In recent weeks, we have been exploring several valuable insights from the book Surge by Mike Michalowicz to help businesses grow effectively. I wanted to take a break from that today to address a very relevant and pressing topic many of our clients have been dealing with lately, cash flow shortages from seasonal demand shifts. We’re nearing the winter season where many businesses, especially in the outdoor or home services industries tend to struggle. I would like to provide some actionable insight and suggestions to help confront these issues.
Summary:
- Proactively managing cash flow during slower months helps keep your business running smoothly.
- By building a cash reserve and creating a seasonal budget you can reduce the stress of cash flow challenges.
- A little preparation goes a long way toward helping you maintain consistent cash flow year-round.
Every business faces seasonal fluctuations, but with a bit of planning and strategy, you can avoid cash flow crunches and stay on top of your finances. Here’s how to keep cash flowing steadily even when things slow down.
- Build a Cash Reserve Before the Slow Season Hits
Every business experiences good months and bad months, but seasonal businesses tend to experience low months for extended periods of time each year, which can really hurt. Whether you deal with a bad week occasionally, or have 3 months of low sales every year, one of the best ways to avoid cash flow issues is to create a cash reserve during your busiest times. Here’s one of the most common mistakes business owners make when times are good: When revenue is really strong for a month, the owner will often take the extra cash windfall the results and spend it. This practice of increasing spending in line with revenue often makes it difficult to bring the spending back down when revenue drops again.
Setting aside a percentage of your revenue in a designated account provides funds to cover essential expenses when sales dip. We’d recommend you work toward a reserve that covers at least three – six months of operating costs, depending on your business needs.
How to Do It:
- Set a goal for your reserve fund and commit a percentage of revenue during high-earning periods.
- Treat this reserve as an essential “expense” each month to ensure you stick with it. If you are using profit First, add an account and update your allocation percentages to include the new reserves account
- When you have unusually high revenue months (months that exceed the level of revenue you’d need to meet the business needs), transfer a portion of that extra cash to the reserve account to be used for low months/emergencies.
By doing this, you can now act as your own bank during cash flow shortages. You have cash available when you need it and don’t have to pay any interest!
2. Create a Seasonal Budget and Stick to It
Mapping out your cash flow needs over a full year helps you understand when expenses might need to be trimmed. A seasonal budget lets you identify areas where you can cut back temporarily while still meeting necessary costs.
How to Do It:
- Identify predictable expenses across a 12-month timeline.
- Flag slow months and adjust discretionary spending during these times to conserve cash flow.
3. Offer Subscription Services or Additional Seasonal Offerings
Adding a subscription-based service or expanding your offerings can keep cash flowing consistently, even when business is slow. Subscriptions create a steady revenue stream and help maintain customer loyalty. If subscriptions aren’t a fit, think about other offerings to introduce in slow months that fit with your existing business.
For example, one of my clients in the window cleaning business typically experiences a slowdown in winter. In the past, they’ve had to rely on high-interest loans or credit cards to cover operating expenses. To counter this, they began exploring winter-specific services like indoor window cleaning and Christmas light installation. Not only does this boost their income, but it also helps retain their customer base throughout the year.
How to Do It:
- Brainstorm subscription or retainer-based options that add ongoing value to your clients, such as maintenance packages, consulting, or VIP memberships.
- Look at seasonally relevant products or services that could create a boost when your primary offerings are less in demand. Even small add-ons or “off-season” versions of your popular services can help generate additional income.
4. Use Short-Term Financing Only as a Last Resort
While it’s ideal to rely on cash reserves, short-term financing can be an emergency backup in unexpected crunches. Options like a business line of credits can give you quick access to funds. Use these sparingly and only as a last, last resort; and have a solid repayment plan to avoid compounding expenses.
Additionally, avoid using credit cards to cover cash flow shortages at all costs! If you use credit cards as if it is cash, you can easily find yourself with massive credit card debt and interest charges that make you lose sleep at night. Credit cards can be used strategically for benefits such as travel points or cash back, but only if they are controlled and used wisely. When you use credit cards for purchases, ensure you always separate funds enough to pay off the card in full. This way you will never have a runaway card balance.
A quick side note: I’d recommend business owners never consider invoice factoring as an option to cover cash flow needs. This is a costly and often ineffective system that will do more damage than good to your business.
What’s Next?
Cash flow management during slow seasons takes planning, but it can ease the financial stress and keep you ready for growth opportunities year-round. Whether it’s building up a reserve, refining your seasonal budget, or adding steady revenue streams like subscriptions, a proactive approach can make a big difference.
With the right preparation, you’ll stay focused on what matters—serving your customers and growing your business in every season.
Adam Litster
Certified Profit First Professional and Pumpkin Plan Strategist
(816) 500-5779 – Option 2
adam@betterbizinfo.com
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