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Seasonal Business Revenue Strategy

Simple Alliance, Kenya Limited


Cyclical Revenue Situations

Your business venture could be garnering the great bulk of its sales volumes during a short time period within the year. This is a seasonal business with cyclical income. Indeed, most businesses that do not deal in Fast Moving Consumer Goods (FMCGs) usually find themselves in such situations. These circumstances mean that you will go through significantly lengthy time periods without earning any income or with little revenue.

The Risks

Seasonal income streams will have certain negative consequences on your business. Major problems include:

  • Cash flow problems
  • Potential losses  

Cash Flow Constraints

Seasonal revenue streams constrain your cash flow, thus limiting your ability to cater for routine business expenses. You could find yourself utilizing business capital to pay off expenses. 

Possible Losses

Worse still, the income seasonality could push your business into a loss-making trajectory. This would occur if expenses become more than the income.    

Your Response

Your business has to meet certain expenses no matter the revenue situation. The suitability of the approach you take defines the meaning of business strategy. Your landlord has to receive their monthly dues regardless of whether you have entered a rough patch in your business’ cycle or not. Any permanent employees you might hire have their bills to pay. The workers have to receive their salaries promptly. You therefore need to devise a strategy for coping with income shortages during slow business periods. Your general idea would be to effectively manage expenses and cash flows.  

Your Goals

As you control business expense and cash flows, you will have a number of objectives. Major ones include:

  • To avoid maintaining seasonal inventory within the business for the entire year
  • To reduce your personnel costs  

Recommended Mitigation Strategies

To deal with seasonal cash streams, you could consider several approaches, including:

  • Diversification
  • Seeking short-term loans
  • Hiring temporary employees during high season

Diversification

Adopting diversification would be a good business approach. This tactic would see you venture into new, but related service or product lines. For instance, if your core business is in baking events’ cakes, you could diversify by venturing into the business of supplying tents and chairs.

Benefits of Diversification

Through diversification, you are assured of some extra income. True, this income could be small compared to the revenue you garner from your core business.  The reassuring fact is that the revenue so gained could go a long way in reducing the problems that are associated with business seasonality. The income will:

  • Reduce the losses you would incur during periods of low business
  • Meet majority of your key expenses

Summary

You have to meet certain business expenses regardless of whether or not your business is booming. Some fiscal obligations give no consideration for whether you have a seasonal business or not. Catering for these static costs could prove problematic to your small business if your income is seasonal. You can however positively transcend these problems if you institute proper management techniques. The quality of your response will define the meaning of business strategy. You could reduce personnel expenses by appropriately reducing staff during low season. You could as well hire temporary workers during peak time. To plug in the income deficits during low season, you could diversify the services and products offered by your business.

Copyright (C) 2016, Simple Alliance Kenya Limited

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