By: First Union
Some Challenges that Seasonal Small Businesses Face
Unlike more traditional year-round business models, seasonal small businesses do face some unique challenges. Companies that are in operation primarily in summer and spring for instance have issues to deal with ranging from cash flow problems during the offseason to employee retention along those same lines. Below are a few of the challenges that some seasonal businesses have to deal with.
1. Cash Flow
As we mentioned, cash flow can be a big one if you are only in operation for a few months of the year. The problem is that certain expenses cannot be scaled back during the offseason. So while yes, you may be able to cut back as far as advertising, payroll, and marketing efforts, you might still have equipment costs, rent, utilities, and things of that nature. And yet, of course, you don't have any money coming in during the off times.
This is why budgeting is so critical for seasonal businesses. More so than year-round companies, you have to be on top of all of the numbers—on and offseason. Talking to an accountant and sitting down with them to come up with a plan might be your best bet. Additionally, you could also look at how you might make some money during the offseason. For example, if you are a landscaper, you could theoretically look into what it might take to offer snow removal services. Some seasonal businesses will utilize a line of credit during the slow season to meet their requisite expenses. And then once the business starts back up again, they begin to pay that line back down.
Employee retention for a seasonal firm can be difficult. As you're only potentially hiring someone for part of the year, they may feel the need to look elsewhere when they are no longer needed. Therefore, establishing a good rapport and that sense of loyalty can be quite tough.
One thing you might do to try and retain your employees is to offer certain incentives. The key is to work to make them feel as though they are truly part of the company. Make them want to come back once the season starts up again. Going out and hiring all new people takes time and energy, not to mention money. So it is important to find a way to nurture the relationships you currently have with employees.
Having excess inventory that needs to be stored for a few months is not an ideal situation. There is the expense of storage itself, and then again, if you work with perishable items, this may not even be possible.
This is why careful record keeping is key. Look at what you've done in terms of sales in the past and then try to order as close to that as possible. Also, look at industry trends as far as how they might affect what you do specifically. There is homework involved with inventory management, but it could save you thousands in the end.