by Reed Richardson.
For those companies that are open only a few months during the year, all the normal obstacles to achieving small business success can be multiplied several times over. Yet a common misconception is that seasonal small business owners have it easier, spending half the year simply relaxing rather than working hard on their ventures.
“People think I make money all winter long and then just go golfing all summer, but that’s a big myth,” explains Davey Pitcher, whose family has owned the Wolf Creek ski area in southwestern Colorado since 1976. “Like most other small businesses, we have expenses year-round, but our cash flow comes in over just 160 to 170 days. So it becomes a management challenge to prioritize resources the rest of the year.”
And because seasonal businesses must cram a full year’s worth of revenue into just a few short months, getting everything in place for a fast start often can make the difference between finishing in the black or running in the red come closing time. In an effort to help you do just that, we’ve gleaned from entrepreneurial experts and real small business owners eight pieces of advice you might consider to get your own seasonal business off on the right foot.
1. Start thinking about tomorrow today
Sometimes, the best time to start preparing for your next opening day occurs the moment you close for the season. For example, Pitcher and his maintenance crew began dismantling one of Wolf Creek’s ski lifts on the last night of the 2010–11 season, while the gear oil in the machinery was still warm from hauling skiers up the mountain earlier in the day. “Because the part we had to replace was so expensive—$150,000—and because the lead time on ordering it was so long—close to 8 months—it was imperative that we start the process of preparing for next season as soon as we could.”
2. Keep ’em coming back (your employees, that is)
“One of the most important things seasonal business owners can do to be successful is to keep their employees coming back each year,” explains Moren Levesque, a professor of business strategy at York University’s Schulich School of Business. “One way to do this is, just before the end of the season, you offer to share some of next year’s profits with your key employees if they commit to returning next year. Or, maybe even make that same offer for next year at the start of this year’s season to get them to buy in early.”
David Gretzmier, who used to own two complementary seasonal businesses in Fayetteville, Arkansas—a lawn care company and a Christmas-light decorating venture—took a somewhat similar approach. He says he gave his employees “convenience pay” that was roughly half of their regular hourly wage during the slow periods in the early fall and late winter. This extra income stream, he found, prevented them from looking for additional work and helped him retain a higher percentage of his employees year-round. Though he was essentially paying them not to work, Gretzmier says the strategy paid dividends in the long run, when the time and opportunity costs associated with not having to train new employees and better customer service were factored in.
3. Don’t assume what worked last season will work this season
“The most dangerous aspect of running a seasonal business is that it detaches itself from the market for a while,” notes Yuval Deutsch, an entrepreneurial studies professor at the Schulich Business School. “Because of this, businesses that, say, closed last spring should get out there early before they re-open and collect information on what the market is doing now.”
Even those small businesses that rely heavily upon a repetitive customer base or that are in fairly traditional industries might want to undergo a more in-depth strategy review before opening their doors this year, says Deutsch. “Especially in today’s volatile financial conditions, re-opening a seasonal business that’s been dormant for nearly half the year can be in many ways similar to launching a brand new start-up,” he explains. “You may want to re-do your entire market research in the off-season to see where your advertising focus should be.”
4. Business owners need time to mentally change gears for opening day
“For me, there is definitely a period in the weeks before opening day where I have to change my mindset,” explains Pitcher. From working a hectic six out of seven days during the season, he acknowledges that his operational pace does slow to working one out of four days in the middle of summer, with a long family vacation usually scheduled for early August. “But once I get back from that, I’ll have more regular meetings with my staff and start seeing lots of things that need to be taken care of,” he says. “And the panic button gets pushed once we have that first freeze and I wonder why we still have all this junk in the parking lot,” he says, laughing.
5. Open seasonally, market daily, learn constantly
When Gretzmier decided to start his Brite Ideas lighting franchise to complement his lawn care business (which he subsequently sold off a few years ago), he expected to easily convert many of his 300 lawn care customers into clients of his new venture. But Gretzmier says he quickly learned that the rudimentary marketing methods he used for his existing lawn care business didn’t carry over—his first winter he only had 10 takers for his lighting service.
“When you’re in the lawn care business, you can basically knock on doors while wearing dirty jeans and sign up a customer that will last 10 years,” he explains. But because his new Christmas-light decorating service involved one rather large upfront fee—anywhere from $800 to $4,000 for the set-up—rather than a series of smaller, weekly $50 payments, potential customers were more hesitant to come on board. “Instead, I had to spend thousands and thousands of dollars all summer long to get new lighting customers,” he says. “It took direct mail postcards, which had a response rate of only about one to two percent, getting references, and showing up on someone’s doorstep wearing a nice jacket before I got the sale.”
6. Unravel that red tape now to stay in the black later
Whether you run one, two, or several seasonal businesses, there will always be some amount of paperwork and regulatory requirements to fulfill. To stay on task during your business’s selling season, why not tackle the red tape before you open the doors again? As one might imagine, a ski resort that also includes a restaurant and bar will have a plethora of licenses, health and safety inspections, and insurance policies that must be updated or redone each year. And while many of them must be complete before the first skier schusses onto a lift, others could be done in-season. “Still, I try and have Wolf Creek fully licensed by mid-September of every year,” Pitcher says. Doing it this way, he adds, allows him to open as soon as the snow cooperates and, for a seasonal business, squeezing in just a few extra open days can sometimes be the difference between a good year and a great one.
7. Start pulling in revenue before you open your doors
In another bid to extend the revenue-generating period, Wolf Creek starts selling full-season passes in early October before the mountain typically opens to skiers. This injection of pre-season money, Pitcher explains, is often instrumental in bridging the gap between the end of last year’s revenue and the start of opening day, and allows Pitcher to handle any unexpected, last-minute maintenance issues.
For his part, Gretzmier’s four-month-long holiday lighting business is now reliably profitable, yet, just as before, he’s started to look at ways to bring in cash during the off-season. Rather than return to running a second business, though, he’s started going after wedding and event lighting projects during his off-season to bring in the extra revenue and keep his company’s name and message more current.
8. Try to avoid going ‘all in’ early on
To hedge against making a potentially disastrous miscalculation right out of the gate this year, Deutsch also recommends that seasonal small businesses should thoroughly revisit any long-standing vendor relationships and purchasing strategies prior to opening day. “The way things are in this economy, it may be a huge mistake to buy an entire season’s worth of inventory upfront,” he points out.
Instead, Deutsch says a business owner might be better off waiting a while to see what customers are buying before committing all of his or her capital. Once there’s enough data to identify some sales trends, a business owner could then devote any held-back cash to purchasing and marketing those products that are selling well. “If all your competitors are stuck with lots of high-end product, but only the low-end stuff is selling, the ability to transition your business’s focus to that latter segment could become a big advantage.”