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How Do I Anticipate and Plan For Down Times In My Business? APRIL 2018 NEWSLETTER
- Some periods of a business year presents slower business times. For example, for most business entities there is a seasonality to revenue and, in most cases, it would be similar most years. As an example, in many retail operations, January and February are slow months, so planning for these months is important. Consider reducing your costs as much as reasonably possible in these slow months in order to maintain profits and/or minimize losses. Other issues that may affect a downtime are new competition or loss of a major customer. Again, these may affect your revenue. Attempt to see this in your future projections and consider how to go after new clients. In reducing, costs the most likely considerations would be reducing wages and inventory. George
- Early in business you should be analyzing year over year performance. A consistency of down months will be noted. It may be a seasonal issue such as the period just after Christmas or holiday months. It may also be caused by unforeseen circumstances such as global or national economy or weather. These are are less obvious on YOY projections. Anticipate these periods with special promotions and additional advertising. Cost cutting within that period may be warranted in various areas of the business such as stock purchases, cutting employee hours but do not be fooled by the power of advertising. In fact, budget for advertising in down times. In busier months, alert clients/customers with notifications of upcoming incentives for your down months. In other words, promote business in good months, in anticipation of slower times. Doreen
- Know your business and cycles of your industry. Most businesses go through ups and downs in their business. These could be seasonal or unexpected circumstances. Dips can be a result of fluctuating customer (seasonal) demands or even supplier issues. Skill is required through such slow times. Simple projections done a few months prior gives you time to proactively plan. Base your projections about seasonality on sales data from at least two or three prior years. If the business hasn’t been around that long, check with peers and industry sources. Allow yourself some contemplative time – working on the business instead of in the business. Build up your resources Cash – Save for the rainy day… before it rains Take advantage of slow stretches to prepare for the peak season. This is a good opportunity for R&D, cleanups and maintenance. Build alternative income streams. Although it might seem like a diversion from the core business, set up additional revenue sources to counteract the off-season. Just don’t let attention to the alternative stream overtake a focus on the primary business [e.g. new construction slows in winter but renovations tend to continue]. Run promotions and specials that can be countercyclical. Stay in touch. Manage the impact of seasonality on staff by possibly reducing opening times, resorting to part time/temporary workers or, at worst, consider layoffs. Some businesses may need temporary shutdowns, in the extreme. Make your Bank your partner and well aware of your seasonal needs in cash flow. Shishir
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