There are many businesses in which sales tend to come in bursts followed by drops in activity, whether on a daily, weekly, monthly, or yearly scale. Shipping centers and mail service business, for example, are going to pick up around the holidays and slowdown in between. Most restaurants ride a similar roller coaster of highs and lows.
This feast-and-famine cycle can be particularly hard on new business owners, who are not sure how to manage the chaos of too much business and the boredom of too little of it. Besides the psychological impact, it’s difficult to manage staffing, suppliers, and cash flow.
It doesn’t matter what kind of business model you have, your corner retail store profitability, your ethnic restaurant profitability, or your UPS franchise profitability will all suffer if you haven’t created a system to manage these fluctuations.
Here are three tips to manage your business during these ebbs and flows:
Capitalize on the boom period.
In many cases, the boom can be anticipated. Perhaps it is certain months of the year. Perhaps it is certain times of the day. Whatever, it is, you should be ready to take full advantage of it. You don’t want to lose sales because you were under-staffed or you ran out of product too early.
Fortunately, a high level of predictability is often possible. It’s not always predictable — for instance, sudden weather changes might cause a rise in demand for your product — but it is predictable enough in the long run for you to prepare for it.
If you’ve anticipated the boom and prepared for it, you should have more revenue by the end of it. This is capital that you should save to better cope with the bust periods when your business will be on life-support. Naturally, this will take some discipline because it’s only too easy to imagine the pleasure of raising wages for hard working employees, renovating business premises, or rolling out a new line of products.
While there is a certain joy, as a business owner, seeing everything flying off the shelves and your business flourishing, it’s important not to see this as a sign that things have finally turned around for you and that you are now on the way up. Recognize the boom for what it is—a temporary thing—and stay even-minded about the whole thing.
Stay productive during the lulls.
Just as it’s important to recognize the boom periods, it’s equally important to recognize the slow times. If you’re not ready for it, you’ll feel depressed and start thinking gloomy thoughts about getting into some other type of business. After the elation of high sales and long hours of intense productivity, perhaps even record numbers, it can be disheartening to watch the numbers plummet and the staff trying to look busy dusting clean shelves.
The way to manage the lulls economically is to have enough capital saved up from the boom and to begin to lower your overheads.
When first hiring staff you should make them aware that there will be times when there will be no work for them and that you will have to cut down their hours. The rise and fall in your business also affects your staff member’s lives, too. They, too, need to budget their money so that they aren’t struggling financially when you have less work for them.
Similarly, you should have worked out agreements with your suppliers to reduce the amount of shipment during the slow seasons. Otherwise, you will have to worry about backstocking excess inventory that you can’t move.
Use the slow period to do productive things—like plan for the future, staff training, product innovation, minor renovations, and major clean ups.
Synchronize your cash flow
Besides the drastic mood shifts you might experience when things are going well and then not going well at all, you also have to keep a firm grip on your money management. Project monthly, quarterly, and yearly goals that match the seasons of your business. You don’t want to have too much money going out during the slow periods on unnecessary overheads.
“Seasonality affects nearly every business, with few exceptions,” observes Stephen Sheinbaum in Entrepreneur. “But building seasonality into the business plan will go far in ensuring success.”