Does your business suffer from rising or falling sales during specific days, weeks or months? If so, you are not alone. Most of the businesses I advise or have a relationship with suffer from seasonality in one way or another. Factors such as the weather or holiday periods can affect your business's performance.
Seasonality is a characteristic of a time series in which the data undergoes regular, predictable changes that repeat every calendar year. Any predictable pattern or change in a time series that recurs or repeats over a one-year period can be called seasonal.
Examples of seasonality:
- Ice cream: Ice cream carts sell more when the weather is hot
- Restaurants: They sell more soups when it's cold; they are packed during Christmas and New Year
- Accountants: They prepare most tax returns from April to July, with a peak in January
- Beauty salons: They see a drop during the summer, when clients are on holiday
- Home appliances: Manufacturers produce air conditioners for the summer and heaters for the winter
- Fireworks: They manufacture all year round, but sell 85% of their stock during festive seasons
- Gyms: Packed in spring and early summer, with higher attendance early in the week and at peak times
- London Underground: 80% of passengers use the system from 06:30 to 09:30 and from 16:00 to 19:00, Monday to Friday
An example I love is a street vendor on Oxford Street. He kept few umbrellas during the summer, when he mainly sold cold drinks and ice cream. As he himself put it: “Rod, look, I can't control the weather. If the day is sunny, I sell cold drinks. Now, if it starts raining, I'll start selling as many umbrellas as I can.”
Why is understanding seasonality important?
Because you will always be able to plan ahead. Seasonality and planning should walk hand in hand.
- An increase in sales means more staff and stock
- You may need to work longer hours and reallocate resources
- In slow periods, you need to be prepared
- The profit accumulated in peak periods should not be used solely to cover the losses of slow periods
What can you do to minimise the effects of seasonality?
- Find out whether your business suffers from seasonality: Research or talk to people in the same industry
- Differentiated pricing: Charge a little more during peak seasons
- Discounted pricing: Offer special discounts during quiet periods
- Membership: Turn occasional customers into members with a monthly payment
- Networking and groups: Join networks where similar businesses can refer customers to each other
- New products or services: Offer alternatives during periods of falling sales
- Recruitment agencies: Get to know agencies operating in your area for when you need extra staff
- Keep selling: Sell as much as possible to stay profitable for as many months as you can
- Start accounting for sales in advance: Plan ahead of your best months
- Maintain high quality standards: Regardless of how busy the business is
- Stock control: Stock is invested money and could be used for another purpose
- Keep in touch with your customers: Communicate about promotions and new products
- Give preference to existing customers: Value those who are already loyal to your business
- Manage seasonal staffing requirements: Know how many employees you need in each period
- Extra equipment: Assess whether it is better to buy or hire
- Working capital: Ensure you have enough money to hire extra staff and buy additional materials
- Save money: Keep profits in the business instead of withdrawing them
- Overdraft: Secure this facility with your bank for emergencies
- Understand your financial performance: Compare with previous periods
- Prepare a cash flow: Track money in and out at least monthly
- Consider closing the business temporarily: In some cases, it is better to close during extremely weak periods
- Don't despair: Stay calm, regardless of fluctuations in sales
If you have questions or would like a personalised analysis of your business's performance and possible strategies, give us a call — we will be more than happy to help: 0207 328 8338.
