Many small businesses rely on a specific time of year to provide a spike in revenue. Oftentimes, it is toward the end of the year, during the holiday season. If your business is dependent on a seasonal surge of income, it’s important to implement a cash flow management strategy that addresses these fluctuations.

 

It can be difficult to maintain an annual budget when a majority of your business capital comes during a short time span. The primary issue is that, even though your profits will rise significantly during the seasonal boom, most of your basic operating expenses remain consistent throughout the rest of the year. Operating costs such as rent or mortgage, taxes, utilities, insurance and salaries still have to be paid throughout the year. During the off-season(s), much of the capital expenditures are put toward preparing for the next big sales season.

 

So, what should seasonal business owners do when managing cash flow projections?

 

1. Estimate your operating expenses for each month. Some will be consistent costs; others will fluctuate. Even if your business completely shuts down for months at a time, there will likely still be some costs to consider. Then make sure you have the business capital and cash in place to cover these expenses from month to month, as you ultimately prepare for a larger influx of revenue during a certain season.

 

2. Project your revenue for the season ahead. Having an understanding of what cash flow will be coming in is important. It can help you budget for the slower parts of the year and be prepared for the increase in business during your primary season. The longer you are in business, the better grasp you’ll have of the financial ebbs and flows, as well as your business capital needs throughout each part of the year.

 

3. Minimize expenses during the slow season(s). If little-to-no revenue is coming in, it’s best to keep your operating costs at a bare minimum. This will help your small business stay on budget.

 

4. Consider a line of credit during the slow times of year. It is a way to stay in business, finance equipment, pay employees, cover rent/mortgage, pay for utilities and stay consistent with whatever production is needed prior to the busy season. Again, it’s vital to project your profits ahead of the season. If you do secure a short-term line of credit, you’ll want to make sure it can be paid off when the seasonal revenue comes in.

 

5. Diversity your products and services to maintain sales during the off-season(s). If you have a strong relationship with your customers and understand their needs, perhaps there is something else they’ll be willing to purchase from you that is not so season-specific. For example, say you make and sell Christmas decorations – could some things be repurposed for other holidays?

 

At Main Street Business Capital, we’re all about helping small business owners achieve their goals. If you need help with a line of credit, working capital loan or equipment financing for your seasonal business, contact us today and we’ll help you find the ideal financial solution.