Small Business Finance Tips To Keep In Mind When Your Seasonal Business Closes

Small Business Finance Tips To Keep In Mind When Your Seasonal Business Closes

Small Business Finances to Help Your Seasonal Business

As a seasonal small business, you know you have unique financial needs. Your business income ebbs and flows with the seasons. Peak season might generate steady streams of surplus, while the off season may bring in just a trickle. Yet, your business expenses don’t always adjust to the amount of income you bring in. That’s why seasonal businesses require specific small business finance plans, which consider this unique distribution of income.

How can you make sure your seasonal business is financially stable, no matter the season? Let’s consider five key strategies.

Strategy 1: Identify your baseline costs

Step one is understanding what your business needs to survive each month of the year, regardless of whether you’re in peak season or off season. These are your baseline costs, and they include things like rent, electricity, water, supplies, salaries, etc. Calculate your baseline costs based on monthly average expenses. This number reflects the fixed amount you’ll need to be able to access from an account every month, no matter what. Note, too, that experts recommended a seasonal business have at least six months of business expenses saved up in a reserve fund.

Strategy 2: Look for cost reductions

Which business expenses fluctuate from month to month, or season to season? Cut back on these variable costs as much as possible to minimize the chance that you’ll fall short one month. The more certainty you can introduce into your financial planning, the better.

For example, when working with suppliers, try to build proactive relationships that make you well-positioned to ask for discounts when buying in bulk or buying in advance. Stick with the same suppliers if possible, so that you can cultivate relationships over time. Buying in bulk or agreeing on fixed prices is a key way to cut down those variable costs.

Strategy 3: Consider other revenue streams during your off-season

Let’s say you run a ski lodge. Maybe in the summer, your lodge becomes available for conferences or intimate weddings. Maybe you create hiking trails so that you become a destination for summer outdoorsmen. Many small businesses find unique ways to bring in additional income during the off season that complement their existing revenue streams, rather than reinvent the wheel. This can also help you retain staff so that you’re not just employing rounds of temporary employees, and can build a staff that’s truly “seasoned” at what they do, so to speak.

Strategy 4: Shorten your customer pay cycle

Consider evaluating the length of time you allow customers or vendor partners to make payments. By shortening a payment window to thirty days instead of sixty or ninety, you can end your peak season with more cash on hand to save and allocate, rather than wait into the off season to collect.

Strategy 5: Work with a financial advisor

There may be times when you need to take out a small business term loan or working capital loan to cover expenses during the off season. While these types of loans are more common among seasonal businesses, they should still be thoughtfully considered to avoid payments that are too steep or stretch on for too long. Partnering with financial advisors that specialize in seasonal small business finances can help you determine if a loan is the right choice for your business, and if so, which type of loan makes the most sense.

Interested in learning more about seasonal small business finances? Our team at Tobin & Collins is happy to answer your questions! Give us a ring at 201-487-7744 or reach out to us online!