It’s been the hottest summer on record and this has affected the UK economy in several different ways. For some businesses, it’s been a pleasure to soak up the sun and the additional revenue. For example, pubs with beer gardens will certainly have enjoyed a busy bar. Ice cream vendors, air conditioning companies, garden product sellers will all have benefited from the hot weather. Meanwhile, office-based businesses have struggled as staff productivity has dropped. Either because staff are simply too hot in the office, or have developed mystery 24hour bugs on sunny days… in addition summer is always a tough time for staffing for the majority of businesses as colleagues tend to take more annual leave between June and September, so resources are thin on the ground. For long established businesses, this lull in summer will be all too familiar and it will probably be expected that there is a dip in revenue or cash-flow. But for new businesses, seasonal peaks and troughs can come as a surprise, and can cause issues later down the line when annual targets haven’t been met.
How to beat seasonal slumps in your business
We recently worked with a hotelier who had fallen onto hard times because their summer trade was relied upon for the entire year’s success. The last summer wasn’t as successful as others and left a shortfall in their budget yet overheads and liabilities remained the same. This scenario is similar to businesses that rely on most of their income from one client contract – it’s risky and doesn’t leave much of a safety net when things don’t go to plan. Some good practice when it comes to protecting the business from insolvency is:
- Plan a contingency budget in case the busy times don’t generate as much income as you’d hope. This doesn’t necessarily have to be in the form of cash in the bank, just knowing that you have a borrowing facility at a reasonable rate ready to tap into if needed – perhaps an overdraft, business charge card or credit card that you can use in the short term to avoid late payment fees.
- Think about new ways to generate some income in the less busy periods. Some seasonal businesses shut down completely for the winter, but then miss out on opportunities that the busy Christmas period can bring about. Tourist attractions for example could be available to hire for Corporate Christmas events, could sell gift vouchers or put on special events for the public. When it comes to Christmas the weather doesn’t seem to bother visitors!
- Carry out a Business Review to look at ways to reduce overheads and liabilities in quieter times. Looking at supplier agreements, staff contracts and even when and how you pay your tax bills can all help add some breathing room into the business to keep finances solvent.
What not to cut out of your business during quieter times
Whilst it makes sense to cut out some expenses during quieter times, there are some essentials that should continue to run throughout the year. Sadly, many businesses tend to have their marketing strategy the wrong way round. They carry out frantic advertising campaigns in the busy times and then cut out marketing spend when it’s quiet. Let’s go back to the Air Conditioning companies that will have benefitted this summer. The ones that will have had the most success will have been those that the local community are most familiar with, have seen somewhere before, or have received some kind of communication from recently. The companies that failed to do any marketing at all in the winter months, will have been left behind and won’t be getting the lion share of the business because nobody will have seen them or remembered them, and when they start marketing in the summer because it’s hot, it’s too late because either air conditioning units have already failed, or everyone else is trying to win the same customers too. Marketing should be a steady stream of messages to your target audience throughout the year rather than a monsoon and drought scenario. By keeping marketing campaigns going, you can generate early sales and bookings even before the busy season starts. This puts less pressure on you to hit targets, allows you to plan resources better and makes it more likely that you will exceed targets and be able to grow the business, if that’s the goal.
When it makes sense to spend more during quieter periods
Sometimes it actually makes sense to spend more in quieter periods, in preparedness for the seasonal highs. For example, carry out renovations and repairs to make the business more appealing to visitors, focusing on rebranding, professional photography or getting the website in order, or purchasing stock while it’s at a lower price in the low season. Unfortunately, we have seen some businesses miss out on thousands of pounds worth of revenue because they couldn’t keep up with the demand for their products in the busy periods, so it works both ways! Those pub beer gardens will probably find landscape gardeners are more affordable during the quiet winter months, and garden furniture is on clearance after the summer peak.
Avoiding insolvency isn’t just about calling in for help when things have gone wrong, it’s about careful planning throughout the life of your business. You don’t need to be insolvent to enlist the help of an Insolvency Practitioner, you should make Business Reviews, Cash-Flow and Finance Reviews and Business Turnaround planning part of your ongoing management regime.
If you would like to carry out a Business Review for your company to gain valuable insight into your financial stability, please contact us and we can explain how we will be able to support you on a one-off or ongoing basis.