Peaks and Valleys in Service or
for Small Business
Plan in advance for
these normal slowdowns and they won't catch you off guard
By Phil Menke, REAP South
Central Business Specialist
A shift in business traffic is both a seasonal and business cycle phenomena that is common to almost all businesses regardless of type. Certain classes of businesses are extremely seasonable, tourism at southern coastal Florida, for example. Peak volume occurs during northern winter months and is almost devoid during the high summer heat.
All businesses are vulnerable to upside and downside shifts in business sales or service volume changes due to changes in business cycles. Itís normal, in other words, to experience fluctuations in business traffic.
What is not normal is when your particular business fails to plan in advance for strategies to cope effectively for this. There are effective and conservative responses to the stress of managing highs and lows in business sales or service volume.
Knowing how to adjust in advance for a rapid change in business volume is the key. When a seasonal or business cycle shifts downward, consider these:
- Defer all capital expending or at least do an exhaustive needs assessment of that spending. Analyze it particularly for its effect on short-term cash flow.
- In regard to credit and collection, ask for leniency and the privilege of extended payment with longer terms, but also be aware that it may not be in your interest to ďhard lineĒ those who owe you. Partial collection and continued dialogue is preferable to non-collection.
- Analyze how you can pare back on money taken out of the business for personal use. Now is the time to match your personal spending with your sense of business frugality.
- Assuming your short-term cash flow isnít adequate to pay all bills, prioritize those which are typically non-negotiable such as rent, telephone/fax, utilities, shipper payments, payroll taxes, and payroll.
- Finally, consider critical business relationships that need to be preserved for business survival. Place them in the next priority level.
How about peak periods of business activity? Why should that be a time for careful scrutiny of finances?
Because you may, by not exercising caution, set yourself up for larger headaches when the down times inevitably come. Peak periods are the time to build a prudent cash reserve for the inevitable leaner times.