, memberships or subscriptions that provide benefits during the peak period may not be as valuable when business slows down.
The aha moment here is all about understanding how to optimize variable expenses:
- Timing is Everything: The effectiveness of your marketing and advertising spending can vary throughout the year. Consider the seasonality of your business and allocate your budget accordingly. For instance, you might reduce ad spend during the off-season and ramp it up as peak season approaches.
- Flexibility Matters: Many advertising platforms offer flexible spending options. Take advantage of this by adjusting your ad campaigns in real-time based on performance and seasonal demand.
- Memberships and Subscriptions: Review the value of memberships or subscriptions during the off-season. If they’re not providing significant benefits, consider suspending or reducing them temporarily.
Prune your expenses during the winter, so you can make them bloom in spring!
With a solid expense forecast, labor flexibility, and savvy expense adjustments, you’ll ride the seasonal waves like a pro, keeping your business finances on a steady course.