Most businesses are cyclical. The key question is: what do you do during the slow periods besides wait for things to pick up again?
Christmas is the key selling season for many retailers. For example, according to the National Retail Institute, jewelry stores report 23.8 percent of their annuals sales occur during December and 9.2 percent during November, which means that about a third of their sales are made during the last two months of the year.
According to First Data, five kinds of retailers saw more than 20 percent of their sales during the 2015 holiday shopping season: clothing and accessories; electronics and appliances; general merchandise; specialty retail; and sporting goods.
Similarly, spring and fall are peak times for landscapers. In many regions, the week leading up to the Memorial Day week is the busiest of the year for these businesses.
Most businesses are cyclical to one extent or another. The key question is: What do you do during the slow periods besides waiting for things to pick up again?
Carrying inventory costs money. As retail consultant Ted Hurlbut points out, “Retailers that depend on seasonal shoppers have a particularly challenging job… "[if] you don’t enough inventory, you lose sales; too much and you lose money to markdowns and clearance.”
Just as bad, you’ve got money tied up in stock just sitting there. Effective inventory management is a careful balancing of:
- Anticipating sales
- Planning adequate stocking levels to fulfill projected demand
Too much stock, and your carrying costs go up; too little inventory, and you’ve not only lost sales, you’ve got dissatisfied customers.
Best bet here is to base projections on historical performance. If you’ve sold 100 of a product every month for the past 12 months, you’ll want to have at least that much on hand. If you typically have spikes during certain periods, plan for that.
Remember the 80/20 rule: Eighty percent of sales are generated by 20 percent of your products. Identify that 20 percent and focus carefully on its stocking trends. Better to overstock than understock.
Needless to say, you need to track inventory, either with some kind of bar-coding scanning system or manual data entry.
As soon as you see significant deviations in historical performance, make adjustments (order more, order less). If it looks as if you’ve ordered more than there is demand, it’s time to introduce discounts.
You’ll also want to plan for promotional seasons that use discounts to stimulate customer interest. If possible, you can reduce your carrying costs using JIT, just-in-time-inventory.
For this to work, you need good relationships with your suppliers and an efficient ordering and fulfillment system.
Don’t Depend on Holidays — Make Some of Your Own
“Everyone knows about the big holidays, but those aren't the only ones that matter in effective seasonal marketing,” Vivian Wagner points out in the E-Commerce Times.
“Non-holiday calendar-based events can sometimes be even more important than holidays. Thus, for instance, a business writing consultant might market her services at the end of the fiscal year by saying, ‘Do you have money left in your corporate budget for training? Consider hiring me to teach your employees to write.’”
Look for a compatible product or service line to pick up the slack during off-peak seasons. Many landscapers, for example, provide snow removal services during the winter.
Construction companies take on residential and remodeling projects to keep their crews busy, and maintain cash flow, when their commercial accounts are in a slump.
Outdoor patio furniture retailers sell pool tables, bar stools, fireplace accessories, Christmas trees and decorations, and other “home lifestyle” items to keep business going year-round.
Plan for Downtime
Remember that just because cash is coming in doesn’t mean it always will.
Put a certain percentage in reserve to keep you going during the lean periods. How much? Figure enough to cover interest payments and operating expenses, plus a little more in case of emergencies.
"Regularize" Cash Flow
The landscaper who signs customers to a snow removal contract could offer a 12-month plan in which payments for all services are averaged out into equal payments.
Sure, you don’t make as much as you might in certain months. But you don’t also go through those dry periods.
Similarly, as Jeffrey Tannenbaum of Ernst & Young points out, “If cash flow is your biggest concern, you could offer your commercial customers, it wouldn’t work with retail ones, a discount if they purchased product during the winter months. It would reduce the overall margin but might solve the cash flow constraints. It might also introduce new customers who would be attracted by the lower price point.”
Do Something Different From Your Competitors
Susan Payton, president of Egg Marketing and Communications, advises looking at what your competitors are doing during both your busy seasons, and then doing something else.
“If your competitors are offering their usual 'Buy 2 Get 1 Free' campaign, you need to come up with something truly unique, like donating money or products to a children’s charity for every purchase," she writes.
"The holiday season is the time to pull out all the stops, especially if sales historically have been slow."
"If you’re a small business, don’t be afraid to compete against the big business competitors this time of year," Payton advises.
"While they focus on sales and discounts, you can use the heartfelt approach by connecting with your community and contributing goodwill.”
Repositioning existing products and services is a relatively quick and inexpensive approach to increase sales, whatever the season.
Consider McDonald’s, which despite being an icon of the fast food industry has of late suffered sale declines. It used to be that breakfast was only offered in the traditional early-morning hours.
McDonald’s recently switched to an all-day breakfast menu. The result: The Wall Street Journal reports sales at U.S. restaurants open at least 13 months saw a 5.7 percent sales hike in the fourth quarter of 2015, the best results in 15 quarters.