Do you and your business suffer from seasonality?
Some Examples of Seasonality
The farmer plants his crops, often borrowing money to buy the seed and fertilizers, hire equipment and workers against a crop that will come in three, four, five or six months later. What do they do if the crops fail or the weather devastates a crop?
Colleges enroll students at one or two times of the year. The students pay upfront and then the college must use that money wisely over the entire year so that they have the money to pay their bills and payroll and maintain the facilities. And what happens if they have unusual expenses or less (or more) enrollment than expected?
Holiday camps, resorts and venues operate 12 months of the year but are often only open for 8 weeks in a year? How do they manage to pay their bills all year round?
Ski fields open when the first real snowfall happens. But what happens when there is no snow or only ice? Yes the snow making machines help but are they the answer to seasonality? And what happens when one year has a six week season and the next an eight week season and the next a four week season and then a twelve week season. What does that do to staffing and other resources?
The less obvious seasonality challenges
Seasonality affects every business in some way. The examples above are obvious examples but what about the following examples:
- Slow down for holidays when business to business trading can cease for up to three months in parts of the world.
- Changes in time, money and resources at budget time.
- Staffing issues when unemployment is low and finding good people is a challenge.
- Finding and outfitting premises when there are few properties available.
- An unexpected disaster or demand that affects the business operation.
- Planning for change and the circumstances of that change are different than expected as happened with the global financial crisis.
Dealing with Seasonality
Since all business experience some seasonality, they need to do the following to manage their seasonality:
- Manage cashflow, always keep a reserve for the unexpected.
- Make decisions quickly to take advantage of opportunities but do a risk management analysis of what happens if it fails.
- Have good insurance cover for business disasters and keep it current and relevant.
- Have a good support team to discuss ideas with, coaches, mentors or masterminds.
- Remember that this too shall pass and if you have to change than change is required. And business is always about responding to change: changing needs, changing conditions, changing products, changing expectations and changing conditions.
- The man who fails to adapt will be out of business quickly
In the comment box, share how seasonality affects you and what you have in place to support the seasonality of your business.
To your future success
How does a lighthouse relate to business and what does money have to do with either?
The lighthouse is a business and to continue to keep the shipping lanes safe, someone needs to pay – pay for maintenance, the lighthouse keeper and the power bill.
This morning Dennis Roberts shared Philosophy ( philo- “loving” + sophia “knowledge” )‘s photo on Facebook.
What you want to earn and what you earn are often very different for many people.
effort = income
There will be times when the income may seem disproportional to the effort you put in though.
There will be many times when you work very hard and seem to achieve nothing. Oh and before you tell me that winning a lottery or another game of chance, think – you have to buy the ticket or enter the contest.
So let’s look at what you want to earn in your business.
You need to do some research and you also need to do some personal mindset work.
- Look at what other similar businesses earn. Keep in mind that the revenue in must also cover the cost of the goods you sold, some of your expenses and the related taxes.
- Look at how comfortable you are at charging that rate. If you feel that the norm in industry is comfortable for you to charge than see what happens if you increase that by 10%. Unless you believe that the rates are too high for your target niche, try never to charge less.
- Look at what you were earning as an employee and how that income supported your lifestyle. In your own business will this be adequate for you or do you need to earn more? If you need to earn more, what more will you deliver to your clients?
- And finally, look at what your clients can afford to pay. If the people you want to deal with can afford what you want to earn, then charge them that price but unless you can find clients who are able to pay you what you want to earn then you will never earn it.
- And finally, figure out if there are enough hours in the day to deliver what you want to earn. If you are the sole deliverer of your service and your service delivery model requires you to produce the goods, then you are limited by the time you have available to deliver. For example – If you get paid $20.00 per hour and can only work 5 hours per day 4 days per week, you can only earn 20*5*4= 400 per week out of which you will have to pay costs and tax.
Take some time to figure out what you want to earn and then create a sales forecast and a cashflow forecast to see if you are VIABLE. It always surprises people when they do the numbers how hard it is to earn what they want.
In the comments let me know if you are earning what you want and what you are doing about changing the situation.
To your well-being