Business is booming for retailers of real Christmas Trees during December but as we know this will be short-lived and come 24th December they’ll struggle to give them away.

This is an example, albeit an extreme one, of seasonal trends that occur within a business. Now, this is a very obvious one, the same with ice cream vans, in that we all know they have a very limited window each year in which to operate and make a living.

However, virtually every business has some kind of seasonal trend although it might not be as obvious. For accountants, we are generally less busy through the summer whilst our clients take well-earned breaks, and then we are extremely busy in the run up to Christmas, as accounts deadlines approach and with of course the tax return filing deadline at the end of January. As I write I can see smoke coming off the keyboard of our Personal Tax Manager; she is working that fast!

Many businesses will close completely over the festive period, perhaps for a couple of weeks. This might not always be through choice, they might not be able to afford to, but if the trade is not there it’s Hobson’s choice.

If you don’t know these seasonal fluctuations and plan for them, when the low season comes, you will be unpleasantly surprised and may even be led to believe something has gone wrong within your organisation, making unnecessary changes. Not only could these be useless but could really damage your business.

How to identify your highs and lows

Hopefully at the start of the calendar year or your financial year, you will set budgets and create a forecast which will be referred back to on a regular basis as part of your management of the business.

Let’s use the example of a stationery wholesaler. Their sales were £300,000 in 2019 and they expect growth of 5% in 2020 so forecast sales of £315,000. In their sales budget they simply divide this by 12 and set their sales team a target of £26,250 per month.

The problem with this is that typically, March and April are their busiest months, whilst July and August are quiet and then they close for 2 weeks in December.

Comparing their actuals to their budgets, they would have over performed in March and April, perhaps even paying bonuses based on this, and then underperformed in July and August, perhaps causing a cash flow issue. They then miss target at the end of the year leaving a de-motivated group of staff at the Christmas party, spending most of their time moaning about the unrealistic targets set for them.

The simplest way to learn your high and low seasons is to analyse sales data. Had they done this and used the information, they could have altered the budgets to forecast the higher sales needed in March and April to see them through the leaner months. It would also have given the sales staff more realistic and achievable targets with which to work towards.

You must know what your Key Performance Indicators (KPI’s) to be able to manage them and identify trends within your business. Take a look at this article written by Will Richardson, one of the founding partners of A4G Growth for expert advice about identifying your Key Performance Indicators.

How to manage seasonal trends

Correctly identifying your seasonal trends is the first step of managing them. Then you can focus on what you can do to reduce their impact. Here are some suggestions:

  1. Ensure budgets and targets are adjusted for seasonal variation, even if just for a drop in trade for Christmas and make staff aware of this so they understand them.
  2. Try to generate work for the low season in the build up to it. This might include making calls to existing customers (could they buy more from you or buy other goods/services? They might not be aware of all you have to offer). Perhaps you could have a marketing campaign or increase your networking.
  3. Consider offering your customers alternative payment methods. If you can be paid via direct debit or standing order, this can reduce the impact of seasonal variation on cash flow.
  4. Can your cost base be reduced? This is a consideration at all times of the year but you might be able to close part of your office to save on utilities or perhaps even sub-let your office for a short period.
  5. If there is drastic seasonal variation, consider diversifying or starting a business for other times of the year. For example, our Christmas Tree retailer might want to sell ice cream in the summer.
  6. Use the time for business improvement and personal development. At A4G, this is often the time when we will work on improving our systems and internal infrastructure. Are there important but not urgent tasks that are put off all year? Perhaps there are staff training requirements. Now is the time to action this.
  7. If you cannot think of anything then use the time to rest and recuperate. Staff can also be encouraged (not forced) to take annual leave during the quieter periods.

If you would like to have a strong and robust business all year round, contact us using the button below. We can arrange an ‘Improve and Grow’ session where we can outline an action plan of what needs to be done to manage the seasonal trends in your business. We will then work with you to follow through with that plan.

Want to find out more?

Call us on (01474) 853856 and we will put you in contact with one of our advisers, or send us an enquiry by clicking below.

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