Practical ways to manage the seasonal peaks and troughs

Not every month is equal for sales, depending on your industry. But firms can open more windows of opportunity throughout the year

‘SALES are for vanity and profit is for sanity.’ In other words, don’t chase sales just to hit a number. They should be profitable sales that leave you with enough to pay your overheads and to have some left over for reinvestment, or for the rainy day. I do appreciate the difficulty, however, when sales are not going to plan and the temptation is to discount in order to get cash in. You only have to look at some of the big companies to see the trouble they’ve got themselves into.

Even if your sales are on target and your costs on budget, have you enough cash throughout the year? Let’s add a tail to the adage above — ‘cash is reality’. Profit that is tied up in stock, debtors or other assets may paint a positive picture on your profit-and-loss account, but a cash-flow statement might show a different picture.

There are many causes of tight cash-flow in profitable businesses. The one I’d like to focus on this week is the pressure caused by seasonal peaks and troughs in the annual selling cycle. SEASONAL PEAKS AND TROUGHS The C&C Group hopes and prays for a hot summer to maximise sales of Bulmer’s cider, giving it a peak in sales at that time. Pharmacists and doctors peak in the winter time when colds and flu are rampant. And the motor industry now has two peaks in the year, in line with the release of new number plates.

In the case study below, Gears Jewellers and everyone in the industry know only too well that approximately 20pc of their annual sales occur in December.

Can you just imagine the pressure that puts on cash flow for the rest of the year?

It’s all very well if your variable overheads go up and down in line with that selling cycle. But what about fixed overheads such as rent, rates, payroll (possibly) and your own salary?

The pressure on businesses that don’t have sufficient cash reserves to get through the troughs in the year can be very stressful and exhausting. TIPS FOR BALANCING SALES ACROSS THE SEASONS What can you do to grow profitable sales and to reduce the impact of troughs in your annual selling cycle? There are obvious options, like talking to your bank and agreeing a facility to spread the load during those times.

Banks are well used to that and when you have a good relationship with them, they will work with you.

At a time when the cost of money is relatively low, it’s worth talking to them. There are also clever things you can do with managing costs, such as with your energy budget and maybe even your rent.

But let’s take a look at some other additional ideas to grow sales at off-peak times. • This might be stating the obvious, but throughout the year there are occasions that are already in place or can be created. February has Valentine’s Day and Six Nations rugby. March has Mother’s Day, St Patrick’s Day and possibly Easter. June has Father’s Day, and so on.

There is something that can be highlighted every month in the year. • If not, create some event and own it. For example, the town of Monaghan has created a country music festival, which is a huge attraction. Could you invent an event in your industry for the quiet months, that give you a reason to reach out to customers? • Are there some promotional opportunities that you and your team could develop for the quiet months? Cash and Carry Kitchens has a calendar of activity that gives it a different story to tell every four to six weeks.

It might be a free appliance with a kitchen, or free fitting. Now, I know I said earlier that I don’t recommend discounting, but now and then it is okay. And you may even be able to get support from your supplier to share the cost for that campaign. • At the start of the year, create a calendar of activity for the year ahead. I supported C&C Wholesale (now called Britvic Wholesale) a number of years ago, when headed up by Des Drumm, and I was always impressed with how that even in the world of B2B, C&C had developed an annual promotion pack. Every month there was some activity outside the norm to drive sales. It still had peaks and troughs throughout the year, but the troughs were not as deep as they might have been without the promotional activity. THE LAST WORD Not everyone reading this has the same opportunity or control over peaks and troughs. Rather than try to have all of the answers, my point is to encourage you to be proactive and take time to plan the year ahead.

If you can’t find any answers then revert to the other options for managing your cash flow. Talk to your providers and explore mutually beneficial options.

Alan O’Neill, author of Premium is the New Black, is managing director of Kara Change Management, specialists in strategy, culture and people development. Go to www.kara.ie if you’d like help with your business