Planning for the slooow times in your business.

May 04, 2011

Planning for the slooow times in your business.

 We’ve all hit those bumps in the road where business slows down and it leaves us scrambling to find work. After the total uncomfort of the situation I’ve really decided not to let it happen again.

 Planning for the slow times revolves around anticipating those times. This can be done by examining historic data. For example a company who’s work is seasonal would certainly experience a slow time. There are factors, other than seasonality, which can be used to predict upcoming slow periods.

 Other factors that contribute to slow periods are often times due to economic variables which may have a direct impact on your business model. For example if your specialty has to do directly with home sales, perhaps you are a new construction sub contractor, and those home sales start to slip you can be sure that your work will start to slip. On the flip side if your target market is the end customer, often times called the consumer, there are economic variables such as vacation and holiday season which tend to slow spending on home improvements.

 Planning for the predictable slow periods is an easy enough task. If you examine your historic data and see that on average you only work 200 days out of a 365 day year, then you know you need to earn enough in those 200 days to cover 365 days worth of expenses. Historic data will also show you when you tend to do the bulk of your business and when your business drops off. Budget reserves for your overhead expenses for these slow periods based on your historic data.

 So what can a business manager do to make sure that revenues don’t ever drop off? This comes with the anticipation of your slow times and knowing your sales cycle. If your typical sales cycle is 1 month (time from estimate to approval), and your production cycle is 2 weeks (time from approval to work begins); Also you know that in June your business dries up this all means your sales staff needs to work extra hard during the April and May months to build a back log so June doesn’t drop off.

 You might need to increase your advertising budget so that you can increase sales, but all of this should be figured out and planned before the year begins. It can be compared to taking a larger bite of a smaller pie.

 Let’s also face facts that no matter how hard you try, you will never be able to predict all slow periods. There are simply too many variables to take into account and sometimes surprises are thrown at you from left and right. However that does not mean that a savvy business manager can’t plan for these unpredictable slow times.

 A smart business manager will have contingency plans and contingency funds set aside to boost sales when an unpredictable slow period hits. What can a contingency plan consist of? The answer is really anything. Incentives can be given to the sales staff to increase sales. Production employees can be used to canvas neighborhoods with flyers and/or door hangers. Diversification of services can be offered, temporarily adding on services that you do not normally call your specialty. Referrals can be solicited from satisfied customers and past customers may be contacted for additional work.

 A contingency fund is simply a sum of money set aside for the primary use of funding the contingency plan. Knowing which contingency plan to follow will determine how much you need to set aside.

 Credit. Is it a bad word? It can be when it is abused, but a “line of credit” can really help you out in a bind. A line of credit is very similar to a credit card, however usually your minimum payments are interest only and you are not paying down on your principal. This is great for when things are slow, and as revenues pick up you can start to pay back the principal which was loaned to you. Credit should really be a last resort and only used when you are sure it can be paid back. 

 If you fail to plan, you are planning to fail. Take note of your normal cycles and plan for the worst using the above strategies. Doing so will ease the pains of the slow times by minimizing their effect. We might not be able to stop them, but we can slow them down!

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