JOHANNESBURG - Cash flow is one of the main challenge that small and medium enterprises (SMEs) face and is likely to be a greater challenge for those that experience seasonal fluctuations.
The fluctuations are something that every entrepreneur dreads: the hours, days or even months of a silent telephone, empty inbox, or under-utilised resources. But the truth is that they are an unfortunate, yet often unavoidable, reality for many industries. And while you may not be able to control the seasonality itself, you can control how you prepare for and handle the quieter season in order to minimise the uncertainty that it is usually associated with.
Below are nine tips to help new business owners in coming to grips with them:
Familiarise yourself with your business’ cycle
The better you know your industry’s seasonal curves, the better you can plan for it.While the curves can be tricky at the beginning an analysis of the company’s figures compared with industry norms may be necessary to identify patterns.
Build a buffer
Set aside some of your gains during the busy season to tide over off-season. Cultivate the discipline of focusing on the whole cycle and build a buffer in time for the slow season.
Put the slow season to use
A quiet period in a business is good for maintenance, retooling and clearing out, not only of physical equipment and infrastructure, but also for operational systems, clearing bottlenecks, identifying inefficiencies, training and reflection.
Cut expenses
Clarify where you are able to cut unnecessary expenses. An internal review might reveal the necessity to reduce your stock, or to negotiate a more efficient stock delivery system with your suppliers.
Don’t stop marketing
Investigate new and cost-effective marketing methods, such as improving your social media presence or catching the attention of influential bloggers.
Consider your staffing carefully
Reduce shifts rather than letting go some of your staff. When short-term contracts or shifts reduction are unavoidable, communicate openly with your staff. Avoid disputes and bad feelings by drawing up proper contracts, and making sure that everyone understands the nature of the business and the path to becoming a permanent staff member.
Negotiate suitable finance
It is hard to maintain the instalments on a straight bank loan in the off season, but it is possible to negotiate repayment terms to accommodate your business’s seasonality. One option is to link repayments to turnover, or to agree that in certain months only the interest of the loan will be serviced.
Consider a side-line project
The side-line’s peak should coincide with the trough of the main business, or at least you should be able to turn off the sideline when the main business hits the peak season. Preferably, the side-line project should also use the same equipment and staff, and even the same client base, as the main business.
Stay positive
Avoid showing signs of panic and actively cultivate a positive mindset. If you become despondent, the whole staff oses motivation..
Ben Bierman is a managing director at Business Partners Limited