The holidays are a wonderful time of year, generating a considerable spike in sales for countless small businesses. However, when the shopping season comes to an end, many business owners experience cash flow issues as traffic and sales drop off dramatically. The transition can be tough on employees and on your bottom line.
To keep up the momentum and avoid a January slump, it’s important to focus on actions you can take to attract and retain customers as well as trim expenses and manage cash flow. Here are seven strategies for boosting your post-holiday bottom line.
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1 – Manage your inventory.
During peak sales seasons, keep track of your best-selling items and avoid running out of stock, and also determine when to stop purchasing new inventory. Anything left at the end of the season is like money sitting on the shelf. Excess inventory should be marked down and sold to increase revenue and reduce carrying costs. Some suppliers might allow you to return merchandise for a credit against future orders. Keep your cash flow cycle in mind when making decisions about buying inventory and creating clearance events. The holiday season may be a time when your business is high in receivables and low on inventory, but you want to avoid any additional expense at a time when you have less cash coming in.
2 – Trim expenses.
Spending less in addition to selling more can help increase your net income, so look for areas where you can cut expenses. If you haven’t done this in a while, you’re likely to find some hidden costs that have crept into your budget. Get competitive bids on your phone service, insurance, copying, shipping, accounting, and other outsourced or independent services. If your business is seasonal, you may be able to negotiate with the owner of your building and ask for a higher rent during peak seasons and a lower rent during slower months. To reduce overhead, small business owners often hire temporary employees during the busiest times and lay them off when the season ends.
3 – Revamp your marketing.
Small businesses often scale back their marketing efforts after a big holiday push. If the competition has gone quiet, you may get more visibility by continuing to market aggressively. People are still in a buying frame of mind, but as the New Year begins, there is a shift in mindset toward getting organized, preparing taxes, and keeping 2018 resolutions. Data shows that self-gifting and household purchasing are typical at this time of year, as is spending money on enhancing health and fitness, safety, and productivity. Small business owners can benefit from aligning their promotion efforts with products or services that meet these needs.
3 – Capitalize on momentum.
Now is the time to build on relationships with customers you acquired during the holidays. Use direct mail or email to offer special deals they can cash in on during a specific post-holiday period. If you have a brick-and-mortar location, host an open house or exclusive event to bring new customers to your place of business. You could use the event to clear old inventory or to showcase new products or services. Extend the reach of your promotions by inviting customers to share them with friends and family.
4 – Reward loyal customers.
Giving your most loyal customers incentives to purchase is a tried and true strategy for boosting sales during a slow stretch. Building customer loyalty is important to small businesses because loyal customers create return business and are more likely to refer other customers. There are numerous ways to make your customers feel special, including thank-you discounts, exclusive limited-time offers, and social-media-only incentives like flash sales for your most committed followers.
Another way to increase sales and attract more clients is by starting a customer loyalty or referral program. These programs are typically designed to retain current customers and turn new customers into returning customers. There are many options to consider, such as offering a free or discounted product or service for referring a new customer. Rewarding the referee as well creates an added incentive to purchase. Keep in mind that your existing customer base is your best ambassador because they have experience with you and your products. Reward them as a thank-you for helping spread the word.
5 – Use downtime strategically.
Slow seasons present the perfect opportunity to prepare for the next phase in your business cycle. Assess customer needs and your financial performance. Revise your business plan. Create budgets that reflect seasonality. Forecasting and budgeting will help you see the big picture and prepare for future ups and downs. It’s also a good time to expand your business network. Make it a point to attend two or three events this month and not just those focused on your industry. Connect with people in other sectors who might be potential customers or who can refer business to you.
6 – Stabilize cash flow.
Working capital financing is a valuable tool for managing your cash flow during slow periods and all year long. Working with a partner like Summit Financial Resources will help reduce the pressure during low revenue periods by ensuring that you have stabilized cash flow to help cover any shortfalls. Our invoice factoring, asset-based lending, and inventory financing programs allow you to harness the cash in your accounts receivable, smooth out your cash flow, and help your business weather the slow times. You can use working capital financing in countless ways, from marketing campaigns to technology investments to replenishing inventory depleted during the holiday season.
7 – Celebrate successes.
Before you rush into the New Year, take the time to celebrate your company’s 2017 results. Chester Elton and Adrian Gostick, co-authors of The Carrot Principle, have found that fewer than half of managers even try to recognize their people. However, bosses who offer praise and rewards to their employees have a three times higher return on equity. Gathering your entire team and acknowledging even the small successes achieved last year will engage and re-energize everyone to tackle the challenges that lie ahead.
A post-holiday slow-down is normal for many small businesses. Finding fresh ways to kick-start sales, manage expenses, and smooth out your cash flow will help you start the year with positive momentum and position your business for success in 2018.
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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.