Business Seasonality & Profitability: 6 Tips to Stay Ahead

6 Tips to Stay Profitable Despite Business Seasonality

If you own a seasonal business, you know that managing the highs and lows of your sales can be a challenge. Do you know how to make money year round, despite business seasonality?

Be profitable despite business seasonality

Many small businesses experience seasonality. But, not all know how to handle finances during the slow seasons. To help you out, here are six tips for staying profitable through the seasonality of your business.

1. Sell last season’s goods

Sell excess inventory when your busy season closes. You could lose the money you spent on inventory between your busy seasons if you decide to store it. You do not earn revenue from the extra inventory. Also, excess inventory costs you money to move and store.

To sell excess inventory, offer your customers incentives. At the end of the busy season, hold a large sale and discount excess inventory. Though you sell the goods at lower prices than usual, you make some profit before business slows.

2. Assess your expenses

Review your accounting records often to understand your seasonal business expenses. Most of your large purchases might occur right before and during your busy season. Make a list of each cost and determine if it is necessary. If you buy too much inventory, adjust your busy season expenses.

Though costs lessen as business slows, you might still pay some expenses year round. Many costs may be overhead expenses. Overhead costs do not directly produce a profit, but are necessary to run your business.

For example, rent is an overhead expense. You pay rent on your business location, but you don’t sell the building. The building does not directly produce profits, unlike your products and services. But, you need to pay rent to run your business at the location.

Try to cut down overhead and other costs. You can do this by negotiating payment terms, shopping for cheaper policies, or switching to paperless records.

3. Review your operating hours

The days and hours you run your business can affect profitability. Sometimes, staying open costs you more money than you make. If you see that certain days or hours cost more than the earnings, consider closing at those times.

For example, a store is open seven days a week. But, the store sees very few customers on Mondays. Though the owner does not make revenue, she still pays utility costs and payroll. The owner decides to close on Mondays.

On the other hand, you may miss out on sales if you open your business too late in the season, or if you close too early. Make sure you know exactly when your season starts and ends. Extending your season could increase your profitability. Compare your competitors’ schedules and industry patterns.

4. Manage your assets

Manage assets wisely to increase your business’s profitability. Some assets could include land, equipment, and property.

Can you rent out assets to another business? Renting your property or equipment during the off season helps you earn income when sales are slow.

For example, you live in Florida for half the year to operate a seasonal restaurant. During the months you do not live in Florida, you close the restaurant. To make money in the off season, you rent the space out to another business owner.

To avoid legal issues, consult a lawyer and sign a contract before renting items out.

During the off season, service equipment, upgrade with renovations, and keep up the location. Regular maintenance brings less risk of losing income due to equipment issues during your busy seasons. Remodeling brings a new element to your company that gets customers excited to buy from you.

5. Introduce new products or services

You may be able to modify your seasonal business during slow months. The modified items can bring in revenue when sales are low. For example, if you own a lawn care company, you might plow snow in the winter.

Off-season products and services should not be the focus of your business. But, they are good for trying out new items for the next busy season. Conduct a market analysis to see if there is a demand for the new items. An analysis of your market can also help you determine if you need to improve the new items before high sales months begin.

6. Partner up with another company to reduce the impact of business seasonality

When two businesses with complementary products or services team up, both benefit. Businesses that compliment each other might have opposite seasons. Consider working with a company that is busy when you are not. Or, complementary businesses might offer products and services that go together well and help reduce the effects of business seasonality.

Businesses that partner up support each other by promoting one another’s company. Each business might hand out or display promotions for the partnering company.

For example, a lodge might join a local restaurant. The lodge offers its guests a discount at the restaurant. The restaurant offers a promotion in return, featuring the lodge on its menu.

No matter how seasonal your business is, you need to record all your transactions. Patriot’s online accounting software is made for small business owners. Sign up for your free trial today to get started with free setup and support.

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