Seasonal trends affect the cash flow of every small business. When you know how they can impact your business, you can better prepare for the tough periods that they may bring.
When small businesses fail, it is often due to a cash flow problem.
The reality is that every business experiences a gap in revenue flow every now and then. But when that gap becomes too wide, paying bills will get harder. Worse, they may have to shut down.
That is why business owners should always be on the lookout for what could cause a drop in revenue for them. And one of those factors they must keep an eye on are the seasonal trends.
For all businesses, certain seasons bring more clients and revenue than others. That is, there are months where you will make a lot of money. But there will also be months when the cash inflow will slow down.
Despite these slow months, you will still have to spend money to keep your business running. And to stay afloat, you may have to take new business loans.
Doing that requires knowing the right time for you to get a loan for your business.
You need to understand which seasons affect your business and how. Having this knowledge will also help you plan ahead. This way, you can fill up the potential cash flow gaps the slow months will bring.
This article will help you get a better understanding of the seasonal trends and how they can affect your decision when it comes to getting small business loans.
How Seasonal Trends Affect Small Businesses
Seasonal trends affect small businesses in different ways. And this depends mostly on the kind of industry your business belongs to.
Industry #1- Retailers
Holidays like Christmas are the most profitable periods for retailers. After all, people shop more during these periods.
To prepare for this boost, retailers often buy lots of inventory a few months before the holidays. This increases their sales and profit margins for that period.
However, retailers might have to wait for some time to turn their stocks into cash before the holiday season. And after the holidays, customer traffic often turns into a trickle. This is when business loans could come in handy to ensure its continuous operation.
Industry #2 – Construction
Construction businesses face a similar issue to that of retailers but in the opposite manner. That is, instead of getting more clients at the end of the year, they virtually shut down. Business often starts picking up for them towards the second month of the new year.
However, they need to stock up on enough materials during this time. Doing so allows them to immediately hit the ground running when they resume operations. Getting a small business loan may help in funding the purchase of those materials.
Industry #3 – Restaurants and Cafes
November and December are the busiest seasons for restaurants and cafes. After all, people are more festive during that period. They also dine out more frequently.
For restaurants and cafes near beaches, the revenue boost extends to other holidays, like the summer season In contrast, those found in industrial and business areas are deserted in the summer.
However, January is generally considered as the time to remodel and carry out repairs in restaurants and cafes. And business may be slow in the following months. Small business loans may be helpful in funding the upkeep and operations of a restaurant or cafe.
Industry #4 – Hospitality
Summer is the most profitable period for businesses in the hospitality industry, followed closely by November and December. More people take vacations during the summer season.
During off-peak months like March or April, hoteliers will see a drop in the revenue they generate. But they’ll still need to keep the hotel premises clean and carry out other forms of maintenance. A small business loan may be helpful to fund this.
Industry #5 – Professional Services
Professional service companies get a lot of business in December. This is the period when their clients often require their services. After all, this is when they wrap up their first half of the financial year. But after this period, demand drops significantly.
To fund the day-to-day operations, a small business loan may be required.
How Do Seasonal Trends Affect Your Business?
To escape cash flow issues caused by seasonal trends, you have to know how they affect your business. And the best way to do this is to identify which industry your business belongs to.
The reality is that seasonal trends will affect your business the same way they affect other businesses in that industry.
You can also determine the seasonal trends of your business, and when it’s the right time to consider getting small business loans, by checking your records over the years.
See how your business performs in and around significant moments of each year. The pattern you notice will give you a clear idea of which seasons favour your business. It will also reveal what times of the year you experience a drop in revenue.
With this information, you can make strategic actions that can boost profitability once your business gets over the expected slump.
Aim for Business Financing at The Right Time
There are several ways to boost your cash flow during slow months when there are drops in revenue. For instance, you can offer more variety of products, do promos, or lower your prices.
But one easy solution is to get small business loans at the right time. Doing so will get you through the slow periods of your business.
Ideally, you should get a loan during off-peak months and then pay it back when you experience a boost in revenue. But if you are just starting out, you may need to take out startup business loans. Keep in mind that you still have to pick the right times to apply for these loans.
Overall, you have to apply for a loan in anticipation of how your business will be affected by the seasonal trends. This will help you prepare better for the slow months.
Make sure your loan application gets submitted sometime before you’ll need it. This will ensure that you get the business financing that you need at the right time.
It could be what will keep you afloat during tough periods and set you apart from your competitors.
Ultimately, you need to keep in mind how seasonal trends affect your business. Having this knowledge is paramount in order to succeed as a small business owner.
If you need further assistance, Unsecured Finance Australia is here to help. Apply online and you can receive your approval within 24 hours.
Find out more by taking a look at our unsecured business loans.