Planning how to navigate seasonal dips in income for 2021

Cashflow Management

In any normal year, seasonal dips in income can be highly challenging when you’re a small business. But, fortunately, SME Financial has some proactive ways to predict, plan for and overcome these dips in revenue.

The key to dealing with seasonal dips is to know when they’re most likely to occur, and to have measures in place to spread your income and revenue pipeline over the course of the year.

Understanding seasonality in your sector

If your business is seasonal such as pool supplies, or a ski gear specialist, you’ll be used to the peaks and troughs, but many ‘non-seasonal’ businesses experience times during the financial year where sales and revenue peak – and, on the flipside, where sales and revenue experience a pronounced dip.

When income is low at certain times of the year, it makes for challenging times.

So, what are the key ways to plan for this kind of seasonality?

  • Forecast your seasonality – it’s vital to know WHEN you’re most likely to experience any seasonal dips. Looking at benchmarking reports for your industry is one way to predict the seasonality in your niche or sector. But you can also use your own accounting data to great effect. Look back through your profit & loss reports and spot where the peaks and troughs have occurred over preceding years.
  • Charge a premium in peak time – one straightforward approach is to apply premium pricing for your products/services during the busy season. By increasing your pricing, you boost your overall revenue, giving you more working capital to see you through the leaner months when sales and income are at their lowest.
  • Offer additional peak-time services – offering added extras and other additional service lines during peak time is another way to maximise the season. In the months where customers are most engaged, look to upsell these premium services and offer more value. Satisfied clients will be more inclined to pay for added extras, giving you an increased revenue stream from the same number of customers.
  • Target other markets – exploring other related markets is another useful tactic. When you’re experiencing downtime, look for other ways to monetise your existing assets, products or services. For example, if you’re a hotel where sales peak in summertime, offer discounted conference space in the winter months to boost revenue.
  • Diversify your products/services – if one product/service has a known seasonal dip, look at adding an additional product or service to offset this downtime. For example, a a ski resort could promote bike-riding or hiking breaks during the warmer summer months to keep revenue constant. Likewise a pool maintenance firm could establish an outdoor fireplace business for the colder months.
  • Have a regional e-commerce strategy – If you’re dependent on a small local market, broadening your marketing and e-commerce strategies can help to attract a wider customer base – and bolster sales. Paid advertising through Facebook, LinkedIn or Twitter can easily target new geographical markets, bringing in new customers and giving your revenue a much-needed uplift during seasonal troughs.

Talk to us about planning for seasonality

If your business is struggling with seasonal dips, and the resulting impact on cashflow, come and talk to us. We’ll help you identify the timing of your seasonal downtime, and come up with a clear strategy for stabilizing your income across the year.

Get in touch with us today and talk to one of our experienced business advisors.

Is this the perfect time to take on an apprentice?

apprenticeship funding nz

If your small business is doing well, but income is intermittent, the biggest challenge can be figuring out how to grow without committing to more full-time team members. An apprentice can be a fantastic way to manage your costs, have a certain amount of flexibility, and get an extra pair of hands to help with your work.

Free fees and plenty of jobseekers

Apprenticeships are currently fees-free until December 2022, and there are 200,000 Kiwis on the unemployment benefit. As a result, there should be some quality candidates looking for a new career and high-energy school-leavers hoping to find secure employment.

For small Kiwi businesses, an apprentice may be a way to help you focus on the more demanding parts of your job, while training your apprentice in the basics. As your apprentice becomes more skilled, they can take on more work. Some organisations will even pre-screen apprentices and supply gear for them – find out what’s available in your industry.

Can you afford an apprentice?

How much impact would an apprentice have on your business? We can help you answer those questions. You’ll need to use cashflow forecasting to estimate:

  • How much money you’re likely to make without the apprentice
  • What an apprentice would cost in terms of wages
  • The cost of equipment or systems you’d need to support the apprentice
  • How much time would be lost training the apprentice
  • How much extra money you could make with an apprentice

After factoring in all those numbers and considerations, you should have a clear answer on whether an apprentice will help you grow your small business.

Your responsibilities when you employ an apprentice

It’s vital to understand what you’re signing up for when you employ an apprentice. The Code of Practice for Apprenticeships outlines your responsibilities, which include:

  • Being informed about what it means to support your apprentices throughout their training.
  • Being a good employer by complying with all the legislation supporting the safety, privacy and human rights of your employers.
  • Provide active and effective training and mentoring.
  • Support your apprentice’s access to off-the-job training.
  • Support your industry organisation’s access to the apprentice.
  • Communicating clearly with the apprentice and the industry organisation.

If you do a good job for your apprentice and they work hard, you could be training up a new staff member who knows exactly how your business operates, as well as providing someone with a great job for the future.