Are you currently running a seasonal business? If so, the million dollar question is always how do you ensure and guarantee cash flow? Continue reading to find out.
Most entrepreneurs are probably aware that running a seasonal business does not guarantee regular cash flow because sales are triggered or activated by the season. However, before going further, let’s determine exactly what is a seasonal business?
A seasonal business is an irregularity a business usually experiences which is as a result of changes in the season. This means that keeping the cash flow in such a business is most likely to be difficult because your sales are dependent on what time of the year it is.
If for example, you are in the business of selling umbrellas, of course, you know that the only time people use umbrellas is during the rainy season. You will definitely experience a boom in sales during this period, and the complete opposite will be the case if it is not the rainy season.
If you are currently facing an uncertainty on how to manage your cash flow in such a business, the following tips will help.
Have A Plan
As the saying goes, if you do not plan, you plan to fail. Since you know that you run a seasonal business, you should plan ahead for the period when there would be a lull in sales. To plan in this case means you should prepare a budget that will cover the period when there will be no sales. This will also enable you to cover all expenses even when there are no sales.
Take Control of Your Earnings
No matter the amount you make from your business, it is essential you keep track of every penny you earn. You should avoid any reckless spending especially if you run a seasonal business. If you are able to track your earnings, there will be no need for you to worry about anything. Therefore, take full control of your incoming and outgoings, and you will be happy when the seasonal era of your business starts.
Predict Your Seasonal Expenses
Having a plan or taking control of earnings may not be enough for your business to survive. Hence, try as much as possible to prepare and predict your seasonal expenses. So, depending on the number of years you have been in business you should easily prognosticate the amount you need. This will help you prepare a thorough statement. Interestingly, your statement is similar to your cash flow statement. In this case, while your cash flow predicts the past, your forecast statement will predict your future expenses. As such, you should anticipate what you want for your seasonal expenses and do not forget to put a figure to it.
Plan Ahead of Unexpected Expenses
The truth is that you cannot predict every expense you will incur if you run a seasonal business. Therefore, try as much as possible to set some money aside for unexpected expenses. This will ensure that you are not caught unaware when the payment arises. Without preparation or if you miss a payment that may be due, you won’t only lose that customer or that business, your reputation will also be damaged because you cannot meet the expectations of your teeming customers who patronise. And in business, if you disappoint a customer, you are likely to lose them. Remember – only a handful of customers are loyal to a fault.
Have An Emergency Fund
You need money to take care of or handle unexpected expenses. If there is no money and you have poor cash at hand, there is a 100% certainty that you will be unable to handle such an expense. This is why an emergency fund is the livewire of any seasonal business. Importantly, ensure that you do not touch your emergency fund unless it is really an emergency. If you do, you will be in a financial mess when the money is actually needed. The rules for accessing such monies such be strict, and it will deter people or your workers from using the money indiscriminately.
Have a Line of Credit
As far as you are human, you already know that things will not always go as planned. If you have this at the back of your mind, you will understand that sometimes even some other things can come up. The emergency fund might get exhausted, or another serious emergency might emerge that the money will be used for that purpose. Therefore, you should liaise with whoever can offer you credit whether it is a bank, family members or your friend to do so. You should, therefore, secure the loan; whether you may make use of it or not, the key thing is for you to have a credit line that will intervene when you run out of cash.
Evaluate Your Needs
Every business has needs and wants. Hence, such a business must separate the needs from its wants. This will make it easier for you to budget for the important things rather than the irrelevant. You do not just determine what you think your business want. You should do a qualitative and quantitative analysis of its needs. This will eventually help you meet the demands of your customers, and before you know it, it will impact your business positively. As such, you should take the evaluation of your customer’s needs seriously. However, note that you cannot meet all their, but ensure that you meet the essential ones.
Use the Off-Season to Save
Regardless of the fact you may experience downtime in your seasonal business, you can actually take advantage of it to save some money. Although this may seem like an impossible task, you should try to avoid unnecessary spending and bootstrap. It is not always easy, but when you put your mind to it, you will definitely achieve results. This will ensure that you have enough money for your seasonal business.
Diversify Your Business
Having different streams or sources of business is good for you. Therefore, you should try as much as possible to diversify your business. Perhaps, during the offseason, you should try your hands in other business endeavors which can actually earn you money. Doing this will ensure that you are not entirely dependent on your seasonal business. And you will earn money to run it regardless of whether it is seasonal or not.
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