Um business with seasonal sales or seasonality has its level of activity conditioned to different periods of the year. Regardless of the sales effort, there will be naturally better months and months naturally worse.
We will see in this article:
- What is seasonality?
- How do I know if my business has seasonal sales?
- Tips to protect yourself from seasonality
Definition of seasonality
Seasonality consists of events in time (repetitive or not) that will impact the functioning of the companies. These events do not need to have a certain deadline and their impact can be positive or negative.
Seasonality of sales refers to a repetitive cycle at certain times of the year. It addresses for example, months in which the entrepreneur closes more business and sales in relation to the months in which the business sells less.
An example of repetitive seasonality is summer, which every year exerts an extremely positive impact in the hospitality and tourism sectors. An example of non-repetitive seasonality for the same sectors is the occurrence of a holiday. This event only occurred, because that year the holiday fell on Tuesday or Thursday, but next year, it will not be repeated.
Seasonality applied to business
When we talk about seasonality applied to business, we usually talk about sales projection. Every business has periods of natural high and low. Why natural? Because they are independent of the sales effort or the production of the company.
Several retailers, for example, need to prepare to sell more on special dates:
- Black Friday
- Valentine's Day
- Mother's Day
- Father's Day
In contrast, the same businesses need to tighten their belts to survive from January to March, when people buy less.
Problems of seasonality
Although the seasonality is positive in many ways - after all, who would not want to make year-round billing in a month? - without planning, it can become the enemy of the entrepreneur. This is because very seasonal businesses cash flow and operational. Some examples:
People management - in the period of high, the company needs many more employees than in the low period. How to hire, train and then absorb them in the company?
Production - without the correct production planning, you will lose sales due to the lack of production capacity in the high period.
Logistics - imagine that a week of high demand for you will multiply by 10 the normal number of requests. Your logistics operation should be rethought, right?
Customer service - the same thing that happens with production and logistics will happen with your phone and other sales channels. Especially when the orders begin to linger.
Cash flow - virtually all structures of the company should be rethought. But how to do this without spending more than will be billed in the high period. And how to generate a profit able to keep the company in the other periods of low?
There are several naturally seasonal businesses. Sectors connected to hotel and tourism tend to warm up in the summer, except for tourism to cold places or snow. Several sectors, mainly related to formal or informal education, follow the school / academic calendar.
But, make no mistake about it. Although the seasonality is not obvious, every company has lower and higher periods. To find out the seasonal sales of LUZ products, I usually use a very interesting tool called google trends.
It consists of creating a base index and recording the variation from the amount of searches for a given term in google. It sounds complex, but it's quite simple. Once, for example, I helped an entrepreneur who produced and sold planners and agendas. Let's see what Google Trends tells us about the term "planner":
It is a search term that is in rapid growth, but notice that there is always a peak between December and January in relation to the rest of the year. The entrepreneur in question needs to prepare for this period since the middle of the year.
Notice that the same is true for "travel packages":
This is a perception that we did not have at the beginning of Light, but the great majority of our products follow the academic calendar. See, for example, the search indices by the term "cash flow":
1. Make a good Financial Planning
Financial planning is key to dealing with periods where you sell less, so you do not get caught off guard and your company runs out of cash. In the case of LUZ, for example, as I showed in the previous chapter, our calendar follows the academic calendar.
That means that December and January, when paying tenth-thirds and several contracts get bigger, will be periods of lean cows. It sounds like bullshit, because when March arrives we recover, but imagine that we have not prepared for the seasonality. A scenario in which we do not have cash on hand to make all the payments is quite feasible.
Therefore, make detailed calculations of how much your operation can be sized during bad times, try to reduce contracts in those periods, and set goals for good times.
2. Make projections year to year, not month to month
It is very common to think:
How much do we want to grow from November to December? And from December to January?
In very seasonal business the ideal is to think:
How much do we want to grow from January to January? And from February to February?
3. Set "weights" for periods
To project the billing of the LIGHT, I impute weights, not only for the months in the annual projections, but for days of the week in the monthly projections. When I started doing this, I was not sure what weights to impute, but as I learned it, I improved the rule.
Today we consider:
- 1 weight for any business day except Friday
- 0,75 weight for Fridays or holiday eve
- 0,35 weight for weekends and holidays.
So if my goal is to earn a thousand reais on a typical business day, I'm already expecting $ 750 for the sixth and $ 350 for Saturday and Sunday. It is a more sensible way of formulating goals, as I can see if the proposed growth - previously kicked - of 15% is feasible in relation to the weight of the month and the number of good days. See the example for December:
4. Plan your operation
In the same way that you have made the financial planning to know how much you will need to bill to withstand the operation in the periods of low, it is worth thinking about the discharge period itself. Use google trends to understand your seasonality and answer the following questions:
- How much do I need to have in stock?
- How far in advance do I need to communicate suppliers?
- How do I operate my logistics?
- Will my current team be able to operate the expected demand?
- By making the necessary changes, can I think of a model that keeps my profit high at the best time of the year?
5. Use a sales spreadsheet
To gather all the relevant information, to aggregate data in a practical way, as well as to understand the seasonality of sales and to calculate more optimally, a facilitative method would be necessary.
It is precisely to fill the gap of this need so expressive in the market, that a sales spreadsheet emerges as the ideal solution to win the seasonality and increase the success of your business.
Imagine getting the key guidelines based on your sales pitch in an agile and practical way, with results from specific analyzes of your Sales Channels, Clients (Overview and Individual) and Products (Overview and Individual)?
The Light Business Spreadsheets offers you the ideal tool to overcome the drama of seasonality: the Sales Spreadsheet in Excel.
With it, you quickly register the data necessary for your company, from the customer and sales carton, to CRM and other functionalities. In addition, you can count on automatic calculation of sales, targets, values and can thus obtain accurate information for financial planning.
Not to mention the possibility of using graphics, facilitating the understanding of data, and a series of tips that will help to accelerate the business of your company and its sales.
So, are you ready to project your sales, get to know your audience better, and get beyond the challenge of seasonality?