If your business faces seasonal fluctuations in sales, it is important to prepare for those dips.
Every business has its challenges. But when your sales cycle is seasonal, it introduces a host of unique issues that can threaten a company's bottom-line sustainability and inhibit future growth. When you have uneven periods of sales and annual revenue depends on a narrow window of opportunity, planning carries a higher risk of being off-target and misdirecting cash flow. The reality is that if your season doesn't go well, the whole year can be lost.
Managing your cash flow year-round to achieve annualized stability is not as difficult as you might think. It involves incorporating three actions into your management strategy:
- Adjust for the impact of seasonality when forecasting sales.
- Take a seasonal approach to managing your sales team.
- Identify opportunities to develop the revenue pipeline to nurture leads during the offseason.
Cash flow issues plague 82% of small businesses, and running out of cash leads to 29% of small business failures. How can you accurately plan to make the most of your selling season and optimize results? The answer is to develop a solid sales plan.
Here are some tips for how you can create a sales plan that will balance the effects of seasonality on your business:
1. Adjust for the impact of seasonality when forecasting sales.
To fine-tune your approach to sales forecasting, begin by letting past performance guide you regarding what is likely to happen. Looking at historical data when planning might seem counterintuitive, but the pattern of your previous cash flow holds the clue to accurately anticipating your future needs. As you pay attention to the revenue flow, it helps to point you to established trends.
These analytical "buckets" should include revenue per product, revenue per customer type (such as new and/or existing customers), and revenue per channel (such as subscriptions, licensing, or one-time sales). Having this information provides insight into not only how the current year is likely to play out, but also whether you are on track for hitting your targets next year.
Even though your past performance will provide keen insights into your future, don't assume that what happened before will definitely happen again. Set up a system of continuous review for benchmarking your actual results against your forecasts. That enables you to adjust accordingly, ensuring you are scaling appropriately.
As you go through this exercise, include employees from all areas of the company, from marketing and operations to finance and human resources. Fostering cross-functionality helps prevent silos from developing.
When allowed to flourish, silos threaten internal communications, undermine support of common goals, and confuse the customer journey because business units become focused on the processes that serve only their interactions with clients. When all your business units work together, it helps ensure your firm fully understands what your customer needs are today and how well you are meeting them. Ideally, you want a customer to have a unified experience with each department.
2. Take a seasonal approach to managing your sales team.
As your sales flow diminishes in the offseason, it can be hard on the sales staff. The sales team suddenly has extra time on its hands and possibly reduced income. Not closing deals can feel demoralizing, given that what makes good salespeople is their goal orientation. But that makes slower periods an excellent time to refocus that competitive spirit on learning new skills and revamping the sales strategy to help your reps sell better and smarter in the coming season.
From reviewing what offerings and wording worked well in sealing new deals to looking into what kept leads from converting, have your salespeople revisit the sales strategy. They should also look for points of difficulty in moving an opportunity to the next stage in the sales process.
You should also consider seasonal employment during peak times. Strategically, it might not make sense to incur the cost of maintaining full staffing year-round. With today's gig economy, staffing up for your peak season with independent contractors can be more cost-efficient than committing to permanent full-time employees. The hiring process is less complicated and time-consuming, and it eliminates the need to offer full benefits.
However, your temporary staff will need some measure of training. Also, the nature and expectations around employment need to be carefully spelled out in any contract you offer to alleviate misunderstandings about which employees at your company qualify for benefits. Where you do maintain full-time commissioned sales staff, you might want to consider structuring your compensation program to normalize the seasonal sales flow by offering recoverable draws.
To pay your sales representatives a reasonable amount during downtimes, "overpay" for performance in that period. A recoverable draw is an advance that is subtracted from future commissions. This enables you to provide a consistent stream of income, even when commissions are light. Effectively, it's like making a loan against future sales.
However, to avoid a situation where more is drawn than earned for an extended period, your contracts should detail how repayment for advancements is treated. Without this specification, you might unintentionally offer nonrecoverable draws, which means there would be no repayment.
3. Identify opportunities to develop the revenue pipeline to nurture leads during the offseason.
It's important to stay in contact with leads and current and past customers during the offseason. In 2018, only 31% of small business owners considered driving sales a top goal, and a mere 25% planned to focus on retaining and re-engaging clients. Using your offseason to focus on both could create a competitive advantage.
When your primary line of business is seasonal, finding complementary products or services to offer during slow times helps even out your revenue. For instance, a fruit grower might still have an opportunity to create sales in the winter months by selling preserves and jams as holiday or hostess gifts.
Regardless of whether you decide to try extending your product line, staying in touch and working to build your customer base in the offseason should be part of the sales plan. Many businesses do this through pre-sale offers with special pricing. Trading referrals for early-season rebates might be another promotion that can extend your season.
Emailed newsletters and social media posts also help keep the conversation going. Offering tips on equipment maintenance or perhaps reviewing new product launches can help you stay top of mind. For instance, if you owned a golf pro shop in the midwest, you might send your mailing list information about and reviews of the latest in club grips or offer special pricing in February for regripping clubs ahead of a spring break getaway.
In reaching out to current or previous customers, you might find places you underperformed. Whether it's uncovering new training tools, reassessing the customer journey, or unrolling a new sales strategy, use your slower periods to really dive into the data and plot improvements where needed.
When you own a business, planning your sales strategy is never done — especially if your business relies on a short window of opportunity to get through the year. By planning ahead, managing your costs and nurturing leads, your business can reduce costs while strengthening your customer relationships. When the sales traffic resumes, be ready to have your best season ever.