Many small businesses have been in their slow season since the beginning or middle of January. It’s around this time that, for reasons beyond their control, small businesses experience a significant dip in demand. The cold weather makes going out to shop seem much less appealing, and customers are tighter with their wallets following the holiday splurge. It’s up to the business leader to come up with strategies for covering business expenses despite the loss of revenue. As unnerving as a rough patch can be, getting through it is usually as simple as implementing a short list of changes and doubling down on the one that proves most effective.
Here are 4 things your business can do to stabilize cash flow during the post-holiday drought:
1. Cut Expenses
This is almost always the first step for any recovery strategy. Even the most efficient and frugal business leaders will find something to cut. If your business’s revenue has taken a particularly hard hit, anything you can do to save as little as a couple hundred dollars without hurting the business should be considered. A good method of determine what to cut is to make a list of recurring or upcoming expenses and labeling each one as essential, nonessential or possibly nonessential. Expenses that fall into the nonessential category should be cut immediately. Expenses that are deemed possibly nonessential can remain unless your cash flow situation gets worse. Cutting expenses is a great start to a broader initiative because it is a relatively easy change to make, and the first step of any major business endeavor is already hard enough.
You’ll also be a lot less stressed about the future when you know you are being proactive, as opposed to letting the situation escalate by delaying what needs to be done now. It’s comforting to be able to tell yourself that while certain elements of your business cannot be controlled, at least you are saving as much as possible.
2. Develop A New Pricing Strategy
Businesses that are highly seasonal (they perform the majority of the year’s sales during the busy season) tend to maximize performance by lowering their prices. This is especially prevalent in businesses that depend on holiday sales and must therefore offer prices that stand out, typically because they are lower than their biggest competitors. But once the holiday buzz dries out, those low prices lose their power. Most businesses just return to their traditional pricing model and eliminate all discounts. This is not, however, the best move for everyone.
Let’s say you have a retail business and, like many of your peers, you unknowingly bought too much inventory before the holiday season. Your shelves are stocked with excessive quantities of items geared towards holiday customers, a.k.a items that must be sold as soon as possible before they eat up any more working capital. Some businesses might therefore opt to maintain or even increase discounts on holiday inventory and eliminate discounts on other items.
3. Find The Right Business Financing Company
If standard procedures like cutting expenses and changing your prices cannot stabilize cash flow on their own, you may want to look into a short-term business loan. One advantage of taking out a small business loan at this time is that your list of options is much shorter. You need a business financing company that specializes in approving business loans during slow periods. The right business financing company for you might offer a number of repayment plans or be willing to negotiate terms. As for which program to choose, your decision depends on how long it will take for demand to pick back up. A shorter time frame points you towards a business line of credit, whereas a merchant cash advance might be a better option for someone currently facing several months of limited revenue. You should also consider how different repayment plans will effect your resources for increasing revenue, like marketing campaigns.
4. Put Your Longest Partnerships To Good Use
The first two sections of this list revolve around vital skills for any business leader. Well, another vital business skill you can hone during rough patches is asking for favors. If your business is alive and kicking, it’s likely because you have continuously fulfilled your obligations to your most important business partners. This includes vendors, marketing agencies, credit card companies, or business financing companies. Establishing a long track record with your business partners is not easy, and therefore comes with rewards. You could ask for lower rates, credit extensions, or one-time discounts. Yes, asking for these things can be uncomfortable. But as any experienced business leader will tell you, knowing which favors to ask for and how to ask for them will get you very far in the business world.
Learning how to conquer slow periods is crucial for business leaders because sooner or later, every business gets hit with a sudden crisis. The main difference between businesses that succeed and businesses that fail is the strength of their recovery plan. Taking less time than your competitors to rebuild cash flow dramatically increases the likelihood of a successful future.