9 Techniques for Managing Seasonal Sales Fluctuations

9 Techniques for Managing Seasonal Sales Fluctuations
Jackie Lam
on March 22, 2020
Read in 4 min

If you’re a small business owner whose cash flow is affected by seasonal sales — we’re talking seasonal companies like Halloween or Christmas retailers, tax preparation services, and landscaping companies — your business may experience peaks and valleys in monthly revenue.

In turn, you could have difficulties covering your payroll and expenses.

To protect your business from lulls in revenue and make the most of the peak periods, here are some top ways you can prepare for fluctuations in cash flow caused by changes in seasonal sales demands.

9 Cash Flow Strategies for Dealing with Seasonal Demand

Project your cash flow a year ahead of time.

Putting out year-long projections before and after your busy season is important to understand what your goals are, and what cash you actually have, says Jeff White, analyst and staff writer at FitSmallBusiness.com.

“This is a step many small businesses don’t take, but it’ll allow you to fully account for any shortcomings that you may have had, which were unexpected before the season began,” says White.

“When the season ends and the money is counted, you then need to go back and re-evaluate your projections again based on how much money you actually have.”

Budget based on the slower months.

Damon Millotte, General Manager & VP of Tailor Made Lawns, recommends not getting too ahead of yourself during the months you’re bringing in the most of their annual sales.

“Don’t pay off one huge expense or spend extra money you have in the bank simply because you have the cash right now,” says Milliotte.

Instead, know your upcoming expenses and budget accordingly.

So If you know that sales historically drop off during a specific period, save money in your busy season to help make up for the lack of sales in your slower season.

Overestimate your monthly costs.

Overestimate your burn rate and monthly costs, suggests Earl Choate, CEO of Concrete Camouflage.

That way you can be prepared for the worst possible scenario.

Choate recommends overestimating your monthly expenses by adding 10% to 15% onto your costs from the same period in the previous year.

“Then you’ll have the unforeseen covered, and will always be doing better than expected,” says Choate.

Save for operating expenses during the peak season.

The best rule is to sock away money during the busy season for the number of months you expect to be off-season, recommends Choate.

As a home renovation company with busy season during the summer months, Choate sets aside a portion of his small business’ profits.

For instance, if there are generally three months that are generally slower, aim to sock away three months worth of expenses during the busier season.

Negotiate with vendors.

Another thing you can do to help manage a tight cash flow from seasonal sales is to increase the terms with your vendors during the off season so you have longer to settle your payables, suggests Passov, President of GreekU.  

Build trust and open the gates of communication with your vendors so they may be more agreeable to negotiating the terms during your small business’s slower season.

“Our relationships with our vendors is just as — or even more — important than our relationships with our customers,”  says Passov, whose business is affected by retail seasonality.

“We simply talk to our vendors and tell them when cash flow is getting tight, but they usually know it is coming every year around the same time. They always work with us because they know we are good for the money.”

Offer a prepaid option.

You can offer a discount for customers who would like to pre-pay for the entire upcoming year, suggests Millotte.

As Tailor Made makes the majority of its yearly sales during the spring and struggles financially during the winter, netting that extra money from end-of-year sales from pre-paid services (the company rakes in on average $50,000 to $60,000), helps it stay on top of bills and payroll come January.

“This is something that would be really helpful for companies in the home services field — or companies that require yearly contracts for their customers,” says Millotte.

Hire help during peak season.

To keep your overhead low during the slower periods, hire seasonal help during the busier periods, suggests Bob Ellis, owner of the e-commerce company Bavarian Clocks.

As Bavarian Clocks makes 80 percent of its sales during the holiday season, Ellis hires extra staff right during the holidays to keep up with the spike in sales and customer demand.

“This helps us manage our cash flow because we’re able to cut staff during the slow season and lower our expenses accordingly,” says Ellis.

Put a hold on monthly subscription services.

Passov suggests putting a seasonal hold on monthly services that you may not need during the slower seasons.

For instance, online subscriptions to SAAS products, marketing services, and so forth.

You’ll want to inquire about whether there’s a minimum length of time you need to put a seasonal hold on, and if there’s any penalty if you want to start up your services early.

That way you won’t be in a bind if business ramps up unexpectedly. 

Look into financing options.

To help you keep your small business afloat during the slower season, you may want to consider taking out a line of credit or loan.

Because small businesses with seasonal sales may not have the cash on hand until their busy season begins, getting financing for your business might be a good move, says White.

“If you time it right, and use the right financial product, then it can be affordable for small businesses to do,” says White.

To help with seasonal sale fluctuations, some options for financing include:

Cash Flow Loans

A cash flow loan is a type of financing that is backed by your anticipated cash flow.

So your repayment schedule are based on your projected cash flows.

Working Capital Loans

If you’re looking to access cash to tide over your company for a short period of time, a working capital loan could allow you to quickly boost your small business’s capital so you can cover operating expenses.

Inventory Financing

If you need to purchase inventory to get you through the peak season, inventory financing could help bolster your equipment and inventory when you need it most.

You can also use your inventory as collateral.

LendGenius offers a simple online form that can help you start the process of connecting with a potential lender – and it’s available 24/7 so you can have peace of mind all year long.

See Business Lenders

Jackie Lam Finance Journalist

Jackie Lam is a personal finance writer and and blogs at Cheapsters, which helps freelancers and artists get creative with their money.

Her work has appeared in Investopedia, Business Insider, Huffington Post, and Acorns’ Grow Magazine.

When not writing about money she enjoys roller derby, volunteering, and writing fiction.