Cash-Flow Tips for the Seasonal Business Owner

For some business owners, there are only two seasons in a year: on and off.


Every business sees some ebb and flow in demand, but seasonal businesses — Christmas tree farms or water parks, for example — are often forced to contend with cash-flow fluctuations that are considerably larger than those experienced by other businesses. The impact is widespread, touching every part of the business from inventory and staffing to use of credit and personal income.


The good news: With a few strategies, you can better prepare your business for the slow periods, even if your busy season is in full swing.

Better manage your cash flow

Experts agree that in order to manage cash flow, it’s important to get a firm grasp on your books.


“Know your numbers,” says Lou Leyes, managing member and investment advisor representative at Stages Financial Group, LLC, a financial services firm based in York, Pennsylvania. “Understand your cash needs during your slow seasons, and make sure you set aside enough to cover those needs, plus a buffer for the unexpected expenses. Make sure your profit margins are sufficient to cover more than just current cash flow needs — including your own income.”


Once you’ve done that, you can tweak your operational plan accordingly. You might opt to establish flexible payment arrangements with suppliers during times of slow revenue. Some might give you 60 or 90 days to pay your invoices, according to Brad Bunt, director of the Kilgore College Small Business Development Center, which partners with the U.S. Small Business Administration to help small businesses launch and grow locally.


Bunt also urges small business owners to show restraint when it comes to their own compensation.


“During good months, don’t write yourself big bonus checks,” he says. “This should only be done at the end of the year or when you feel comfortable predicting your cash flow during slow months.”

Use credit carefully

Slow periods often require tapping into credit lines for day-to-day expenses so as not to exhaust cash reserves. Credit might be needed to restock inventory during slow seasons in preparation for a busy period ahead.


Consider a garden center that derives all or most of its revenue from the late spring and summer months, but business ebbs during the fall and winter. Slow season is when everything from rakes, wheelbarrows, bulbs, and mulch need to be ordered. Credit might bridge the gap, allowing the owner to pay for inventory without dipping into an emergency fund or his or her own pocket.


Experts say that business owners opting for this strategy should follow two rules.


First, “the best time to borrow money is when you don’t need it,” Leyes says, “so establish the credit lines in the good times. Don’t wait.”


Second, if you’re in a crunch and need credit quickly, “always have a plan for prompt repayment,” Bunt says. “Successful companies always have a plan for repayment — lines of credit should never be treated like a loan.”

Manage expenses

Ask any small business owner to name his or her biggest expense and chances are you’ll hear “staffing.” Whether you run a restaurant or an accounting firm, paychecks and benefits are likely to be one of your largest expenses.


In order to cut expenses when business is slow, focus on managing your staffing needs and, where applicable, the way your staff is bringing in revenue.


Bunt suggests implementing a program to encourage employees to sell on commission as opposed to hiring more salaried staffers, thus tying revenue to headcount costs and reducing overhead — if such a strategy is applicable to your business model. He also warns of overstaffing during busy months while also spending more on advertising as “this eats up the additional profit and the higher revenue month becomes a lower net-profit month.”


Of course, staff reductions may be unavoidable. The silver lining is you’re often able to pinpoint the slow periods ahead of time, so short-term employment arrangements may not come as a surprise to you or your employees.


“Reducing staffing when it’s slow might be uncomfortable,” Leyes says, “but it’s much easier if your employees know in advance that it might happen this way.”


If you’re averse to layoffs, you could look into diversifying your business so when lower revenue months occur, you’re able to pivot to other goods or services.


“Thinking creatively may lead you into another stream of income,” Bunt says. “A water park I work with, the majority of their income is the summer months, but in the off season, they rent out their covered areas for meetings, parties, and other events.”

The bottom line

While seasonal businesses encounter different cash-flow challenges when compared to other small businesses, adopting any of these strategies can prepare you to be in better financial footing in both busy seasons and not-so-busy seasons.

More information

We are committed to helping your business succeed. Our dedicated business banking professionals can help you find the right product to meet your business’ needs. To learn more, please call 1-800-428-7463, visit us online, or visit your nearest Citizens Bank Branch.


Disclaimer: Views expressed may not necessarily reflect those of Citizens Bank. The information contained herein is for informational purposes only as a service to the public, and is not legal advice or a substitute for legal counsel, nor does it constitute advertising or a solicitation. You should do your own research and/or contact your own legal or tax advisor for assistance with questions you may have on the information contained herein.