A Short Season (Case Study)
A Short Season
Q1. What impact do highly seasonal sales have on a small company's cash flow?
The amount of any small company's working capital must maintain stable and is also affected by seasonality. During peak productivity times, the amount of working capital will, in general, be higher to cover all increased operating expenses. That depends on the nature of the industry, as some of the working capital may have to be put in reserve especially when the business and the cash flow is down.
It is important to know how a business is affected by any seasonal change and to plan accordingly. Researching the industry and observing it trends is one way to understand how a business might be affected. Depending on previous experience in the industry and directly observing trends will help to deal with these changes.
Q2. What other advice can you offer owners of seasonal businesses about coping with the effects of their companies?
These two advice are for developing and sustaining a successful seasonal business.
1- Customer promotions need to be active.
Take advantage of times when other competitors are in quiet mode by targeting costumers that are often accessible before a busy season start.
2- Build alternative income streams.
Setting up an additional revenue source to handle the off-season impact. But we shouldn't let our attention to the alternative source overtake our focus to the main business.