Fiducial | We help your business grow and be profitable.

by Renee Fellows

June 3, 2008 — Springtime in the U.S. means the beginning of the ‘busy season’ for millions of the nation’s seasonal small businesses. While ice cream stands are filling with sticky handed kids licking their triple scoops, what happens in the off months when the temperature dips below zero and you need deicer just to get into your car? How a small business manages cash flow and more importantly makes its financial and buying decisions can make or break its success. For seasonal businesses, those decisions are magnified by shortened selling periods making even one wrong choice life-threatening to the health of the business.

Lori Harris owner of Mary Jane’s, an upscale women’s fashion boutique in Park City, Utah knows what it means to run a seasonal business in a tight economy. Unlike other year-round retail shops, Mary Jane’s is located in a heavily trafficked ski town that sees its busiest season opposite retail’s traditional ‘boom times’. From late November through March the town is bustling with travelers, ski bums and families on a winter vacation and then the town empties out leaving only its residents to support the economy for the remainder of the year.

Seasonal businesses are also drastically affected by ‘seasons’ that are far outside their control. These events, especially the weather and economy, can cause sales to fluctuate wildly with no way to predict what may happen during the course of the year. “Retail buying runs in two distinct times,” says Harris. “Fashion designers typically introduce new designs in a spring, summer, winter, fall cycle or just twice a year. That means that buying for the shop happens almost six months in advance consuming the bulk of our annual cash flow. If we’re faced with a warm winter like last year, we could be stuck holding an entire season’s worth of winter boot inventory. We have to be sure that what we’re buying will sell or be prepared to take the nearly $20,000 financial hit when it doesn’t.”

Mary Jane’s isn’t alone in managing that inventory crunch. Donna Robertson, owner of The Village Bean, a coffee, tea and gourmet gift boutique in Windham, New Hampshire faces weekly buying decisions. “We have to buy not just perishable food items like cream, sugar, bagels and muffins, but also non perishable gift items for the boutique side of the store. It’s an interesting balance between what will sell for breakfast and what a client might buy her mother for Mother’s Day,” says Robertson.

Managing Cash Flow

Many small businesses are turning to unique business opportunities to generate cash in their ‘off season’. From small business consulting services to a full second company, entrepreneurs are often found juggling multiple jobs in order to keep their income stable and seasonal business afloat.

John Halecky, owner of Movies in the Park also maintains a public relations consulting firm during the winter months. “The outdoor movie business is highly reliant on the weather and we all know how unpredictable that is,” says Halecky. As his bookings increase in the spring months, he sets aside a modest amount that he needs to cover fixed costs and run operations during the off season. His payroll is event-based and built into the pricing structure for each event. He hires a few college-aged students and trains them early in the season.

To compensate his accounts receivable during the off season, Halecky runs a small one-man public relations firm. “I have a handful of clients that I continued to do work for,” says Halecky. For him, working the second business wasn’t a matter of generating ‘survival income,’ but a way to keep his hand in the public relations work he had loved doing for years.

Prior to her retail experience Harris had a diverse career in business management consulting starting two telecom companies in San Francisco. Before that she was a chef and manager of a restaurant. She’s pooled all of her resources to start and grow Mary Jane’s and continues business consulting to help pay down her credit card debt. “The consulting revenue funds our newest store in St. Louis,” says Harris. “Our investors wanted to see if we could make Mary Jane’s successful in a more traditional environment but they weren’t willing to fund it. Using my consulting revenue enabled me to make that jump.”

New Outcroppings

Finding new ways to sell was the key to success for Bronner’s, the World’s Largest Christmas store in Frankenmuth, Michigan. “Store sales had pretty much leveled off by the 1980’s, but our catalog really started to pick up,” says Lori Lipka, Communications Manager for Bronner’s. “Then we launched an accompanying online storefront that has been growing in leaps and bounds.” Distribution systems were already in place with the catalog division, so Bronner’s simply expanded their in-house distribution and shipping to accommodate online sales.

Bronner’s also added movie production supplying to its commercial line about ten years ago and business is really booming. From giant nutcrackers to snowmen and everything in between Bronner’s creates Christmas-themed set pieces and delivers supplies for Hollywood’s films. “We have five commercial sales representatives with one rep exclusively dedicated to handling movie production needs,” says Ann Koehler, Merchandising Manager for Bronner’s. “We have our own fiber glass manufacturing facility right here in Michigan so we can produce whatever the movie needs for their sets and ship it directly to the filming location. It’s been a great addition to our commercial division.”

Municipalities often didn’t have the recreation budgets available for summer events and needed creative financing to pay for Halecky’s summer movie programs. “I began looking for sources like grants to help pay for the events,” says Halecky.” There’s a great deal of money available from organizations like anti-drug coalitions and initiatives to help strengthen communities; all we needed to do was help communities connect with these funders.” Halecky keeps a running list of funders and doesn’t charge for this portion of the business. He says that the helping hand he provides is a value-added service that generates goodwill in his community.

Get Outside Perspective

No matter what type of business you operate, there’s a consultant firm available to help streamline business operations and assist in buying decisions. Mary Jane’s uses retail buying consultant Management One to help with both the Utah store’s difficult market and the new St. Louis store. “Even Management One’s consultants have difficulty with our erratic and off-cycle selling season in Utah,” says Harris. “But between their expertise in retail markets and my gut buying instincts, we’ve done pretty well together.”

Trade shows are a great way to get a bird’s eye view of the market and predict future market buying trends and behaviors. Buyers and family members from Bronner’s attend the huge AmericasMart®, the International Gift and Home Furnishings show in Atlanta, Georgia in January to do the bulk of their annual buying. From there they learn color and fashion trends for the home along with what new items will be the season’s anticipated big seller. The buying group also goes abroad to Germany and Hungary and makes an annual trip to Asia for the last round of annual buying. “Everything has to be in stock in our warehouses by July to be ready for the summer tourist season and fourth quarter selling,” says Lipka. “We tell visitors that the best time to come to Bronner’s is in July because everything is here, but we’re not totally crazy with customers yet.”

Harris attends several large fashion shows on the West Coast each year to help determine what Mary Janes’ will carry in their stores. “We have to be so careful not to turn off our 15 year old clients or the 65 year old grandma,” says Harris. Most of her target lives in the 18 to 40 year old bracket but she carries gift items such as accessories with a fun, contemporary flavor that have a wide range of appeal.

Village Bean’s Robertson also attends food shows in order to meet new vendors and explore fancy food options. She has been holding in-store customer surveys and tastings as a way of helping her with buying decisions. “We recently completed a two-week sampling where we brought in new coffee products and let customers vote on their favorites. They enjoyed trying the new flavors and felt good that their opinion mattered. Their selections are now part of our regular offering and are some of our best sellers!”

International Flavor

Thomas Christel and his wife Romina Abbadini left the U.S. to run Bed & Breakfast La Torrette Bianca (which translates to ‘the Little White Tower’) in San Benedetto del Tronto, Italy but that doesn’t mean they’ve left their business skills behind. By Italian law bed and breakfasts are required to shut down operations for three months each year. During the off season of December through February, Christel and Abbadini use their experience to provide marketing and event planning consultation services to local businesses and past colleagues in the U.S. Christel has over 25 years experience in global high-tech marketing and Abbadini was an event planner and linguist. Between their off season work and the recent addition of guided tours and event planning for larger groups during their peak season, they have managed to maintain cash flow and streamline operations.

With tough economic times in the U.S. and abroad, bookings are slightly off this season already. The duo says they’re not ‘hoarding money’ but rather they are “very closely evaluating every expense in accordance with the business benefit.” When clients pay in U.S. dollars, they bank the dollars as a ‘safety net’ in the event that the travel market is drastically reduced. The world economic downturn is impacting U.S. tourism in their area, but a majority of the B&B’s clientele consists of northern Italians and Europeans. Since they are limited by the number of rooms they can offer, alternative businesses are the only opportunity for growth. “We are 100% occupied in August so we’re testing other services as a way to build our nest egg and grow the business,” says Christel.

Lessons from the Voices of Experience

What all of these experienced business people offered was their best advice on how to keep a seasonal business liquid and ready for growth opportunities.

• Spruce up your floor space – “Retail businesses should really give the show floor a once over with new eyes,” Says Bronner’s Ann Koehler. “During difficult economic times, we try to make sure that our store experience is the best possible. That means stunning displays and a truly customer-focused experience. Many of our clients are repeat customers and we want to keep them coming back by providing an amazing experience every time they come to Bronner’s.”

• Watch price points – Mary Jane’s Lori Harris advises buying lesser price point products when economic times are tight. “Our St. Louis store has a boutique competitor located just down the street. Many of our customers have come in and purchased items from us instead. They tell us how happy they are that we have an adorable dress for just $69 instead of the $165 dress at the other boutique. For many it’s the difference between the dress or necessities. A cute lesser priced dress means they can buy both and be happy.”

• Special offers - Businesses can entice customers with special offers including coupons and incentives. Bronner’s entices customers to visit from local states rather than from greater distances. “With gas prices as high as they are, we know that they may be forgoing a big family trip, but might make a shorter day trip to visit us,” says Koehler. “We’re also doing more Internet coupons to help boost our online business.”

• Nest egg – Thomas Christel’s U.S. dollar nest egg is just one way businesses can build a little security for tight times. “Really scrutinize your purchases and be sure that every expense you’re making will have some kind of return for your business,” says Christel.

• Survey Your Clients – Use online survey tools and in-store trials like The Village Bean’s taste testing to let customers dictate what they’d like to see stocked on store shelves. The results will be increased sales because the customers have told you what they’ll buy.

• Watch expirations – “Make sure that you keep accurate track of perishable items and rotate stock frequently,” says Robertson. “We used to have a tremendous amount of waste, so now we spreadsheet every item in the store and discount items close to their sell date. By making them a special feature we’re able to sell the product before the expiration date and reduce the loss.”

 Love what you do

Entrepreneurs spend way too much time working in their businesses to do something they hate.

“The businesses I’ve chosen are very positive businesses,” says Harris. “Unlike my previous jobs in telecom where there are complaining customers, people in the restaurant and retail environments are generally happy to be there. It’s uplifting to come to work every day and make people smile.”

No matter what type of seasonal business you operate be sure to take advantage of trade associations and get a business mentor to help guide your decisions. There is a very limited window to make the business successful so the choices must be based on the best possible advice and information available. To learn more about operating a seasonal business while keeping a watchful eye on cash flow, talk with a Fiducial Advisor by calling 866-Fiducial or visit the web site at www.Fiducial.com.

Renee Fellows is the owner of ClearPoint Marketing Communications in Derry, New Hampshire. She works with small business clients to develop marketing and public relations strategies that bring business and customers closer together. She can be reached at 603-434-9433 or via email at Rfellows@oneclearpoint.com.

Whatever your small business needs, your Fiducial tax and financial professional can analyze your situation and recommend an appropriate action plan. To locate a Fiducial office nearest you on fiducial.com, see the Zip Code Locator located in the upper right hand corner of the page. Do you have a particular topic that we should be writing about that can help your business? Please send your suggestions to: Howard.Margolis@Fiducial.com.

DISCLAIMER
Although we do our best to provide our users with useful and accurate information on our web site, we do not update this information which is derived from sources believed to be accurate. Users must understand that information presented does not serve as an endorsement of any particular company or individual and that this information changes frequently and is subject to differing interpretations. Users are hereby advised that they are responsible for ensuring that the facts and general advice obtained from our site are applicable to their specific situations and should discuss their specific tax, business, financial, and legal matters with pertinent professionals.