Like many business owners, you’re an expert in your field, and you’re not only the reason your business exists, but you’re the reason it still exists. You will never find another person as devoted to your business as you are. You know that there are many factors that contribute to your success. Seasonality is a good thing during your busy season, but it can be nerve wracking during the slower months.
While it’s not getting cooler yet, we know it’s not too long until Labor Day weekend and the “official” end to the summer season. Vacations are over, kids are back at school, and the streets are quieter. After a busy summer, many small businesses experience a drop in sales. If this describes your business, you may be thinking, “how can I make the profits from my busy summer months stretch as far as possible?”
There’s a ton of advice out there on how to manage your budget and things you can do to reduce your expenses. I’m going to assume you’ve already thought of all the obvious things you can do, and that you don’t need to be told to quit spending money on summer decorations.
Here are three areas you can use as a measuring stick to make sure you know what your financial position is and what you need to make it to next season.
Look at the Metrics:
We’ve talked a lot about evaluating your metrics this summer. That’s because knowing the details & the trends of your business is the only way you will be able to measure how you’ve done in the past and what you need (and don’t need) to succeed in the future. There are so many metrics to measure, and every business will have different needs. Pick 2-3 metric that are business critical and check in on them like your kids (or grandkids) check in on their favorite stars on SnapChat. (i.e. frequently)
Stop spending on certain items, change your marketing if your CPA is getting too high, switch up your inventory if it’s not turning over as fast as it used to. Metrics won’t do the work for you, but they’ll help you work smarter—because they’ll identify what business activities need your attention.
Prioritize Your Expenses:
You’ve done a great job managing your busy season to bring in as much revenue as possible. Now, when you’re cash rich, is a good time to look into the future and make the big decisions on what expenses are most critical to your continued success. Do you have repairs to make? Should you expand into a new region? Build up your marketing? What can you do without?
I went to school for design, and a professor once told me something that I’ll never forget: because it’s true in all aspects of life, not only in design. He said, “It’s always harder to take away than to add, but your design won’t be the best it can be until you’ve taken away everything that isn’t 100% necessary for it to work.”
I’ll clarify that he didn’t mean every design needs to be bare, but that you should not create without purpose. If you apply this method to your business and comb through your expenses and process, it’s likely you’ll find things that weigh you down more than they raise you up.
What You Should Look Out For:
The phrase, “everything is 20:20 in hindsight” is a phrase that has always irked me because: of course it is! I dislike when people say obvious things, so I will always try not to do that to you, but sometimes conventional ideas are glossed over for their obvious nature and need to be brought to the surface.
The goal of a business owner is not to look back and see what they did wrong, but to be able to predict how to avoid making mistakes to begin with. Ty Kiisel, our resident small business educator, and I talked a lot about how a business owner can tell if they are doing well financially. He started to talk about financial statements (yawn), but then he started talking about something that made complete sense to me. He brought up this idea that every business should aim for a 2:1 current assets to current liabilities ratio. He specifically pointed out that most businesses will never reach the perfect 2:1 ratio, but that if your ratio is less than 1:1 and is in negative territory this is something to worry about.
If you’re consistently looking at your metrics as I mentioned above, you will notice, with plenty of time, if you’re trending in the wrong direction and will be able to fix the issue before it becomes a serious problem. Do your financials add up? Do your marketing costs and plans continue to make sense? Are your customers leaving positive feedback? Are you getting the best deal on your inventory? Can you renegotiate your internet/phone plan (yes, you can)?
There are hundreds of ways your business can stretch your profits from your busy season to last until the next uptick. My goal is to inspire you to find what works for your business and keep going strong.