Managing seasonality to be a profit generator

Sidney Halpern, Chartered Accountant, Winnipeg, MB, CYBF Mentor

Seasonality in the business cycle can be the greatest profit generator. Conversely, if improperly managed, it can be the greatest cause of business failures.

Overheads are incurred 24 hours a day, 7 days a week, and 365 days a year! If revenue does not match that cycle, those unmatched overheads are a charge on profits and thus exponentially increase the per-unit cost, creating uncompetitive business conditions that could result in business failures.

A first priority should involve having the marketing division be mandated with the responsibility of developing new products and/or generating sales of existing products.

Secondary priorities include ensuring all staff undertake projects that add or create quantifiable and measurable value, therefore reducing the aforementioned unmatched revenue. These should be formally reported and measured.

Projects should also be formally defined by senior management and could include analyzing percentage of territorial penetration and developing strategies for enhancing coverage by increasing sales to existing customers (the priority), and then sales to new customers (the next priority).

Lastly, priority should be placed on reducing staff if quantifiable productive tasks are unavailable. In order to avoid loss of good staff, layoffs with part payments ought to be explored.

By giving appropriate thought to the priorities outlined above, managing the seasonal business cycle doesn’t have to be something you dread – it can be an important part of your path to success for the long run.