Five Financial Planning Tips for Seasonal Businesses

Running your own business can be hard work. However, the challenge can become even more intimidating if you operate a seasonal business. Whether you own a food truck hoping to find success in the colder months or a landscaping company trying to drum up business year-round, you may face challenges that more perennial businesses wouldn't have.

However, just because you operate a seasonal business doesn't mean that your success needs to be constricted to the months within your sweet spot. There are strategies you can follow to map out a business plan for annual, structured success, including monitoring your cash flow closely and looking at the bigger picture of your business.

1. Common Financial Challenges for Seasonal Businesses

Every business will face some sort of challenge, but there can be some unique ones, especially when it comes to seasonal businesses. For instance, an ice cream shop, especially one that offers no indoor seating, is likely to experience some drop-off in business during the cold months of January and February.

"We see many common challenges among our business customers, including seasonal businesses," said Maria Murphy, Assistant Vice President of Commercial Operations for American Heritage Credit Union. "Commingling of personal and business finances, overspending, and expanding too fast are typical for businesses. Additionally, the lack of a business plan or absence of budgeting can also be detrimental to a business, especially a seasonal one."

So how can these challenges be addressed? Let's look at five financial planning tips that seasonal businesses can follow.

2. Routinely Update Your Cash Flow

As with any business, you'll want to maintain a positive cash flow year-round. This can be a challenge, especially as an owner of a seasonal business. You can best protect yourself by maintaining several cash flow models on distinct timelines, including an annual model, as well as models for each quarter, month, and week. While this may sound like a challenge, you'll gain a chance to better understand your business and how much you can expect to come in.

Additionally, look for ways to trim expenses during slower months. Some questions to ask yourself may include:

• Do I need the same staff in the slower months compared to the busier ones?
• Are there services or products that could be scaled back or put on hold during the slower season?
• Should I change the hours my business is open?

As you answer these questions and find processes that work best for your business, revisit your cash flow models and track your progress. You may have found a great new solution that you can use moving forward!

3. Think of the Bigger Picture: Skip Short-Term Decisions

In our current age of instant gratification, it can be all too easy to look for a quick solution to a problem. But as a business owner, the easiest answer isn't always the best one. Awareness and foresight are vital tools that any business owner should have, especially when it comes to positioning for success. Be sure to think of the bigger picture when it comes to your business.

Let's say your business has several locations, but only one brings in significant business during slower months. It may be in your business's best interest to close the locations that bring in less traffic during this slower time of year. This represents a change you can repeat in the years that follow if you feel it maximizes your chances of success.

When it comes to developing tour business model, thinking about the bigger picture, as well as what will be the biggest benefit in 3-5 years' time, is always a great strategy.

4. Have a Line of Credit at the Ready

A line of credit can be a critical tool for businesses, especially for ones that are seasonal. In the quieter months, you can turn to a line of credit as a resource for expenses like new equipment, software, or renovations. You'll be sparing yourself the headaches and anxiety knowing you have a reliable resource you can use in your offseason.

"A business should consider a line of credit before they begin to realize cash flow issues," said Bruce Collins, Vice President of Commercial Lending for American Heritage Credit Union. "A line of credit is designed to provide short-term working capital used to cover operating expenses. In many cases for a seasonal business, the line of credit is used for timing differences in the cash flow. For example, a pool company may use their line of credit to stock inventory during the winter months when sales are slower. This allows them to be prepared for the busy season when they expect revenues to increase."

While a line of credit can be a great tool to turn to, make sure you have a repayment plan in place. Responsible use and intentional spending will ensure that your costs don't skyrocket, especially coming off months where your business won't be as dominant.

5. Remain Flexible with Your Operations

Flexibility is a crucial tool that every business owner should have in their back pocket. By being flexible, you remain open to new challenges and finding ways to overcome them. This is a strategy that can support your business year-round, and not just in the leaner months.

Think about flexibility when it comes to your staffing. Team members who can take on a variety of roles (i.e. customer support, bookkeeping, or merchandising) can find a groove that fits them as the business fluctuates throughout the year. Additionally, be open to getting creative with sales or off-season purchases. You may be able to test something in the busy season that can support your business year-round!

6. Have a Cash Reserve You Can Rely On

Like a line of credit, a cash reserve is a major resource that every business owner should have. You can turn to these funds for any major repairs or emergencies that may come up when your business is slower. A cash reserve can also be a good tool to rely on compared to a line of credit, as you won't need to worry about repayment.

"Creating a cash reserve for the offseason is a great strategy for any business to have," said Murphy. "Especially for a seasonal business, you can turn to your cash reserve during your slower season. Be sure to budget appropriately throughout the year to build up this resource."

7. Business Products with American Heritage Credit Union

American Heritage Credit Union is proud to offer a suite of products and lending solutions to business owners. The same products and services are offered to both year-round and seasonal businesses. Some of the most popular offerings include online banking services, mobile deposit, and credit card processing. Additionally, American Heritage also offers lines of credit and term loans within the lending space.

"We provide the same products and services to a seasonal business as we would to a business that's open all year," said Murphy. "Credit card processing services are a great example of this. A seasonal business may opt to pause this service and re-enable it when needed, and we offer this option to them."