According to the Ministry of Business, Innovation and Employment, small businesses in New Zealand generate 28% of the country’s GDP and employ over 600,000 people. 97% of businesses in New Zealand are small and medium enterprises, which make them a big factor in the overall economy. Small businesses are deemed crucial because they support healthy communities, keep profits within the country, help spread the wealth, and are the precursors of big businesses.
It’s also a fact that New Zealand businesses are affected by seasonal trends. There will always be busy and slow seasons within a year. Seasonality in business is tied to patterns seen annually, such as certain months having a big cash flow and other months that don’t.
As a small business owner, you’ll experience certain periods where high demand will be well above what your staff and operations can handle, and it will be detrimental to your delivery of quality. And there might be times that your staff and equipment will remain idle, as profits slow down and operational costs increase. If you gain a good understanding on how to manage seasonality in your business, you’ll prevent losses or losing your business amidst it all.
You always have the upper hand on whether your business will fail or thrive. Careful planning and implementing strategies will make your business succeed whatever the season is. So how does seasonality work and how do you manage it? This guide will give you the ropes to traverse seasonal trends.
What are Seasonal Trends as a Small Business owner in NZ?
Seasonality happens at varying degrees in many businesses. Take for example the skyrocketing sales of some retailers during the holiday season. It will eventually plateau for the rest of the year. The summer season is also the busiest for the hospitality industry. Hoteliers will eventually lower their rates to attract more customers during off-peak season. In another note, other companies tied up with those businesses will also be affected.
Seasonal trends can also be affected by climate change. Take for example farmers whose crops will have a change in harvesting times due to global warming. Some businesses might slow down due to the changing climate, while others will benefit from it.
The transition phases between busy and slow seasons are relatively shorter compared to periods of high and low sales. Business owners, for this matter, have little time to adjust everything in business – which includes inventory, staffing, and budgeting to cater to seasonal trends. Busy seasons can also happen quickly, so you need to generate as much profit as you can during that short timeframe to sustain your business for the rest of the year.
Behaviours of Business Owners at Different Times of the Year
Some business owners neglect the fact that they can increase prices when demand is high, and lower prices when demand is little. Entrepreneurs lessen their chances of profiting as much as possible when demand is on the rise. And when demand slows down, entrepreneurs can offer sales or discounts to keep attracting customers.
There are also businesses that don’t close down during slow months, despite the fact that they generated little sales and had to incur losses. However, there are business that took advantage of small business loans to help them stay afloat during the slow months, and pay it off during peak season.
One of the tricky situations that business owners are in is when they hike inventory purchases once the busy season approaches. They can go overboard with hiring more staff, spending more on advertising, and buying more equipment to keep up with the demand. There’s a need to balance all of these expenditures because once the busy season ends, a slow season will eventually come that might not be able to sustain all of these purchases. Take advantage of evening out your spending all throughout the year, and always keep buffer money at hand.
How to Make the Most Out of Seasonal Trends
Seasonal trends can make or break a business, but you don’t have to flounder when profits slow down as expected. Here are the key takeaways from successful businesses who thrive amidst the changing seasons.
Advance Preparation is the Key
Take a look at the sales trends of your business for the past year or two. Which months had an uptick of sales, and when does sales go down? How can you make the most out of those busy months? How can you curtail expenses during high and low months?
Give yourself time to formulate strategies that will help you manage busy months, while keeping your business afloat during slow months. Create financial projections and aim for a sales target during busy months so that you can still keep your business running for the rest of the year.
To keep your business up for any seasonal changes, take a closer look at how you implement pricing. Take advantage of high demand and scout the field for competition. Increase your prices in such a way that you make the most out of selling a product while still being competitive. During off-peak times, show the market that you’re giving a bigger discount than usual. You can also offer deals and promotions which combine different products or services. Be more flexible in pricing so that you are able to manage demand and improve profits.
Another option is to offer a level pricing model. For example, you can offer customers a flat monthly rate for signing a year-round contract. The customer can pay the same rate when they opt in for your service weekly, or monthly when they need less of your product or service.
Offer a Variety of Products and Services
Create a cyclical revenue source that will sustain your business all year round. What else could you offer to your market when an item is off-season? What other services can you provide which will complement your main offerings? Diversify into off-season alternative products or services so that you can keep earning even if it’s not your peak season.
You can also collaborate with other businesses to offer off-season deals to customers. Another tactic is moving your sales online, so that you can cater to national or international customers besides your usual local customers.
Boost Up Events and Promotions
Make the most out of creating excitement in your market when it comes to what your business can offer. Organise events during slow seasons to keep attracting customers. Provide loyalty programs where avid customers can keep buying so they can get discounts. You can also strengthen your marketing strategies during slow months so that you can build up excitement for the peak months.
Try collaborating with other businesses as well to offer off-season deals to customers. For example, if you have a spa business, partner with skincare providers to offer sunscreen products during summer and at-home spa kits for winter.
Here’s how you can be creative with what you can offer to customers, even if your business is affected by seasonal changes. Counterintuitive coping means offering something to the public when businesses are expected to slow down. Find ways in which you can still promote or sell more diversified products during your off-season. For example, if a bookshop would usually have slower sales during summer when highschool and college students are on break, it could offer summer deals such as must-reads for the holidays or summer-time activities that can still promote the business.
Provide an Omnichannel Experience
Another tactic is moving your sales online, so that you can cater to many customers from different localities. Besides catering to customers in your city, you can ship products to customers from other regions who are attracted to your brand. You can also offer digital products that complement your main business to create more profit-making opportunities.
Boost your content and promotions online, and don’t forget to keep engaging your market through social media. You can also lessen expenses for paid advertising if you grow your followers organically and engage them with related content. Grow your online presence so that more and more people would get to know your brand.
Grow Your Money
To further supplement your income, consider saving some of your profits in interest-earning accounts. From this you can keep your money growing even if you’re not using it for working capital. Part of your savings can also go to stocks or mutual funds, which will grow your money as passive income. Having different income streams in the form of active income from your business and passive income in other investments will give you various opportunities for financial growth.
Get Support From Financial Houses
If you have current business needs that need financing during slow months, consider getting a small business loan to tide you over. You can get a loan during off-peak months, and repay it when there’s a boost in profits.
Take for example equipment financing where instead of paying for the full cost of equipment upfront, you can pay it through installments from a lender. The loan will focus more on how much the equipment will cost instead of your personal credit score. Your equipment financing will last for the expected lifespan of the equipment, so you won’t have to pay for longer than you’ll get to use it for.
You could also apply for a business credit card from the bank. It’s a popular form of small business finance, but the interest rate is usually high. Banks and other financial providers do offer an interest-free period on charges, so you can do repayments without having to pay for interest.
If you have poor credit, you could go for merchant cash advances for immediate financing. With a merchant cash advance, the lender gives you a lump sum of money, which you pay back by allowing the lender to take a fixed percentage of your daily credit and debit card sales.
You can also factor invoices through invoice financing. This is best for business owners with unpaid invoices, or those who have customers who pay late. You submit the invoices to a financing house, and they’ll give you payment in advance. You get the remaining funds once the invoice has been paid by the customer, minus fees and charges.
Getting a business overdraft should be considered as a last resort, but it can work for you if you need quick financing. A business overdraft allows you to run a negative balance in your regular transaction account up to a certain amount. You’ll have to pay the interest on any funds that are overdrawn. Besides the interest to pay, you’ll also be charged with certain fees. You can get business overdrafts in secured or unsecured forms.
Two of the most highly recommended types of business loans are lines of credit and unsecured loans. Both types of loans can be applied for with little requirements, depending on the lender. You can also get either one of them as quickly as 1 to 2 days.
A business line of credit allows you to borrow an agreed amount, and pay for the interest on what you actually use. You can repay the loan at your own pace and have the flexibility to get money only when you need it. There are also many small businesses out there that use interest-only lines of credit during times of the year when cash flow is tight. They can eventually pay it off when sales increase during another season.
Another option is unsecured business loans, which are perfectly suited for SMEs due to the convenience of getting them. You don’t have to provide a collateral, and you won’t have to go through a complicated application process. The lender will analyse your finances, which includes bank transactions and other information, to determine how much can be loaned to you.
Small businesses in NZ can still continue to flourish if they strategically operate their business in a way that makes them seasonal-proof. To sum it all up, you can make your business thrive all throughout the year by planning ahead, managing finances, preparing for any up or down trends, and adjusting your operations according to the season.
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