Most businesses experience cyclical fluctuations in activity, which can be managed without a large impact on existing resources. For some businesses, however, cyclical fluctuations can prove challenging, in which case a strategy to help manage these fluctuations can be beneficial.
Ideas to manage your business more effectively through peaks and troughs
- Know when your business is likely to peak and slow down. Most businesses will instinctively know when their business peaks and slows, however, analysing sales data and customer flows for different periods of time (such as on an hourly, daily, weekly or monthly basis) will give you a more accurate understanding of when your peaks and troughs are most likely to occur.
- Be flexible with your staffing arrangements. This includes reviewing customer flows and having appropriate staff numbers to match predicted customer flows. Make sure the staff you engage to cover peak periods are qualified for the role and properly trained in the service standards you expect.
- Use cash-flow forecasts to ensure you have adequate cash buffers and available funding to cover business operations through non-peak periods, including fixed commitments such as rent and loan repayments.
- Have working capital funding facilities in place, such as a line of credit or overdraft you can utilise to help fund stock purchases you may need to make in a peak period.
- Carry the right amount of stock. While it may be tempting to be fully stocked for your peak period, carrying excess stock comes at a cost to your business, such as insurance, storage costs and spoilage. Instead, negotiate with suppliers for delivery when required and/or reducing stock purchases through changing when you re-order stock, for example only order new widgets when you have five left, not 50.
- Identify excess capacity. Consider reducing excess capacity, particularly in non-peak periods through changing staff rosters, disposing of excess assets, outsourcing non-core activities, utilising short-term leases or leasing or sub-leasing out assets or premises during off-peak periods.
- Consider charging a premium during periods of peak demand or early in a product's lifecycle. Outside those times, your pricing strategy could include bundling products or services or, if that is not successful, reducing prices.
- Look for opportunities to expand your business that are consistent with your strategic direction and can be properly funded. You can mitigate fluctuations in business income by expanding your business into areas that are less impacted by peaks and troughs, or peak when your existing business is in a trough or can extend your peak season. Such expansion can include opening in new locations or expanding your range of products or services to those that are less impacted by fluctuations in demand.
- Go on holiday. In spite of your best efforts, you may lose more money running your business during slow periods than if you were to temporarily close it. If you do close your business, you should consider leasing or sub-leasing your assets or premise to another business during that period.
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