Whether it is a fishing boat in Alaska or a Christmas card boutique in New York City, some businesses are specific to handling a busy workload during a certain season of the year. For these businesses, every busy season has a corresponding slow season that can literally make or break the business.
The goal of every business should be financial success to one degree or another. This means having the cash flow to cover your business needs as well as preparation for unexpecting expenses. In order to be reach this level of financial success, a business should make decisions based on their long-term success and not solely on current needs.
Here are 3 ways you can prepare your business for the slow season and see financial success:
1. Know Your Business Needs
Every business incurs costs to keep the doors open. These costs can typically be broken down into 2 categories: fixed costs and variable costs. In order to be prepared for a slow season, a business should know both the fixed costs and the average variable costs. Once you know what those expenses are, you can begin to plan accordingly. It may be helpful to have 6 months to a year’s worth of operating costs in your savings account. That way, you can keep going even when unexpected expenses come up.
2. Know Your History
We’re not talking American History; we’re talking about the history of your business. If you have encountered slow seasons in the past, what have those seasons looked like? Prepare and review the financial reports from previous years to gain insight into how to be ready for this year. Your accountant will be able to help you to access this important information as well as provide research on similar companies and their profitability.
3. Spend Wisely
It’s tempting for businesses to spend money when earning levels are high. This can be a mistake in the long run if you do not focus on the “slow season.” It is a much wiser strategy to put some of the money you earn during your peak season away in preparation for the slow times. When you spend too much of your earnings when they are high, you risk damaging your business by not being able to cover expenses, such as payroll, when things are slow.
Having an accountant with experience like Hacker Accounting at your side can make a huge difference in how you prepare for the slow season. We can help you keep an eye on what is coming up while also looking to the past for historical patterns.
Call us today at 602-375-5251 and let’s discuss your business needs.