Most businesses have certain periods of seasonality. Which means that for a portion of the year, business is slow. For your business it could be slow from January to July, but then picks up later in the year. Does that pattern sound like what your company struggles with? Does it create financial stress when it occurs? Well, if it does, there are several strategies that you can employ to help eliminate financial stress in your business.
Budget, Plan, and Review
Make sure that you have a company budget, which is implemented and planned for the whole year. In your budget, you should incorporate a financial plan that specifically addresses how to handle the seasonality of your business and how the overall revenue will cover the costs for that period. Be sure to stick to the budget by reviewing the budget each month. Additionally, your balance sheet should project the fixed costs to run your business and the total overhead expenses so that you are always aware of how much your company is required to have each period in order to remain operational.
Financial Plan
You should always have a financial plan to cover for your cash shortcomings. In some businesses, there is enough money at the start of the year to handle any shortfalls of the future months. However, it is best to determine and establish the amount of cash flow that will be needed for each period in each year and have a line of credit handy as backup, just in case your company experiences a slow period for longer than expected. If your company’s track record is impeccable, then your bank will not hesitate to loan you money to get you through the tough season. However, you must have a financial plan in place to determine whether you are going to need a loan and how much money will be needed.
Maintain Core Competency
A key feature that you should try to maintain in your business during a slow season is core competency. You don’t want to deviate from the image that you have created for your brand and cause irreparable damage to your reputation as a business owner; just to make a few extra dollars. Embrace the fact that your business is seasonal at certain periods of the year. Combat the urge to deviate from your core competency with proper planning and budgeting.
The Bottom Line
An important factor in keeping your business afloat during rough times is understanding the nature of your business. Let budgeting and planning be your focus from the moment you decide to go into business because the more you exercise your ability to understand a business, budget for shortfalls, and plan for a rainy day, the more you will reduce financial stress during seasonal times.
Financial Stress Elimination
The budget is the most difficult and important thing in any business, so with that you should also be prepared to face downturns and know how to prevent financial stress. Despite seasonality, if you maintain a core competency in order to capture your customers and maintain an understanding of the needs and culture of your business, you will be prepared to face financial issues within your company.
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