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Small Business

The Small Business Owner’s Guide to Seasonal Budgeting

In nature, animals often increase food consumption during times of abundance and relax during times of scarcity. This instinctive behavior has protected them from starvation for years.

Humans, however, are different.

We have been known to relax and increase spending during times of abundance, then scramble and save during times of scarcity.

We may have been able to scrape by with this strategy on a personal level, but when it comes to business, success lies in seasonal strategy.

Here are some proven business strategies that will keep you afloat during both the feast and famine of the business cycle.

Peak Season (Feast) Strategy

Determine your baseline. With the ups and downs of business income, seasonal budgeting can be difficult. One method would be to look at your financials to determine the minimum amount of income necessary to cover the rent or mortgage, keep the lights on, pay the salaries, etcetera each month. Keep this amount available in the bank each month.

Build up your business savings account. Having cash on hand can give you a greater sense of security, strength, and flexibility. Businesses have ups and downs so putting aside some funds for a rainy day during “feast” times is a smart move. Ideally, 6 months or the number of months during your off-peak season is sufficient. There are a number of ways to accomplish this savings goal. You can put aside 10% to 20% of your gross income into savings. Or, after you determine your baseline, you can place a percentage of your income above the baseline into savings.

Pay down debt. If you have outstanding loans, but not sure how to tackle them, consider paying them off using percentages. Set aside a percentage of income, 10% or 20%, which is automatically taken out of your account each month to go towards loan and/or credit card repayment. You can create a special bank account called “Debt Repayment” when the funds are automatically transferred.

Strategically give raises and bonuses. Consult with your business accountant and financial advisor to determine the right way and right amount to give. Giving the “right” amount can help your workers feel appreciated and improve production and sales. Giving either too much or too little, however, can negatively impact your business.

Off-Season (Famine) Strategy

Improve your business marketing. When things slow down, think about low-cost ways to get your business out there. Taking small affordable actions now can pay off big later. Consider creating videos that introduce your business to the world, start a referral program, experiment with online advertising or create a subscription program to generate repeat business. Brainstorm with your employees and let those creative juices flow.

Increase employee training programs. Good employees are found. Great employees are made. It is much easier and more cost-effective to properly train your staff with the skills they need to be effective. The off-season is a perfect time to sharpen the saw (in the words of Steve Covey). Invite trainers, attend conferences, or sign them up for online classes. Sales training, technical skills training, personal development training, etc. can not only improve your company culture, but it can do wonders for your bottom line.

Consider a business loan. The off-peak season can be an ideal time to make business improvements that could increase revenue when the high season rolls back around. Small business financing could be just what you need to fill in the gaps when you need to remodel your store or upgrade equipment.

Final Thoughts

Even with great strategies, you never know when unexpected bills, emergencies or even great opportunities can appear. Consider a business loan from LoanMe. Your small business could qualify for loans between $3,500 to $250,000.