Seasonal Sales (html)

Seasonal_Sales

Small Business Management – MGT 292

Professor Charles N. Toftoy

Seasonal / Fluctuating Sales

Many small businesses are dramatically affected by lulls in sales and sluggish economies particularly if owners and managers are caught financially unprepared. Unlike medium and large sized companies, small businesses depend heavily on earnings from operations to finance ongoing production or services. Therefore it is essential that industries that commonly have seasonal sales be prepared with a financial plan to weather non-peak periods. While there may likely be many ideas for generating sales during slow periods that are industry-specific, this page addresses general areas for managers to focus in preparing for sluggish sales periods.

Financial Planning and Budgeting

There are many reasons for having a financial plan and working budget. But it is essential for small business owners that have non-peak seasons to have a detailed blueprint of how to maintain viable cash flow.

þ A budget should begin with estimates of annual sales, which should be apportioned or broken down by month. Sales estimates can be projected using historical data while accounting for any fluctuations, such as shifts in the market, changes in operation, newly purchased or sold equipment, etc, that may affect the growth or reduction of sales.

þ An estimate of cash and credit sales should be determined. If sales are being made on credit, the length of time for collection should be estimated along with an ongoing analysis of accounts receivable. Also, any proceeds from loans and/or investor contributions should also be considered in the budget forecast.

þ Estimates for cash outlays should be made, which might include inventory / material purchases, labor costs, overhead and administrative costs, loan interest and repayments, etc. These estimates should be broken into monthly costs based on projected sales.

þ Once this budget forecast is assembled, an analysis of actual vs. budget should be reviewed on a monthly basis. Any significant changes in cash inflows or outflows can be recognized and addressed before they become unmanageable.

It is important that additional earnings from months that are estimated to have heavy sales be retained to subsidize months from weak sales, thus making the organizational cash flow more consistent over the fiscal year.

Marketing

Effective marketing should always be customer-focused and not sales-driven. Therefore, during periods of sluggish sales, marketing and sales staff can use this time to their advantage for developing innovative methods for offering better solutions for customers, exploring new markets, and developing strategies to outdo the competition. These ideas should be quality-focused and service-driven with a particular emphasis on building customer loyalty. The following is a list of suggested ideas to consider:

Make contact with ongoing customers. This can include personal contact such as a phone calls, personal letters, or site visits. Database marketing can be productive if good information is kept on customers and purchases. Be prepared to solidify the relationship and build loyalty with your customers.
Evaluate your sales and customer needs. A questionnaire can be an effective means for identifying problem areas as well as obtaining feedback about what is important to your customers.
Promote your business by organizing free demonstrations, consultations, and seminars. Presentations should be aimed at information about a high interest topics or needs. The presentation should conclude with a short pitch for your product / service followed up by a compelling way for customers to sign up.
Plan the use of promotional campaigns in accordance with non-peak sales intervals. Before the slow season, stimulate repeat sales by sending coupons to current customers for upcoming purchases or by offering special deals on early orders. Free samples, special end of season sales, and sweepstakes and contests may draw additional interest
Consider an alternative line or counter product to market during non-peak seasons. This may complement your current line but augment your sales during these slow periods.

Short-term Credit

Seasonal sales may occasionally threaten the financial viability of a business. While sluggish sales may be viewed as a short-term problem, a terminal cash flow shortage can have long-term effects caused by interrupted operations, the feeling of instability among valued employees, or loss of confidence by vendors and creditors. Hence, managers should consider the use of short-term credit options. This often provides the needed working capital to weather slow periods and not interrupt normal operations. The following is a list of just a few short-term credit options available to small businesses.

Small Business Administration (SBA) Seasonal Line of Credit Program (see site below)
Basic Business Loan
Business Credit Card
Business Line of Credit
Asset-based Financing Program

For more information and advice on how to address seasonal sales, check out the following sites.

http://sae.ca/bid/mainframe.html

** The Business Idea Developer is designed to help you appraise your business idea and develop this idea into a business plan. It also contains many valuable aids to help you start-up and manage your business, including forecasting and planning your cash flow.

http://www.edgeonline.com/main/bizbuilders/BIZ/financialmgmt/cashbud.shtml

** Entrepreneurial Edge Online is a service of The Edward Lowe Foundation. This site gives step-by-step instruction on developing and analyzing a budget.

http://www.ec2.edu/SBA/061697.html

** Setting Prices For Maximum Profits by Harvey A. Goldstein, was also printed in the Los Angeles Business Journal, June 16 - June 22, 1997. Mr. Goldstein is the managing partner of Singer, Lewak, Greenbaum & Goldstein, an accountancy firm based in Westwood, CA.

http://www.sba.gov/gopher/Business-Development/Success-Series/Vol9/12highim.txt

** This is an article posted by the SBA titled 12 High-Impact Marketing Programs You Can Implement By Next Thursday

http://www.sbaonline.sba.gov/business_finances/facts/Seasonal_Line_of_Credit.html

** This site offered is on the SBA Seasonal Line of Credit Program which offers short-term loans to help small businesses to get past cash crunches attributable to seasonal changes in business volume