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Jan started her consulting firm at the beginning of the year. As with many new business ventures, money was tight, but her network and marketing efforts began to pay off and her client base began to grow. By mid-year she had several clients she was working with regularly, and she was confident that things would proceed steadily.
But as the year-end holidays approached, Jan’s workload slowed considerably. One major client, whom she relied on for a significant portion of her business income, stopped using her services all together. They were satisfied with her work; they simply didn’t have any work for her. Jan’s income dwindled. She began to fear that her business would not be able to survive.
This is an all-too-common occurrence for small businesses. With the exception of the retail industry, it’s fairly typical for business volume to slow down as the end of the year approaches. Many businesses have a January to December fiscal year; b. By the time November rolls around, project budgets have been depleted, and additional dollars won’t be allocated until January. Holiday shut downs and employee vacations can also be a contributing factor.
And though most industries find themselves busy once again in January, many small businesses — especially new businesses — lack the financial resources to get them through these lean times. Fortunately businesses can survive holiday slowdowns with a bit of forethought and sound financial planning.
- Create a Budget: Every business should have an annual operating budget. This budget should factor in projected earnings and expenditures for the year and be used to make spending decisions. If you know you will have $4,000 in expenses each month, determine how much money you have to bring in during the busy times of year to cover those expenses during a slowdown.
- Open a Savings Account: When your business is growing it can be tempting to funnel your profits back into the business to fuel that growth further. But remember that income fluctuations are unavoidable. Use your budget to determine how much money you would need to hold your business over for at least three months and keep that amount of money in savings.
- Apply for a Line of Credit: Most banks and credit card companies offer business lines of credit. A line of credit can be used — sparingly — in case of unexpected expenses or a sudden dip in income. Interest rates and limits on lines of credit can vary widely, so do some research before applying. And for your long-term financial wellbeing, don’t treat your line of credit as a source of income. It should be used only when absolutely necessary.
- Diversify Your Client Base: Having one or two steady clients providing the majority of your income can have its advantages. But the toll this can take on your business’ financial well being if those clients no longer require your services can be devastating. Aim to have your income balanced as equally as possible among your clients. This can be challenging for businesses just starting out, but the key is to continue to network and market your business, even if you feel you are “set,” client-wise.
For more ideas on planning for holiday slow downs, visit the Small Business Development Center — Olympic College (SDBC) in Bremerton. The SDBC’s certified business advisor can help you create a sound financial plan to keep your business financially healthy all year round.
(Editor’s Note: Wendy Miles, Director of Customized Training and Military Education at Olympic College, oversees the operation of the Small Business Development Center (SBDC). For partnership opportunities, contact Ms. Mile hers at 360-475-7786. For SBDC counseling services and workshops contact Rand Riedrich at 360-307-4220, rriedrich@olympic.edu.)
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