Managing Your Finances as a Seasonal Business

By Amy Thompson

Dec 09, 2022

10 min read

As a small business owner, it’s important to be aware of the recurrent nature of a seasonal business and to plan ahead for potential financing needs. Seasonal businesses often experience peaks and valleys, which can make managing cash flow and expenses one of their biggest challenges. Because sales are likely to fluctuate throughout the year, it’s essential to anticipate slow periods and plan accordingly.

It’s fundamental to always plan for potential financing needs. If you know you’ll need additional funding at certain times of the year, start researching financing options well in advance. Many seasonal small business owners utilize a short-term working capital loan to meet these needs and keep their cash flow healthy during slower periods. By being proactive, planning, and doing your research, you can ensure that your business has the financing it needs to thrive – no matter what time of year it is.

Here are some additional tips to help small business owners manage finances as a seasonal business:

When Business is Good, Closely Regulate Expenses 

It’s especially imperative to be very mindful of your spending and cash reserves when business is good. During peak periods, you should be focused on building up your capital so you can weather any potential storms down the road. Closely monitor inventory levels and expenses, and only spend when absolutely needed.

Think Strategically

It’s also important to think strategically and keep your eyes on the long term when managing your finances as a seasonal business. The new year is a great time to forecast what could happen in the next twelve months and plan accordingly. For example, the time to borrow the working capital you may need to get through an off-season is not during the off-season. When applying, you will need to show you have more cash flow than is required to make the loan payments, so it’s best to apply when your revenue flow is high.

Distinguish Between Needs and Wants  

When making financial decisions for your business, it’s important to differentiate between needs and nice-to-haves. Borrowing capital can help a seasonal business alleviate pains during a slump but should be used in ways that will benefit the business and contribute to its overall value. This could include things like launching a new marketing initiative, exploring a new product geared toward the traditional slack season, working on physical facilities improvement, or utilizing equipment financing to expand or upgrade outdated equipment. While borrowing can help keep the doors open during slow times, it’s essential to use the funds in ways that will improve the business as a whole.

Review Your Credit Profile 

Finally, it’s important to always review your personal and business credit profile regularly. This will help you identify any potential red flags that could impact your ability to get financing when you need it. If you find any negative items on your report, take action to correct them as soon as possible.

Like many business models, seasonal small businesses have their ebbs and flows. But unlike other businesses that may have a more even distribution of revenue throughout the year, seasonal small businesses often make the majority of their money during a very limited window of time. This can put them in a tight spot when it comes to cash flow, but by planning and diligently managing your expenses, it can be easier! Borrowing could certainly be helpful, but it’s crucial to use borrowed capital wisely and apply at the right time. You can learn more about your working capital loan options or equipment financing through CAN Capital here.

Managing finances as a seasonal business can be challenging, but following these tips could help you stay afloat during slow times and take advantage of opportunities when business is booming.